You may have heard the phrase, "Good intentions are not enough..."

I was thinking about that while re-acquainting myself with Missouri's law on tenant security deposits. We can't require more than an amount equal to 2 months' rent for a deposit (pet deposits are not included in this total). Pre-paying some/all of the lease or collecting last month's rent might be a way around this, but it opens up a can of worms I'm not 100% comfy with. So scratch that idea to work around the issue.

I'm guessing that a well-meaning group of legislators thoughts this would "protect" some poor tenant from a greedy land lord seeking to extort a ridiculous amount of cash. Unfortunately, it also makes me less likely to take a tenant who is borderline, such as someone with mediocre credit (not terrible, just not good), or who is fairly new on the job (I require a minimum of 90 days plus stable previous job history of 1 year or more), or who has non-garnisheable income (SSI/Social Security, etc).

In my market, the typical requirement is a deposit equal to one month's rent. If there really were greedy land lords seeking to rob tenants with massive deposits that were never returned, the market forces would drive them out of business because hardly anyone charges that much as standard practice. So...I think this law is unnecessary and the market forces in play would take care of it...in my market at least. Who know about St. Louis or KC?

I mention this because this time of year I've had several marginal candidates apply. Not much really WRONG with them, but not much really RIGHT either. Just not enough information to make a secure decision for me. If I could require 3 months' rent as deposit to cover potential lost rent, legal costs, and damages...I would probably take them. But only 2? No way. I know how much it costs to boot a non-payer, clean, and repair...and 2 months isn't enough. Plus the aggravation...that's worth something too.

So some applicants are left lx-ing fingers someone who doesn't care as much will be willing to "give them a chance." I don't take chances. Can't afford to. I wonder if anyone present at the original debate on this legislation brought up the burden of creating an undue hardship this would be. Without this law, I think the market would self-regulate against greed and also give marginal tenants a chance to make a bargain that ultimately would benefit them vs. staying in long-term stay hotels or whatever roach-infested house the local slum lord manages.

Good intentions...bad results. Anyone else notice something similar in your area?

Sid, you and I have come to the same conclusion about borderline applicants: just say no.

As for the unintended consequences of tenant protection laws; I am amazed at the lack of weight that the forces of the free market carries whenever this type of legislation is considered. I feel quite confident that should I fail to return security deposits that word would travel and my business would suffer.

“Of all tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive. It would be better to live under robber barons than under omnipotent moral busybodies. The robber baron's cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience.”

I had someone last week that was so far past the borderline he was in another country.

Running his credit check showed he owed (among other collections) over $500 to our local water/sewer company.

I ran his credit history before checking our Marshals Service since that online site was down. When I got to that one the next day I found the guy has SIX pages of dispossessories (evictions). SIX!!! I thought my printer was going to run out of ink printing them out.

I shoved everything in a large envelope with the reasons why he was declined and sent it back to him, then ignored the five or six phone calls from him wondering what the results were.

This morning when I was in a doctors appointment and had left my phone in my truck he left a message saying he received the mailing and asked me to call him so we could "work something out"(!!!) Was even willing to pay double the security deposit!

Seriously????

As Sisco and Gail K remind us, there are some folks we won't rent to even if they gave us 3 months' (or 4 or 5) deposit. My concern is with borderline (i.e. ALMOST there, but not quite) applicants.

Here's a real example to help illustrate.

Younger gal, age 25. Had a few blips on her criminal from 4-5 years ago...a couple of DWI's. Been clean since then. New at her job (2 months) so still under that 90 day window when employers often let go folks for little to no cause if things "just aren't working out". But made good money as a nursing assistant...about 4x the monthly rent. No pets. No boyfriend (that I know of...hee, hee, I'm sure he'll show up later). Credit marginal MOSTLY due to unpaid medical, but had a few credit cards and a repo car loan 3 years ago. Current since. No evictions, no other judgments related to land lord stuff. When talking to her, she gave off all the "right" vibes. Not desperate. Doesn't need the place yesterday (okay with waiting 3 weeks until current tenant moved out). She speaks well and has a neatly groomed appearance, well-kept if humble vehicle, and no visible sign of entitlement attitude. Doesn't trash talk her past land lord with whom she had to buy out of her lease, and they had gave her an okay reference. Seems genuinely on the road to a brighter future. Can't give me a co-signer (her family history may be why hers started out spotty as well), but she's got $$$ and most likely COULD do the extra deposit...IF the law allowed us to do that.

