On September 13, the Minneapolis City Council approved changes to local housing law in what has become known as the Renter’s Protection Ordinance. Actually an amendment to existing code, this multifaceted piece of legislation marks a significant departure from the status quo, particularly when it comes to how landlords screen potential tenants.

Owners of buildings with 15 or more units must comply with the new policy starting in June of 2020, while owners of smaller properties have until December 2020. Below, we will dive into the specifics of the ordinance and summarize the key points you need to know to be ready when it goes into effect.

New Restrictions on Tenant Screening Criteria

Currently, Minneapolis landlords follow State and Federal Fair Housing Laws along with the HUD Guidelines when making screening decisions to be consistent from one potential tenant to another.  Criteria that falls within these guidelines typically include rent to income ratio, housing history, employment history, credit history, and a criminal background check.   The new ordinance places much stricter limits on the factors landlords can consider when evaluating a potential tenant.

Under the ordinance, landlords cannot turn away potential tenants simply for having bad, or no credit. Information on a credit report directly relevant to fitness as a tenant may be taken into account, and a renter who knowingly withholds this kind of information can be rejected, but other aspects of their credit history are off-limits. Similarly, it is prohibited to reject a tenant based on a sparse rental history, unless they are withholding relevant information in bad faith.

On the topic of rental histories, past eviction actions may only be considered if the action resulted in a judgment against the applicant entered within the last three years.  The tenant cannot be rejected if any of the following are true: (1) the judgment was entered into three or more years prior to the date of application, or (2) the action ended in a dismissal or settlement one or more years before the date of application, or (3) the action resulted in judgement in favor of the applicant.

Income Test Restrictions

Landlords who employ a minimum income test (such as requiring tenants to earn three times their monthly rent) are required to make an exception for those who can demonstrate a history of successful rent payment.

Considering Criminal Records

The other new restrictions on tenant screening pertain to renters with criminal records. Broadly speaking, a past conviction may only be taken into consideration if sentencing occurred within seven years of the application date for a felony, or three years for a misdemeanor. There are several exceptions to this rule. For more serious convictions, including but not limited to first-degree assault, first-degree arson and aggravated robbery convictions, the seven-year restriction is extended to ten years. A landlord is also free to deny applicants who have ever been convicted for the distribution or manufacture of a controlled substance, as well as those who have been convicted of offenses that mandate denial of tenancy in federally-assisted housing. This last exception comes into play, for example, when an individual or any member of their household is subject to a lifetime sex offender registration program.

Though strict, these limitations are not necessarily ironclad. If you feel that a certain case justifies criteria more prohibitive than those described above, you can conduct an individualized assessment of the potential tenant. When making an individualized assessment, the landlord must accept and consider any supplemental evidence the tenant submits, as well as the specifics of the incidents that could lead to a denial.  This might include the incidents’ nature, severity and number, as well as when they occurred and the applicant’s age at that time.

Dealing with Denial

In addition to restrictions on screening criteria, the Renter’s Protection Ordinance contains rules landlords must follow when rejecting a potential tenant. The requirements differ depending on whether the denial is based on the criteria described above, or on a landlord’s individualized assessment of the renter.

In the former case, the landlord must simply notify the individual and specify what criteria they failed to meet within 14 days of rejecting their application. If the denial is based on criminal history, they must also consider supplemental evidence provided by the tenant.

When a denial is based on an individualized assessment, the same 14-day rule applies. The notification must also be in writing and include any supplemental evidence supplied by the tenant, as well as an explanation of why said evidence is insufficient to compensate for the factors that led to the denial. The property owner is expected to retain this notification for at least two years, and provide it upon request to Minneapolis’ Director of Regulatory Services or their designee.

New Restrictions on Security Deposits

Somewhat more straightforward, but equally noteworthy, is the section of the amendment that deals with security deposits. Under the new law, landlords are prohibited from charging an amount equal to more than a single month’s rent as a security deposit. The ordinance provides a formula to adjust if the rent period is longer or shorter than a month.

Under the ordinance, at or prior to move in, landlords may charge the security deposit and the first month rent only, with the security deposit capped at a single month rent.  Alternately, if a landlord requires more than one month of rent up front plus a security deposit, the security deposit is capped at 50% of a single month rent. In this scenario, the resident may also choose to pay the security deposit in installments.

How Guardian Property Management Can Help

The Renter’s Protection Ordinance is complicated and can present Minneapolis property owners with a variety of new challenges, including risk of violating Fair Housing State and Federal Laws, when attempting to comply with Minneapolis’ Renter Protection Ordinance. Guardian Property Management is evaluating its application process in light of the new ordinance so clients can rest easy knowing that they are in compliance. For more information on how Guardian can serve your needs, call 651-287-2011 or visit www.guardianprop.com.

Posted by: guardianpropertymanagement on November 6, 2019
Posted in: Uncategorized