Tenant screening is one of your best tools for maintaining your profitability as a landlord. It’s a way to weed out potential tenants who pose a risk to your property, or those unlikely to stay for more than a few months, and focus on the reliable, long-term tenants you need to turn a solid return on investment, or ROI. Generally, this means taking tenant applications before accepting new tenants, and reviewing information like past residences and personal financial history.
However, tenant screening can be complicated from a legal perspective. On a federal level, it’s illegal to discriminate against anyone for any number of reasons, such as:
- Race or skin color.
- National origin.
- Disabilities or handicaps.
- Sex or gender.
- Pregnancy status or family status.
Many states offer additional protection against other types of discrimination, like discrimination based on age, marital status, or even sexual orientation.
You can be cited for discrimination for many different reasons, such as refusing to rent to someone based on one of the factors above, recommending a different property to someone based on the factors above, setting different terms for people who differ in the above characteristics, or in some cases, simply asking for information about one of the above factors.
Even if you have the best intentions, if you’re not prepared, your tenant screening process could be found to be discriminatory. That’s why it’s important to be proactive, and keep your tenant screening absolutely legally compliant.
Staying Legally Compliant
Do note that laws will vary based on your city, county, and state, but these are some of the best general guidelines for keeping your tenant screening process legally compliant:
- Keep your policies firm and universal. It may seem like the best approach to trust your instincts or make accommodations on a case-by-case basis. That way, you can forgive problematic criteria in some applications where it makes sense and be more personally accommodating overall. However, this can get you into trouble. If your spur-of-the-moment rejection is based on a gut feeling, it could easily be interpreted as discriminatory. Instead, make a firm list of reasonable criteria for which tenants you want in your property, and apply those criteria to every candidate, universally.
- Avoid asking for too much information on applications. The obvious word of advice here is to avoid asking about any factor that could be used in a discrimination case, such as existing disabilities, race, or ethnicity. But it’s important that you avoid asking for information that may be tangentially related to these factors, or could potentially inform you of an applicant’s specific characteristics. You’ll need to ask for several pieces of personal information, such as previous addresses, current income, past jobs, and references, but try to stick to these fundamentals, and don’t stray too far from that foundation.
- Rely on a third party. If you’re worried about exercising the development of tenant applications and making all the major decisions yourself, you could rely on a third party to take care of things for you. For example, you could work with a property management firm that takes care of your tenant screening directly, so you have no direct say in what tenants you take on, other than to specify the general criteria. You could also use an app or automated process to accept or reject applications based on data like current level of income, which are not considered discriminatory.
- Consider criminal records carefully. The Department of Housing and Urban Development recently released a memorandum to forbid landlords from having a firm, blanket policy on whether or not they accept people with criminal records as tenants. In other words, if you reject every application from someone with a criminal history, regardless of other factors, you could be found to be discriminatory. It’s okay to ask for this information, but make sure you consider it in the context of other information you receive.
- Pay attention to new laws and developments. The laws on housing discrimination are complex, not only because they can be interpreted in many ways but also because they exist on federal, state, and local levels. On top of that, new addendums and new laws are near-constantly rolling out. In other words, even if you have a nearly perfect understanding of discrimination laws as they exist today, they could change by the time you’re ready to seek your next tenant. Accordingly, it’s important for you to pay close attention to new laws and new developments in your area.
- Provided rejected applicants with a clear reason. It’s a best practice to send rejected tenant applicants a letter, with a clear explanation for why you rejected them. This isn’t just to be polite; it serves as a physical piece of evidence that excludes discriminatory practices as a reason why a tenant was rejected. For example, you might point out that their credit history makes them seem unreliable, or you might explain your policy of only hiring people with a full-time job.
- Consult with an attorney. If you’re in doubt about any discrimination laws or whether your tenant screening practices fall in line with them, talk to a lawyer. They’ll know better than you do. In fact, even if you’re sure about your tenant screening process, it’s probably a good idea to talk to one anyway. They may be able to offer additional insights or strategies you can use to better protect yourself.
Outsourcing Your Tenant Screening
If you want to spare yourself the headache, the best thing to do is outsource your tenant screening work. You won’t have to get your hands dirty or stress about how you’re handling the operation; instead, you can rest assured that experienced professionals are handling your tenant acquisition in a controlled, legally compliant way.
If you’re interested in learning more about Green Residential’s tenant screening services, or if you’re interested in hiring a full-on property management firm, contact us today! We’ll provide you with a free consultation and help you determine exactly where your needs lie.