Tenant approved, lease is not signed yet, can we back out ?

22 Replies

Hi All,

This is my first post. We moved to a new house and are planning on renting our current house.

We have a property manager who gave application to 2 parties out of which the 1st party didn't meet the criteria but 2nd party did meet the criteria & has been approved. Party has signed/filled the rental application and paid for application screening. Our property manager has informed the party that they have been approved and they can move-in within 2 weeks but we don't want to rent our place to the 2nd party - is it legally possible to back out now ? we haven't signed anything yet and neither has our property manager signed anything with the tenants accept for screening their rental application and taking the application screening fee of $40 per adult.

House we are planning on renting is a 4 bedroom 1954 house with 1 bath in Portland Oregon ( frankly 3 bedroom and 1 media room which opens via sliding door to the backyard but does have a closet). Family planning to move in has 2 adults and 7 kids and we don't think the house can handle 9 people especially the toilet/bathroom with old sewage/septic system. We also are concerned about the washer/drying and the plumbing issues.

Any help in this regards will greatly appreciated.

You can not discriminate against a prospect based on family size.  If they meet the legal requirements for occupancy then you can not reject them based on this.  The fact that they have already been approved verbally means that if you back out now, you have just set yourself up for a virtually unwinnable lawsuit.

Here in Colorado, the number of legal occupants is #of bedrooms X 2 +1, so for your 4 bedroom, it would be 9 people as legal occupancy and that family would be permitted and allowed.

Find out what your legal occupancy legal is for related individuals (it is usually different for unrelated individuals).  If they are within that legal limit, I think that the odds of them suing you for discrimination is way too high and I would bite the bullet and go ahead and rent.

I agree with @Linda Weygant , if they've met all your acceptance requirements and been approved you may have an issue with rejecting them. Double check their application to see if there are any of your posted acceptance criteria that they don't meet, like 3x income, minimum credit scores and so forth. 

Linda does make a good point, check your occupancy limits in your state/city. In my city in Colorado there cannot be more than 3 unrelated adults in a house, that would not technically help in your situation but there are different occupancy laws all over the US. 

Double check with HUD as well, I thought the occupancy with HUD was 2 people per room, so in your case, it would be 8 if the 4th room was legally conforming if it's not a conforming room it would only be 6. Also, check with any laws dealing with the Fair Housing Act. I know familial status is protected but there may be another out if you're really concerned.

Be careful though an FHA of HUD complaint would not be fun to deal with.

Gotcha. Ya, well maybe your PM is eager to get them into your unit to collect his fee. Double check their reports against your criteria. Pulling at straws there, I think you better bet is to look into HUD occupancy limits.

Good luck, let us know if there are any updates!

I'm not sure what your situation is as to why you retained a PM or what he/she charges,  But if your only renting out your previous house, and your somewhat close to your old home.  You want to reconsider using a PM.

No issues whatsoever.  A lease or any contract is not legally binding until the contract(lease) has been signed and delivered to both parties.  Either party at this point can change their mind.  Anyone who says a lawsuit may follow, albeit anybody can sue anybody, final terms ie... method, time of payment, form of payment or any particulars have yet to be agreed to

@Greg H.   Agreed,  I just reread their original post 

"we haven't signed anything yet and neither has our property manager signed anything with the tenants accept for screening their rental application and taking the application screening fee of $40 per adult."  

Nothing has been signed, there is no issue.

I do have to ask, why are you using a PM?  If you just have one house and you live in the area, there is no reason for you to have a PM.  Renting a home in Portland is as easy as putting up an add on Craigslist and talking to a couple of people.  You can get all the docs you need from this site, they have applications and leases.  I use the application from this site, I already had a lease so i didn't look at theirs, but i know you can get solid leases online if you feel what's here isn't good enough for you.  For collecting rent i have them deposit it directly in a checking account of a bank that's closest to the house.

I've told several people this, being a landlord on a single family residence in your town is very easy.   Both my wife and I are working professionals and spend plenty of hours in an office.  The amount of time needed to manage a fixed up rental is literally hours,,,,, a year.  Biggest amount of time you will spend is getting it rented out, and with portland's hot rental market its not going to be long.  You aren't handy?  no problem, there are lots of people who are that you can hire.  You are afraid you are going to get ripped off by a plumber?  don't be, if you end up paying $149 to unclog the bathroom drain, that's still less than one month management fee, and you only have to pay the 149 once..  That 8-10% management fee is forever.  Seriously, you don't need a PM, i was able to manage my two properties in Portland for two years while i lived in NY.   The list of repairs i've completed over the years mostly comprises of dead appliances and clogged drains.  I mean unless you have an absolute phobia of talking to people, this is something you can do on your own.  

