Considerations For Choosing Tenants
Today, we are providing some of the screening tips we use to avoid getting a bad tenant. There are a few steps we take to ensure we are screening properly and getting the best possible renter for your property.
Can Landlords Choose Who to Rent To?
The simple answer is yes. Landlords have the right to choose the most qualified applicant as long as the decision is based on legitimate business reasons, such as sufficient income or credit score. The decision should be compliant with fair housing laws as well. The Fair Housing Act prohibits discrimination based on race, color, religion, sex, ethnic background, familial status, or disability. Some local laws also prohibit discrimination based on source of income, sexual orientation, marital status, or age. Make sure to familiarize yourself with federal and state laws.
Since landlords can accept or deny applicants for business reasons, they are allowed to screen tenants to determine if they are reliable and will pay rent on time. Running credit and background checks, requesting proof of income like pay stubs, and contacting references are all legal during the screening process. If a prospective tenant doesn’t meet the screening criteria, landlords can legally deny them. For example, a history of late payments, serious property damage at previous residences, and prior evictions are valid reasons for denying an application.
Legal Restrictions for Rental Applications
Along with bad rental history or credit, landlords can legally decline an application if the prospective tenant smokes or owns a pet. Smoking is considered a lifestyle choice and isn’t covered under the FHA, so landlords can prohibit smoking on the property. Similarly, landlords can refuse to rent to applicants with pets, unless they are service animals. Service animals aren’t considered pets under the FHA and landlords are legally required to provide reasonable accommodations.
Review Applications by Order Received
Accepting applications out of order isn’t illegal, but in your best interest as a landlord to accept (and deny) applicants in the order they are received. It’s recommended to accept the first qualified applicant.
It’s also a good idea to take back-up applications in case the first applicant changes their mind or negative information appears on their background or credit check. Also, hold off on running credit and background checks until it’s time for the next application to be reviewed. Being transparent with potential tenants is also important. Communicate to applicants that someone has already applied for the unit, but they are next in line to be considered. This helps minimize the risk of someone suspecting discrimination or feeling brushed off. Being open and honest will help you maintain a positive reputation.
Since there isn’t a law stating that a landlord must take the first applicant in line, some landlords will rate applications and choose who they believe is the best fit. As long as the ranking factors are the same for all applicants and not designed to block a group protected under the FHA, landlords are allowed to use a ranking system. Landlords must create a ranking system based on legitimate business criteria such as having a solid rental history and high credit score.
Document your process
Having proper documentation is necessary and can help you avoid a discrimination claim. Make sure you have an FHA-compliant list of criteria when reviewing applications. Using a written list will help ensure selection standards are applied equally while also narrowing down who will be the best tenant.
Every time you accept a new tenant, record why you selected one tenant over the other to protect yourself from lawsuits. If you ask for references from previous landlords, document the day you called them and their responses to your questions. For example, if an applicant’s previous landlord notes they had several late payments, noise complaints, or created serious property damage, write down that information.
Whenever you deny a rental application, send a letter or email to the applicant detailing the reason they were rejected and the criteria used to make that decision. If you’re denying an applicant for negative information on a credit report, you must let them know in the letter because of the Fair Credit Reporting Act. Include the name and address of the agency that reported the negative information. You should also let the applicant know that they have the right to obtain a free copy of the report by requesting it from the agency within 60 days.
Be consistent
Consistency is one of the best ways to meet fair housing compliance. Pick one selection method and stick to it. Using the same policies ensures you don’t violate fair housing laws. You’ll also be able to refer to your documentation to prove your history of being fair and consistent if an applicant questions a rejection or files a discrimination claim.
If you have any questions about this blog, or you’d like some help screening your tenants, please contact us at MSB Property Management.