Webinar Q&A Application Fees & Deposits Is the application feee of $50 per adult or per family? Under the VRLTA, the application fee can be charged to each applicant over the age of 18 years. Can the application deposit be nonrefundab ble? By definition, an application deposit must be a refundable deposit. If the tenantt fails to rent the unit, the landlord must refund the application deposit, minus the landlord s actual expenses and damages within 20 days of the tenant s failure to rent or the landlord s rejection or within 10 days if the deposit was made by cash, certified check, cashier s check, or money order. If the landlord withholds funds from the deposit, he/she mustt provide an itemized list of damages and expenses. If the payment is nonrefundable, it must be an application fee. Is the application feee capped at $50 total or $50 over and above the expensess for the background and/or credit checks? The VRLTA caps the application fee at $50 ($ $32 for a public housing unit or other unit subject to HUD regulation) over and above any actual out of pocket expenses paid by the landlord to a third party performing background, credit, or other pre occupancy the application fee and the application deposit? Under the VRLTA, an application fee is a nonrefundable fee which iss paid by a tenant to a checks on the applicant. Can you please recap the difference between landlord or managingg agent for the purpose of being considered as a tenant. An application fee cannot be more than $50 (or $32) as explained above. An application deposit is a refundable deposit which is paid by a tenantt to a landlord for the purpose of being considered as a tenant. If the tenant fails to rent the unit, the landlord must refund the deposit, minus any actual expensess and damages within a specific time period set by the VRLTA. Background Check Is there a limit to how far we can go back to look at items that come up on the criminal background check? This is a very new area of law right now and has not yet been tested in the courts. In early 2016, HUD released a guidance document that advised that blanket prohibitions on renting to tenants with certain crimes/convictions have a disparate impactt on minorities and therefore violate fair housing law. Landlords should have a policy that reviews each situation individually as to whether the tenant would still be a clear and present threat based on the facts and circumstances of the conviction and how much time hass passed. The tenant should also be allowed to provide any mitigating information pertaining to the crime. Althoughh HUD has not spoken to an acceptable look back time period, the current practice appears to limit look back
periods to 7 10 years or less. This is an area where you want to work with your third party screener and attorney to develop a policy that falls within HUD s recommendations. Can you ask a tenant about his/her criminal history? A landlord is allowed to perform a criminal background check on prospective tenants. According to HUD, decisions must be made based on conviction history, not arrest history. Again, this is a very new area of law. Please see the answer above and speak to your attorney and third party screener to craft a policy that is in compliance with fair housing laws. What ability does a property manager, on behalf of a landlord, have to deny a lease based on a criminal background check? As stated above, HUD issued guidance in April 2016 as to how and when a landlord could deny a lease based on the results of a criminal background check. There is an exemption, that allows a landlord to deny a lease based on a tenant s conviction for illegal manufacture or distribution of a controlled substance. Disclosure Do you really need to disclose agency to unrepresented potential tenants? Does that look the same as disclosing to an unrepresented buyer or seller? Licensees must disclose to an actual or prospective landlord or tenant, who is not the licensee s client and who is not represented by another licensee, that the licensee has a brokerage relationship with another party to the transaction. The disclosure must be in writing and included in all applications for lease or the lease itself, whichever occurs first. If the terms of lease do not provide for the disclosure, the disclosure must be made in writing no later than the signing of the lease. This disclosure requirement does not apply to lessors or lessees in single or multifamily residential units for lease terms of less than two months. Escrow If the company engages in sales and property management are two separate escrow accounts needed? There is nothing in the Virginia Code or the regulations that states two separate escrow accounts are needed. However, we do recommend separate accounts as a best practice. It not only makes the accounting of funds easier, but it also separates accounts with a lot of escrow activity from accounts where escrow monies may stay in the account for years. Just to confirm, rental payments made monthly must be deposited into the escrow account and not the operating account? Any payments that come into the property management company, and are made out to the property management company, are technically someone else s money and should be deposited into the firm s escrow account. At that point the landlord s portion of the check can
be sent from the escrow account to the landlord and the Agent s portion, if there is one, can be sent to the brokerage firm s operating account. The firm can then pay the Agent his/her fee from the operating account. If the check is made out to the landlord, and no portion of the check is due to the agent, the check can be sent directly to the landlord. What if a licensee owns property and leases it on an annual basis, usually for multiple years and does not have activity in the escrow account? The regulations state that any monies in the escrow account that ultimately belong to the licensee shall be separately identified in the escrow account records and shall be withdrawn at intervals of not more than six months. There is no prescribed time limit on activity in the escrow account, or a maximum amount of time an account can be open. Licensure Can a salesperson licensee, not a broker, manage properties? A licensed real estate salesperson may manage property (and everything that entails) without a broker s license. However, the licensee must do so through a licensed firm and under the supervision of a principal broker. Can an owner who hires a real estate broker to locate a tenant then have rent paid directly to owner and can owner hold the security deposit? Essentially, the broker s job is completed once the lease is signed. Yes, licensees can act as listing agents for rental properties. VAR offers an Exclusive Authorization to Lease (Form 975) form which can be used to accomplish this. Can an unlicensed individual "open" a property for a potential tenant if they are not discussing lease or property details? In general, no. The Virginia Real Estate Board has made it clear in the licensing regulations that showing property is a licensed activity, regardless of whether the property being shown is offered for sale or for lease. There are two exemptions to the licensing laws that could apply in this situation. First, any person, partnership, association, corporation, entity, or their regular employees, who as owner or lessor perform what would otherwise be licensed activity, where the acts are performed in the regular course of or incident to the management of the property, are exempt from the license laws and the need to have a license to show property. And second, any salaried person employed by a licensed real estate broker for and on behalf of the owner of any real estate which the licensed broker has contracted to manage for the owner if the actions of the salaried employee are limited to: 1. Exhibiting residential dwelling units on such real estate to prospective tenants, if the employee is employed on the premises of such real estate; 2. Providing prospective tenants with factual information about the lease of residential real estate; 3. Accepting applications for lease of such real estate; and 4. Accepting security deposits and rentals for such real estate. Note that in the second exemption, the unlicensed individual may NOT negotiate the amounts of the security deposit or any leases.
