Are property managers required to inform the owner of all submitted rental applications?
In practical terms, the short answer is yes, unless the owner has told the manager something else, in writing. It’s not normally a legal requirement, but it’s a professional requirement for practicing realtors and property managers who are themselves members of the National Association of Residential Property Managers.
Standard of Practice 1-6: REALTORS® shall submit offers and counter-offers objectively and as quickly as possible. Let’s consider a case in which you are doing business with a realtor, who may well be acting as a property manager or just a leasing agent.
In either case, that realtor is held to the requirements of the Code of Ethics of the National Association of Realtors:
- Standard of Practice 1-7: When acting as listing brokers, REALTORS® shall continue to submit to the seller/landlord all offers and counter-offers until closing or execution of a lease unless the seller/landlord has waived this obligation in writing.
If you are doing business with a property manager who is himself or herself a member of the National Association of Residential Property Managers – or an employee of a member firm, they are also obligated to follow their organizations’ code of conduct.
Under the heading “standards of professionalism,” item 4-1 states that “The property manager shall offer all prospective renters a written application.”
True, there’s nothing in the code of conduct that says that every offer to rent needs to be forwarded to the owner. And the code of conduct also states, ”Tenant applications shall be reviewed and verified in order to determine the Applicant’s ability to pay and to determine the likelihood that the Applicant will comply with all provisions of the rental agreement.”
Part of this process is the application fee or the application deposit. Implicit in the contract implied by accepting an application fee is that the manager agrees to provide the application, if the renter meets the minimum qualifications to rent, to the owner.
It is always better to err on the side of caution and present all applications to the owner. This is valuable to both the owner and the property manager as a potential defense against allegations of unlawful housing discrimination.
What is in a well-designed rental application form?
A well-designed rental application form does not contain any questions that could be construed as an intent to discriminate. A rental application form, for example, will not ask an applicant’s race, religion or national origin – any of which could get the owner and manager into trouble with the Department of Housing and Urban Development simply by virtue of asking.
The property manager, of course, usually sees the applicant face to face, and therefore knows the race of the applicant, at a minimum. By forwarding the completed application to the owner, and letting the owner make the final decision, it is much more difficult for a plaintiff to demonstrate that unlawful discrimination took place.
This protects the owner as well, because owners can and are held liable for discriminatory actions of agents acting on their behalf.
In practice, many property management companies will state, right on the rental application, that they are obligated to present all rental applications to the owner until the lease is signed (and the property is no longer available for rental).
There may be cases where the property manager is not a member of the National Association of Rental Property Managers, or any other organization with a code of conduct. In any case, state law applies. But overall, the best practice by far, is for the management firm to present all completed applications to the owner, and let the owner make the final decision. Learn more about screening tenants once the application is submitted, and the factors that matter most.
Writing about personal finance and investments since 1999, Jason Van Steenwyk started as a reporter with Mutual Funds Magazine and served as editor of Investors’ Digest. He now publishes feature articles in many publications including Annuity Selling Guide, Bankrate.com, and more.
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