Finding the Perfect Fit the Right Way

Many of the issues that landlords encounter with problem tenants can be avoided or, at least minimized, by using a comprehensive screening process. This is sometimes easier said than done. Screening applicants in order to find the right fit is legal. However, landlords must be mindful that, under the Fair Housing Act and other applicable state and federal laws, a landlord cannot refuse to rent or lease to a person or otherwise discriminate against a person based on race, color, religion, sex, familial status, disability or national origin. Furthermore, while background searches and/or credit checks can be an effective screening method, a landlord must adhere to certain procedures during the application process. It is important to have the process outlined beforehand and carefully follow it with each prospective tenant to ensure fairness and consistency. The following are some helpful guidelines to keep in mind in the screening process:

Require an application and application fee.

Make sure the application covers everything you need to know about a tenant. For best results, choose an application that inquires about financial, employment, and personal information. Be sure to ask for a social security number, driver’s license number and bank account numbers for a credit check.

Run a credit report & background check.

Make sure the application plainly states that a background check, criminal history report, or credit check will be ordered and that the prospective tenant is granting authorization for a check into his or her financial, employment, and personal history. It is a good idea to have the prospective tenant execute a consumer report disclosure and authorization explaining the prospective tenant’s rights regarding a credit or background check. The Fair Credit Reporting Act establishes certain guidelines that a landlord must abide by when requesting a credit report and making any adverse decision based on the information contained therein. The prospective tenant has the right to obtain a free copy of any consumer credit report and/or investigative consumer report and to dispute the accuracy or completeness of any information contained in any consumer credit report and/or investigative consumer report. However, if there is a question or dispute regarding the completeness or accuracy of the information used to create the consumer credit report and/or investigative consumer report, it is the prospective tenant’s responsibility to contact the consumer credit reporting agency to discuss and/or address the disputed information.

Moreover, there may be additional requirements imposed by applicable state laws.

Contact previous employers & landlords.

It is important to do more than just ask for employment and rental housing history – actually follow-up on the information provided. People can give a great first impression, or may even provide inaccurate or deceptive information; however, talking with others who know and/or have had business dealing with them may provide a more complete picture of a prospective tenant.

Require a deposit.

It is quite simple – a tenant who can afford a deposit is more likely to meet his financial obligations on a monthly basis. Moreover, a deposit provides security to the landlord in the event the tenant ends up causing damage to the property.

Meet the tenant face-to-face.

This step cannot be overlooked! Do not forget to use your intuition and common sense when meeting a prospective tenant – what impression do you get? Aside from the information gathered through an application and checks, things like on-time arrival, cleanliness, and general demeanor in a meeting can really show you whether or not the prospective tenant will take care of the property and meet his/her obligations under the lease.

Remember, a proper, legal screening process can help landlords protect their property and avoid problematic tenants. If you have questions about the legality of your screening process, contact the attorneys at McBrayer today.

BYates

Brendan R. Yates joined the Lexington office of the firm as an associate in 2002. Brendan is a member of the firm’s Litigation Department, where he focuses his practice on construction and real estate litigation, workers’ compensation defense litigation, insurance defense and commercial litigation. He has successfully defended his clients in state and federal courts, the Kentucky Court of Appeals, the Kentucky Supreme Court, and in administrative agency proceedings in Kentucky. He can be reached at byates@mmlk.com or (859) 231-8780, ext. 208.

This article is intended as a summary of  federal and state law and does not constitute legal advice.

The Rise of Agritourism & Important Considerations

Agritourism is becoming an increasingly popular way for rural property owners to earn additional income from agricultural properties.   In additional to more traditional farm tours and seasonal activities such as hay rides, corn mazes and u-pick fruits, farm owners are devising new ways to bring people to their door by offering more entertainment-oriented activities. Some farmers are offering their barns as venues for weddings, parties, dances and other special events.  Others are opening their homes to visitors for vacations so guests can experience life on a working farm by helping out with routine farm chores such as feeding or herding the livestock, milking the animals, making cheese, collecting eggs, picking vegetables and preparing farm fresh meals.   This may sound simple and easy to accomplish but often those who want to offer agritourism activities on their rural properties are blindsided when they run in to unanticipated difficulties with regulatory authorities over building code, fire code or zoning issues.

In general, barns used for agricultural purposes are exempt from state building codes. Converting them to a rustic setting for special events can change the classification and necessitate often expensive retrofitting of the structure to make it safe for public assembly. The renovations may include fire separation walls, sprinklers, new water lines, larger septic systems, code compliant bathrooms and other improvements. Not only can these be expensive, they can diminish the rustic look that some people are looking for when they select an event site.

