Legal to Require Monthly Income 4X the Rent & Continuous Income?

Question

would it be legal to require applicants make at least 4X the rent monthly to be considered?

ie rent is 1000 so must document that income is at least 4000 every month?

also how could it be made legal, if possible somehow, to  include in a month to month written lease, that reduction of income by 50% or greater and/or loss of income for more than 2 weeks must be communicated to owner in writing and either such event understood as the equivalent to a 30-60 days advance notice of moving out (to hopefully a cheaper apartment for their new lower income situation)?

Account Closed · Answer

Neil the more you say the more you hurt yourself.

A lease agreement is a contract.  It has an amount and a due date.  If tenants don't pay the amount on or before the due date you send them a Notice to Quit.  If they don't pay you take them to court.

Don't complicate your lease agreement by putting in too many clauses, it may come to bite you in the butt.  Amount and due date is all you need to file for eviction.

Your criteria for selecting a tenant must be within reason, and requiring 4 times the amount of rent is up to you.  I require 3 times the amount of the rent.

You will know if that is a good thing or not by how many people apply for your rentals.

Nancy Neville

Marcia Maynard · Answer

Account Closed You can set your price and income requirements, but your market will determine how much you can push it.

Once the tenant is in place, their circumstances may change, but you can't force them to leave until they fail to abide by the terms of their lease/MTM rental agreement or you decide to give them a "no cause" notice of termination. What you can or can not do at that point really depending on the landlord-tenant law for your jurisdiction.

But why force the move because of what you perceive as a potential inability for a tenant to fulfill the rental agreement terms before giving them a chance to prove otherwise? Adding that kind of verbiage to a rental agreement could be a real turn off for most renters, as it would threaten their security. Life circumstances can change in a heartbeat, add to it a sudden loss of housing because of the landlord's fear? That's oppressive.

Bill Gulley · Answer

Try evicting on that drop in income.....and, how will you know how to enforce it? And No, it is not common or usual or customary and I'd think a judge would laugh before s/he threw it out.

I've had several tenants who lost their jobs and still paid the rent, mortgages too!

Requiring 3X is customary, you could require more, but you limit your tenant market. Don't you require decent credit too? Do they have the ability to borrow $500 on a charge card or some overdraft protection account to make up the difference in rents in a down income month?

Let your first applicant be a protected class and apply when you jack the income requirement up to 4X and see what happens, it's sure going to look like you jacked the qualification up beyond reasonable and customary to deny them!!! As Nancy said, this can bite you in the butt!

I'd say you are perceiving risks that may not exist. The rents charged at a market rate already include the market and financial risks of doing business, both parties have responsibilities and the risks associated with them. There is no such thing as a risk free business, risk and returns.

Which then leads to the thinking, if I'm such a great tenant and present much less of a risk to you, why should I be paying higher market rates in rents as if I were the usual risk off the street? I want you to discount my rents to reflect my better than average abilities to pay....don't banks give better rates to better customers?

It's better for new landlords to learn to go with the flow and stop shaking at night about what could possibly go wrong and dreaming up how to avoid it. Accept the business as it is designed and customary or, if the heat in the kitchen is too hot, get out of the kitchen.  :)

Andrey Y. · Answer

Curious where you came up with that 4X requirement. Is that from personal experience, where you felt tenants with less than 4X the rent in income had trouble paying their rent?

James DeRoest · Answer

I don't mean to be rude, but are you drinking?

It's this sort of dumb thinking that gets politicians making more and more laws that make it difficult for the rest of us.

There was a discussion on BP a few days ago about unenforcable clauses in contracts, and what you've just shown is one of them, and you are also demonstrating contract of adhesion incredibly well. You are making terms in your contract that would make the contract unequal, by incumbering the tenant with the cost of moving at a time they could not easily afford to.

Suck it up buttercup, until they owe you money, you are stuck with them.

Steve Vaughan · Answer

I would say legal to require 4x income (or whatever multiple you want) as long as the same is equal across all your qual guidelines.  Fair housing rules basically make sure you treat every applicant the same.

As far as the reduction of income notice, I would vote no that you can't do that.   Until they fail to pay, there isn't much you can do or write that up in a lease.  Just my opinion from experience.  With CA being about as tenant-friendly as WA, that's my best guess.  A cool thought tho, Account Closed.

Derek B. · Answer

Neil, I took a look at your profile.  For someone whose holdings apparently include office, retail, commercial, multi family and sfr, you sure are spending a lot of time worrying about things that have not even happened.  Do you treat your "commercial and retail tenants" with the same arrogance you are displaying here toward your "poor" sfr tenants who you think are likely to lose their job any day now? I feel bad for the people that rent from you.

Account Closed · Answer

I think it's important to think in terms of what you would be okay with.  Landlords forget that their business involves actual human beings sometimes.

Would you be willing to rent a place that required 4 times the income?  Quite possibly, if you could afford it.  But, if you could afford it, you'd probably be looking at nicer apartments.  But, maybe not.  Maybe you're looking at cheaper apartments because you want to save up to buy a house... I rented to a few people like this.

Would you be willing to have a landlord require proof of your income and/or savings accounts and investments every 3 months?  Probably not.

Then think about who would be willing to put up with that?  That's who your tenant would be.

It wouldn't be me or anyone I've ever known, that's for sure.

When I became disabled, and waiting to be approved by Social Security, I first ran out of workers comp, then state disability, then I lived on my credit cards for a year.  I was never late on rent.  Are you kidding?  Who'd rent to me?  There's a huge incentive for someone who loses their job to be sure and come up with the rent until they find a new job - because who's going to rent to them when they're unemployed?

If your screening shows a really responsible person, they'll either find some way to pay the rent, or leave peacefully.  In my opinion.

Steve Babiak · Answer

I have a tenant who a few years back had surgery, resulting in temporary disability. Meaning that income dropped. Tenant made good on all rent owed over that time and is still there, working again these days ...

Bill Gulley · Answer

Newly acquired rental, you can start with 4X and see what happens, the market might support that, mine won't. Just follow the Golden Rule of Landlording: Be Compliant, consistent and fair, everything else will fall into place. Good luck :)

Legal to Require Monthly Income 4X the Rent & Continuous Income?

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