I'd can your PM, take the home off the market for a week and then put it back on.  Personally i'd much rather be the one placing tenants in my home vs someone who just wants it rented for them to collect their fee.  You are the only one who will have your best interests in mind.

Can you have your pm call and cancel saying there are issues with house and you are removing it from the market "until further notice" and then take it off the market a little while. Next time list as a 3 bedroom and consider one room an office maybe.

Thank you all for your responses.

We hired the property manager because the screening of application, agreement etc was becoming a little tedious for us to manage as we both work full-time and have toddler age twins :-) & the property manager was charging only 4% 

Here is another thing I heard from our property manager: in her applicant screening process she only verifies their rental history and criminal background check and doesn't do any credit score check.

Also the applicants who got qualified are coming from overseas (African continent) so am not sure how my PM verified their rental history, criminal background check and their 3x income .. Also the applicants snail mailed our PM the $40 each for screening both the applicants. Also our PM said that the applicants have booked their plane tickets.

This whole situation is making me nervous.

Originally posted by @Sunny Hande :

Thank you all for your responses.

We hired the property manager because the screening of application, agreement etc was becoming a little tedious for us to manage as we both work full-time and have toddler age twins :-) & the property manager was charging only 4% 

Here is another thing I heard from our property manager: in her applicant screening process she only verifies their rental history and criminal background check and doesn't do any credit score check.

Also the applicants who got qualified are coming from overseas (African continent) so am not sure how my PM verified their rental history, criminal background check and their 3x income .. Also the applicants snail mailed our PM the $40 each for screening both the applicants. Also our PM said that the applicants have booked their plane tickets.

This whole situation is making me nervous.

 Yeah, no. Whole situation sounds sketchy. No contract was signed so you aren't binded to anything. Them purchasing plane tickets is none of your concern. Their application got approved, they didn't sign a lease. It's like having my job application approved. It doesn't mean the company is now obligated to provide me a wage. It's not official until both parties sign an agreement/contract.

Do you have septic? how many bedrooms is the septic rated for? If you have septic it is recommended to give your PM a reasonable occupancy limit based on the # of bedrooms of your septic and any other property limitations. H U D fair housing does allow that you can do so but It is less specific on what is considered reasonable. Anything you do should be consistently applied and based on more then just an old septic. Do you have a septic report and what does it say? Aside from this you need to know how the PM is vetting international prospective tenants. and tenants in general. I would also say limit should not be less then your own occupancy.

Although this is a old post you have not responded on your decision. I would immediately inform them the unit is no longer available and pull the listing. I would also spend the money to remove a closet and turn one bedroom into a office to help avoid this situation in the future.

Fair housing or not I would never agree to rent to anyone with 7 kids. Can't imagine the condition of the property within a year. You would defiantly be not renewing their lease and be facing extensive ware and tear repairs.

Sunny, i think you just made my point about who has the best interest in mind.  i had to reread your first post.  9 people in a 3 bedroom?  Would you allow that if you were the one taking the applications?  Here's a quick story for you.  There is a small 2 bedroom 1 bath home that rented really close to my home to a couple with i don't know how many people they had living with them (kids and adults)...  My wife and i would walk by the house almost daily (it was on the way to our gym), we'd always comment about how many people were in there, it was never less than 6...  Well, not  a year later cops were there (we don't know why) and then the family was gone.  Next few weeks, the owners were there doing a lot of repairs.  We could tell from the get go it wasn't going to end well for that home, just too many people.  Now there's a youngish couple living there which is much more appropriate for a home of that size.

I am curious to how much work you had to do with the application process?  I find after talking to the perspective tenants i pretty much know if id rent to them or not.  All i require is an application, have them run a report from freecreditreport.com and provide me with their current pay stubs.  I hate to say it but there has even been a time or two when i didn't even check their references, I just knew.  And so far,,, its all worked out.

If you want a PM that's fine, i get it life is busy.  But if your first PM is thinking of putting 9 people in a 3 bedroom, i'd seriously reconsider using them.  I'd get another company, pay the 8%+.  You will probably end up ahead, cause the wear and tear of 9 people,,  that's going to add up. 

 Anyway, good luck with your rental, and in a year or three you might realize you don't need a pm anyway and give it a go on your own.

Originally posted by @Marian Smith :

Can you have your pm call and cancel saying there are issues with house and you are removing it from the market "until further notice" and then take it off the market a little while. Next time list as a 3 bedroom and consider one room an office maybe.

 that works until the tenant googles the landlord and finds this thread lol

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