Kentucky Landlords Face New Requirements

Kentucky landlords need to be aware of the new requirements imposed by the enactment of the Dodd-Frank Act, The far-reaching bill was passed in July of 2010 and recently became law in July of this year.

This legislation affects large management companies as well as individuals in Kentucky renting a single unit. By now, I'm sure companies in the business of managing large apartment complexes are up to speed on the nuances, however, if you have just decided to rent out your garage apartment to raise extra cash, pay close attention.

If you are requiring a credit check of prospective tenants, beware of the steps you need to take if you find an applicant's credit score not to your liking. In the real estate rental business, this is known as "adverse action".

Adverse actions are meant to protect a Kentucky landlord from non-payment or default. These can take several forms, such as denying the renter's application, requiring the applicant use a co-signer, increasing the amount of the security deposit or increasing the amount of monthly rent.

Under Dodd-Frank, if you decide to pursue an adverse action because of an insufficient credit score, you must now provide specific information to the applicant as to why the action was taken.

Not only do you have to provide the prospective tenant their credit score, you must name the company that issued the score, the date of the credit report, a range of scores within the scoring model and the key factors that adversely affected their credit score.

For the individual renter in Kentucky, the last two items may be difficult information to provide. Most problematic is discerning the key factors that influenced the credit score. It is highly doubtful small-time landlords will be able to interpret score weighting.

These requirements went into effect on July 21, 2011 under the jurisdiction of the Consumer Financial Protection Agency. It may be time to hire a property management company to take care of any of your Kentucky rental units, just to be on the safe side.

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