In addition to building code issues, using agricultural properties for special events, farm stays, corn mazes, serving farm raised meals, wineries with associated entertainment and other types of agritourism typically requires special permits from the local zoning authorities, such as a conditional use permit, that trigger the need for a hearing and notice to neighbors in the notification area. It is important to check with the local zoning authorities about whether such permits are required before opening for business. Regardless of whether special zoning permits are required, consideration must be given to the impact of the use on other properties in the area and address potential issues before they become a problem. For example, limiting the number of events could reduce neighborhood safety concerns about too much traffic on an unlit, narrow country road. Not allowing outdoor amplified music or requiring music to cease after a certain time would go a long way to prevent neighborhood complaints that the use adversely impacts the rural quality of the area.

A Hay Ride Returns From A Pumpkin Patch

Agrituourism has tremendous potential to provide an alternative source of income for rural property owners and can boost tourism in many areas that do not have the more urban type of activities that attract people to the area. But it is important to fully investigate local and state codes and regulations, as well as anticipate neighborhood concerns before starting up the new business.

CWestover

Christine Neal Westover is an attorney in the Lexington office of McBrayer. Ms. Westover has extensive experience practicing law in both the public and the private sector. The focus of Ms. Westover’s experience and area of practice is land use law since her assignment in 1991 as legal advisor to the boards, commissions and divisions of government within Lexington Fayette County on all matters related to planning, zoning and land use law. Ms. Westover has an extremely deep and broad expertise of the laws governing land use in Kentucky and the procedural and substantive complexities that underpin planning and zoning matters. She also has significant experience dealing with governmental divisions such as Building Inspection, Code Enforcement and other administrative bodies due to their regulatory authority in land use matters. Ms. Westover can be reached at cwestover@mmlk.com or (859) 231-8780, ext. 137.

Is An Interest-Only Mortgage Right For You?

There are a number of financing options to consider when purchasing a home, one of which is the interest-only mortgage. This type of mortgage requires a homeowner to pay only the interest that accrues on the loan each month. None of the principal is paid off until the interest-only period expires. The length of the interest-only periods can vary, but payments are relatively low during this time. After expiration of the interest-only term, the buyer is then required to make monthly payments for the principal.

Traditionally, interest-only mortgages were used when home prices were so high that a conventional mortgage payment was out of a borrower’s range. They gave homeowners more bang…or, specifically more house…for their buck. Many saw interest-only loans as one of the many contributing factors to the foreclosure crisis. Freddie Mac stopped backing the loans in 2010; as a result, fewer lenders now offer interest-only mortgages and those that do utilize strict qualifying standards.

This kind of mortgage still presents some advantages. The extra cash that an interest-only mortgage payment leaves a homebuyer with can be used for other purposes, such as to pay off school loans or to upgrade the home. The key, as I see it, is to invest the saved money wisely or put it into other appreciating assets. Ideal candidates for this type of mortgage are those who are certain that they will sell the house before the interest-only period ends or individuals who may have unpredictable income or earnings with a large variable component. For example, brokers who work on a commission structure and whose incomes can fluctuate dramatically can certainly benefit from the flexibility, if they commit to paying the principal when the income is available.

Perhaps the most significant disadvantage to interest-only mortgages is the potential for “payment shock” at the conclusion of the interest-only period. This can be a devastating situation for borrowers who fail to plan properly. There is always the risk that the value of the home will fall during the interest-only period, leaving a homeowner owing more on the home than it is worth.

Borrowers using this particular financing plan should assess their abilities to stay within a financial plan and determine upfront how the cost savings will be used. An interest-only mortgage is not for everybody, but for some, it can be a helpful tool in an ever-changing financial landscape. If you have questions about buying a home, contact the real estate attorneys at McBrayer today.

CRichardson

Christopher A. Richardson is an associate at McBrayer, McGinnis, Leslie & Kirkland, PLLC in the Louisville, KY office. Mr. Richardson concentrates primarily in real estate, where he is experienced in residential and commercial closing transactions, landlord/tenant relations, and mortgage lien enforcement/foreclosure. Mr. Richardson has closed innumerable secondary market and portfolio residential real estate transactions and his commercial practice ranges from short-term collateralized financing and construction lending to development revolving lines of credit. He can be reached at 502-327-5400 or crichardson@mmlk.com.

This article is intended as a summary of  federal and state law and does not constitute legal advice