Hello Sid,.

This is exactly why in our area there are soooo many slumlords. Now, don't jump to conclusions, because they almost have to be to make it. We just spent 3 weeks getting renters for a house we had available. Ads every avenue you can imagine. We had raised our rent $25 from the last tenant as markets indicated to $575. In our area, you have types of renters- most popular- desperate people who will take anything(usually have evictions, felonies, no job, attitude problems, etc) or those who want cheap. ( Many would put their families in a drafty shack if it would "save"them $100 rent). Of course, I want neither. The good renters usually can have the pick of the lot and stay put when they get comfortable. They also know that they can get it cheaper BUT don't want the shack. So, to strike the balance.

Yes, the deposit isn't enough. Hardly if ever. Things are just too expensive to fix. We would never get a renter if we charged even 2x the rent for a deposit. So I want a good renter who will take care of things, and AT LEAST pay my market rent. This renter will appreciate our hard work in maintaining the property, and reciprocate(keeping it nice and paying)

So hence that's where slumlords come in. It's a lot of money, security risk and uncertainty waiting three weeks for a renter. It's too much work and money (and disheartening) to fix it to get it to where that nice renter wants it, because you can still get burned. It's a lot of time wading through the "losing" pre-applications. (I estimate going through no less than 80 pre-apps). So hence, the anxiety kicks in and the ll just rents it to the first one who will "take" it. Many lls don't do any checks, they just go with their feelings about an applicant. Tenant is a bum, destroys the place easily with 5-10k in damages within months.

Long story short, I'm not interested in anyone who would need to buy up with the deposit, because frankly 3x or more wouldn't cover the increased damage that they seem to cause. I prefer to do the work on the front-end of the rental and not behind.

I do think market would regulate this security so for the most part it would not be necessary to even put it in legislation, but it's for the few who would take advantage of the newbie renters or ones who were desperate to give their entire tax refund just to be accepted.

Great post Sid,...however, can you tell me exactly (in one or two sentences) what you really want to know?

Roy, no, I'm not looking for ways to rent to so-so renters. The law and my screening processes are clear, and when I follow them things go right almost always.

I would guess most tenants (especially if they have money problems anyway) don't have and if they did have would not pay a security deposit of 3x the rent, plus a month's rent. That's A LOT of money for folks who don't have any.

the example you gave sounds like a young lady who went a little wild when she came of age and has now settled down but you would be the test of her stability in life going forward.

Some of you are too young to remember just why the HUD laws were put into place.

RathdrumGal, I'd be willing to bet the "vast majority" of rental property owners back then DID discriminate in a variety of ways.

But because institutionalized racism and bigotry is now unlawful, large property owners can't pass blanket discrimination policies anymore.

Sid,

How long will you allow your units to stay vacant until you find that ideal tenant that meets all of your standards?

In the example you gave about the 25 year old gal,...those are typical for my market. You and I both have Class C rentals and you have described a typical Class C applicant.

WMH,

I would need more than a minute to make my decision,..LOL.

With any marginal applicant(s) that I am considering 'rolling the dice on',...I have a sit-down face to face "come to Jesus" type talk with them. I show them my 7-day P/Q notice and have them read each word back to me. I let them know right then that I don't play games when the rent is late.

ATTN: Roy & WMH, You have stated that you would approve the applicant that Sid described. Please elaborate on the thinking behind your decision.

Is it that you have seldom had any issues collecting your rent or keeping other lease terms from a Younger gal, age 25. Had a few blips on her criminal from 4-5 years ago...a couple of DWI's. Been clean since then. New at her job (2 months) so still under that 90 day window when employers often let go folks for little to no cause if things "just aren't working out". But made good money as a nursing assistant...about 4x the monthly rent. No pets. No boyfriend (that I know of...hee, hee, I'm sure he'll show up later). Credit marginal MOSTLY due to unpaid medical, but had a few credit cards and a repo car loan 3 years ago. Current since. No evictions, no other judgments related to land lord stuff?

