Tips on Screening Applicants for Corporate Rentals
Corporations or other businesses do not necessarily have protection under fair housing laws. For example, if a landlord accepted all corporate rentals except those from a particular religion, there could be a discrimination issue. For the most part, the landlord decides whether he wishes to rent to other than "real" people. If he does, he should establish written criteria for screening that is distinct from his regular criteria (not necessarily different, but distinct).
The landlord can say, "We only rent to the person who will be living here and they must meet our qualifications." Or, "We allow corporate or business entity rentals, and the rules are as follows:".
- The business application should include information regarding the credit of the company.
- Profit and loss statements, tax returns, and other relevant data can be checked.
- If the company is incorporated, the status of the corporation should be checked. If they are operating in California, they must be registered with the Secretary of State and must be "active."
- Corporate tenants sometimes later claim that the person signing the lease wasn't authorized to do so. To avoid these types of claims, request a corporate resolution that shows that the person signing the rental agreement has the authority to do so. Alternatively, have the rental agreement signed by (1) the chairman of the board, the president or any vice president and (2) the secretary, any assistant secretary, the chief financial officer or any assistant treasurer of such corporation. If a document is signed by two corporate officers, in the combinations described above, under California law the corporation cannot later claim that they signatories were not authorized."
- Since the corporation is not a person, it must have a person designated to be the agent for service of process and registered with the state for that purpose. That information should be confirmed and listed on the contract with a clause indicating that the corporation must notify the landlord immediately if there is any change.
The reason a business incorporates is to limit its officer's personal liability. If there is a lawsuit against the company, only the assets specifically owned by the company can be accessed to pay the debt. Thus, many landlords require the personal guarantee of an officer of the corporation, making the assets of a qualified person also subject to judgment.
- If the entity is not a corporation, the landlord should again have specific criteria for qualifying. Is there a rule which allows an entity to be the only responsible party if it is sufficiently solvent and legally responsible? Or is there always a personal guarantee required? The entity should have documentation of income and assets to support the ability to pay the rent. Have they ever done a rental before? What is their payment history?
"Corporate" rentals can be lucrative, but require specific knowledge and documentation. Please contact your attorney for advice on establishing written procedures before beginning this unique process.
(The above discussion is general in nature and should not be construed as individualized legal advice. Readers are cautioned to seek individualized legal assistance based on a detailed analysis of their particular facts and circumstances. If you have any questions regarding the above material or any other matter involving landlord-tenant issues, you may contact the Law Offices of Kimball, Tirey & St. John, 800-338-6039.)
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