As a landlord, you obviously have every right to pick your own tenants, and you’re certainly free to set very high standards for the type of tenants that you want. But being a landlord necessarily, and unfortunately, opens you up to potential claims of discrimination or unfair renting practices. Through my time operating a tenant screening service, I’ve heard some crazy stories about threats of litigation, slander in the community, and other unfortunate consequences of choosing not to rent to an applicant. Here are a few thoughts that every landlord should keep in mind when renting out his/her property:
You will need to establish qualification criteria before you can select a tenant. You can be as choosey as you want to be or willing to take risks in setting your standards. However each and every applicant must be judged against the same standards. In this one instance applicants are all the same. There can be no deviation or variance in your qualification process – every applicant must be treated the same. Federal, state, and local anti-discrimination laws are very specific as to what you can do in screening applicants. You are free to choose your next tenant from prospective applicants as long as you base your selection on legitimate business criteria. For example you can reject applicants with insufficient income to meet rent obligations, have credit histories that show serious delinquencies or collections, are known to have caused property damage at a prior rental address, or cannot meet requirements for security deposits or fees.
Federal Fair Housing laws prohibit discrimination against the protected classes of race, religion, national origin, sex, color, familial status, or disability. State and local fair housing laws may have additional protected classes and thus be more stringent than federal law.
You will need to decide the logical progression of the screening steps to qualify your applicants. Your first screening is always to verify identity. The next step is to review the completed application. Some landlords prefer to run credit reports on all applicants, while others prefer to contact landlord references regarding prior rental history before spending money for a credit report. However, early in the qualification process you will need to verify current employment or other income sources to establish if there is sufficient means to meet rental obligations and ascertain that the applicant has adequate cash resources to pay the security deposit, utility deposits, the first month’s rent, and other costs of moving into your rental unit. This is usually best accomplished by providing upon first contact with applicant written information regarding costs rather than by requiring proof of cash availability. If the applicant just can’t afford it, there is no reason to conduct further screening.
Initial screenings (identity, rental history, employment/income) being done, you’ll want to know a little more about the applicant’s background. This type of tenant screening can include credit history, criminal conviction records search, public records search, eviction records search, and reference checking. [Insert shameless AccuRental Tenant Screening plug here]
All screenings should be conducted on every applicant of legal age. While the costs of checking multiple occupants can seem burdensome, some of the expense, if allowed by state law and under certain restrictions, can be offset by charging an applicant deposit. This can work to the landlord’s advantage, but conversely, requirement for excessive application fees can reduce the pool of qualified applicants. Accordingly, you may need to absorb part of the processing expense.
Relying on a consistent and uniform screening process will (1) take the burden of performing credit checks and looking up criminal records yourself; and (2) insulate you from claims of unfair renting practices. If any such claims arise, you can simply point to your screening reports and show exactly what your decision was based upon.