Or does this applicant work because you employ guerrilla tactics that will keep this applicant who has shown instability, failure to pay as agreed and has a brand new job "on the beam"?

If the later, what tactics do you do to improve your odds of making this a profitable endevor?

Amy, posts that applicants of this sort is a causation of "slumlord" type operations - That is how that I see it, because turnover costs are untenable whenever I get short term tenancies, and she appears likely to leave before the lease term is fulfilled, and she doesn't work very long at a job, so wage garnishment will be very challenging.

I think that we all get these types of applicants; In the past I approved them, but I could never be profitable whenever I approved them.

Roy & WMH, Please tell us how you make this deal work.

Sid, she's young and trainable and in a very good profession - one of the professions we look for, in fact. Sounds as if she is getting her life together after a few mis-steps.

Old DWIs don't bother me, half the beach has them on their records, it's crazy.

We would of course discuss with her up front - and quite frankly - our rules. That we do not do late rent, grace periods, or "work with people." We will schedule a payment program that works for the way she is paid, but after that, she must stick to it or we will promptly evict.

And that our three main "house rules" are 1) Pay your rent, Pay your rent, Pay your rent (and yes, I do repeat that three times!) 2) Be a good neighbor. No cops, ever, unless they are your friends and are just visiting! 3) Take care of the place. Full stop.

Okay Sisco,...I will give you my 'point of view' here.

Based on my 11 years of screening and renting to marginal tenants, I have learned that you can screen a Class C applicant inside and out, backwards and forwards, and after all that,...never really learn what you Really Need to Know about this applicant. I have been shafted by marginal tenants who had screened well and by marginal tenants who screened poorly. There are no absolutes here.

Sisco - Have you ever heard the ole saying "You never really know a woman until you marry her?" My personal motto is: "You never really know a tenant until you rent to them!"

Whenever I screen or interview an applicant,...there is one thing my radar is looking for,...is this applicant someone who is willing to take 'responsibility for their own actions'. The only way I learn this information is by asking probing questions during a face to face interview.

WMC: The Jim Crow laws were actual LAWS -- that is the definition of institutionalized racism. LLs in "white" areas COULD NOT rent to people of color without breaking the law. The civil rights laws of the 1960s were federal laws the over rode the state and local laws.

I remember traveling with my family as a child from California to the mid-west to visit relatives. I remember seeing hotels with "colored only" painted on the side with large letters. My family recognized that as wrong then, and it is wrong today.

The fact that the Jim Crow laws ever existed proves my point -- LL would have rented to whomever they could have found most profitable regardless of race. If LL were motivated by racism over profits, these laws would not have been necessary. Thomas Sowell states that racism was declining BEFORE the enactment of the Civil Rights laws.

To be clear, I am not asking individuals if your tenant approval criteria are stricter than mine or weaker. I am asking if any of you have had any experience where a law that was designed to protect your tenants backfired.

Those who missed the point are welcome to try again....

Oh I don't think I said that, did I? BUT to your point, maybe the laws do, though!

Sid you said "What I really wonder is if anyone thought of the unintended consequences of making this law to "protect" people. It definitely shuts out some folks I would otherwise consider."

I think the advocates either dont know or dont understand the result their demands are creating. I think they are attempting to force landlords to rent to marginal (or worse) tenants. The politicians generally support the advocates because, it wins them votes and reduces the number of tenants on the social housing roster.

You asked "I am asking if any of you have had any experience where a law that was designed to protect your tenants backfired."

-absolutely this has happened numerous times when I have listed properties for rent. Often I get a party very very interested in the property, but I KNOW there is no way I can rent to them (for a variety of legal reasons).

Maybe they have a pet, maybe they are smokers, maybe their "boyfriend" is with them when they come to see the property and I know the "boyfriend" is going to move in, despite saying they wont.

Maybe its family instead of a couple and Im paying the heat and water (and have an equally qualified couple that also applied), maybe the applicant has marginal credit or no credit, or is in a high turnover industry or has just started a new job.

These issues could be overcome with a higher deposit or slightly higher rent to offset my extra costs.........but Im ONLY allowed to collect last months rent as a deposit and it can ONLY be used to pay the last month's rent.