Can an unlicensed spouse open a Property Management Firm and have the other spouse work there? In general, real estate licensees must always perform licensed activity through a licensed firm under the direct supervision of a broker. If the spouses have an ownership interest in the properties being managed, the previous exemptions may apply. Can you repeat the requirement around the licensing requirements? For instance if your license is hung with one broker, can you start a property management firm and hire a broker to be the managing broker? If an individual wishes to perform residential property management, including licensed activities, they must perform those activities through a licensed firm under the direct supervision of a broker. While real estate salespersons cannot hold concurrent licenses at multiple firms, the regulations do allow for brokers to obtain concurrent licenses to hang at different firms. If you wish to have a license hanging with one firm for sales transactions and another license at a different firm for property management transactions, you will need to obtain concurrent brokers licenses. There is no requirement that you are the principal or supervising broker at either or both firms. In what situation would a property manager represent a tenant? Do they not work for the owner? A property manager could represent a tenant as a dual or designated agent. Because the duties of most residential property managers involve acting on behalf of the landlord in some capacity, there will likely always be some form of brokerage relationship between the landlord/owner and the property manager. May a real estate licensee act as property manager of their own property without a brokers license? There is no legal or regulatory prohibition on this. The regulations prohibit negotiating leases for third parties through an unlicensed firm or without a principal broker. Repairs Can you go over who is responsible for storm damage again please? The obligations depend on whether you are subject to or have opted into the VRLTA or whether you are operating under the common law. Both the common law and the VRLTA allow the parties to agree that the tenant perform specified repairs, maintenance tasks, alterations and remodeling, but only if the agreement is entered into in good faith and not for the purposes of evading the obligations of the landlord. Both the common law and VRLTA establish a baseline that the landlord shall: make all repairs and do whatever is necessary to put and keep the premises in a fit and habitable condition; and maintain in good and safe working order and condition all electrical, plumbing, sanitary, heating, ventilating, air conditioning and other facilities and appliances supplied by him. The
common law allows the landlord and tenant to agree to shift these duties to the tenant as part of the lease agreement. The VRLTA does not allow for shifting any of these duties. VRLTA Is a corporation considered a "natural person" then for purposes of application of VRLTA and the two property limit? The VRLTA defines "Natural person" to include co owners who are natural persons, either as tenants in common, joint tenants, tenants in partnership, tenants by the entirety, trustees or beneficiaries of a trust, general partnerships, limited liability partnerships, registered limited liability partnerships or limited liability companies, or any lawful combination of natural persons permitted by law. Are vacation rental properties subject to VRLTA? The VRLTA applies to all rental agreements entered into on or after July 1, 1974 unless there is an exemption. One of the exemptions is a guest who is an occupant in a hotel, motel, extended stay facility, vacation residential facility, boardinghouse, or similar lodging if such person does not reside in such lodging as his primary residence. So while the typical vacation rental property would not be subject to the VRLTA, if an individual rents a vacation property for an extended period of time and considers it his primary residence, it would be subject to the VRLTA. Can I use the VRLTA for a condominium unit? Yes. Any owner can opt into the VRLTA, even if they are not subject to it. Additionally, the VRLTA includes condominium units in the definition of single family residence. Is a townhouse or duplex considered a single family home? The VRLTA defines single family residence as a structure, other than a multi family residential structure, maintained and used as a single dwelling unit, condominium unit, or any other dwelling unit that has direct access to a street or thoroughfare and shares neither heating facilities, hot water equipment, nor any other essential facility or service with any other dwelling unit. So depending on the construction of the townhouse or duplex, it may be considered a single family residence. What if you rent rooms out of a house, and you only own two houses? As stated before, the VRLTA applies to all rental agreements entered into on or after July 1, 1974 unless there is an exemption. There are 11 exemptions, including occupancy in a singlefamily residence, which is defined as a structure, other than a multi family residential structure, maintained and used as a single dwelling unit.