I cant collect a pet deposit, I cant collect a damage deposit, I cant charge extra for extra occupants, I cant charge a deposit of more than one months rent, I cant accept more than one months rent in advance (ie tenant cant pay me 6 months rent up front). I doubt Ontario landlords are even allowed to charge an early lease termination fee.

To make matters even worse, as you know doubt know by know, our rental laws in ontario are most unfair towards landlords.

The result is these poor tenants travel all the way across the city (often on our slow transit), in hopeful anticipation of renting one of my places (and they really are great deals, as our family were once also tenants).

Its sad and unfair to the applicants.

I can hear the excitement in their voices when they are confirming their appointments. And I know what will happen ............ what MUST happen under the very rules the "advocates" created.

But I have no choice, I must show the units to all applicants or risk being fined by our human rights commission or advocate lawyers.

I do accept marginal tenants if they are willing to pay twice the security deposit. Like Mo, Pa only allows up to two months for deposit and we are not allowed to hold it after the first year........so I let the tenant know that if they on time for the first 11 months, they will get the extra month of deposit back. If they do not pay on time, we will use this surplus to boot them out.

SID,

I'm in the clear! Even our well paid applicants FEW can come up with deposit and first month, so double rent is not part of our new economy.

Most of our leases, even expensive homes, are signed with the deposit and a payment plan for the prorated first month.

Our low priced homes: we'll sign if they can bring MOST of the deposit.

I've also learned that no amount of "splainin'" will give them money to pay the rent. When they're out of cash ain't nothing left.

I believe people DO want to keep up with their bills but they cannot.

To your original question: I've been in the room and helped write some laws (simple trash and abandoned vehicle ordinances, nothing major!) It's an ugly, non-logical process of oiling the squeaky wheel. It's slow, drawn out, and aggravating so the good people get tired of the process and go back to running their businesses.

The elected officials get paid for each meeting they attend so they want ANOTHER session to talk about it. The do-gooders don't have jobs or their employer allows them time for "community involvement" so they don't mind repeated committee meetings. The responsible people finally say "this is enough - I have work to do" and cut out.

Laws are made by elected officials or their helpers, the very bums we want to throw out of office. They propose laws for the publicity to be re-elected. "Look at all the laws I proposed to help the down trodden. Vote for me!"

One guy just wrote proposal after proposal, knowing they would not fly, just to keep his name in the papers. "Champion of the people." He did not have a clue how his proposals would affect ANYONE except himself.

Indiana has a law that unpaid sewer bills become a lien on the property, so if my res does not pay for his own poo I get to! Why? Because the sewer utility lobby has it locked up.

Workign on one right now, an ammendment to our abandoned vehicles ordinance. They wrote up that non-operating vehicles in an enclosed building or behind a fence. We raised the question "What kind of fence? Chainlink, 6' privacy?" They said "Oh we never thought of what kind of fence." Argh!

I suggested simply using the phrase "Out of sight from the street or neighbors, either in an enclosed building or behind an sight-blocking privacy fence." Too simple, gotta make it more difficult.

Getting me worked up! Going to bed now!

BRAD

To the point of whether laws have negatively impacted my teni, Yes, absolutely yes. Lead paint compliance alone has prevented countless kitchens and bathrooms from being remodeled.

When I remodel, I do not raise the rent of the shacks. My thinking is based on a better product will keep teni for longer.

I'm open minded to the spirit of these laws however in my LL lifetime I have never experienced a reason for my LL practices to be scrutinized. What I'm saying is that I put my teni first and do not need supervision.

Another example of how rules intended to help tenants actually hurt them is.........in my area once a tenant moves in, they no longer have to pay the last months rent as a deposit. Yes its insane, but that is our rule.

Brad

Can you give an example of how you set up a payment plan? For example, let's assume that I have an apartment that rents for $ 850.00 and I want a security of that amount and the first month's rent or $ 1700. Assume the tenant only has

Thanks to everyone who has chimed in on this post. It's given me a lot to think about in spite of deviating from it's intended course.

GKARL, I recognize what you say about the "cash only" society. I do not care if someone has NO credit, but this applicant had borderline bad credit for legitimate reasons...credit cards and car repos are not the same as medical bills. Regardless, she seems on the right path. But again...how many times have I been bitten by "seems" and there are other applicants out there who are a more solid choice. Why settle for a C- when you can have a B+?