How To Screen Tenants And Avoid Discrimination

June 2017

If a rental applicant thinks you discriminated against him or her, the applicant could sue. To protect yourself from a tenant lawsuit and safeguard your property from problem renters, it's important to screen all tenants. Learn why and how to screen tenants legally every time you advertise an available apartment.

Why You Need to Screen Tenants

Busy property managers and landlords might decide their risk of a lawsuit is low, and skip screening prospective tenants. Is it really worth avoiding a few minutes of extra time to wind up with renters who destroy your rental property, don't pay the rent or cause problems for other renters, who then decide to leave your apartment rather than renew their lease?

Screening tenants not only delivers peace of mind that your apartment is in good hands and you'll receive the rent on time, it prevents you from having to devote your time and energy to following up with problem renters.

Finally, tenant screening can protect you against complaints of discrimination. Under the law, you cannot discriminate against renters on the background of race, ethnicity, religion, age, family status or disability. Additionally, you cannot ask about an applicant's citizenship status. If a renter thinks you did not accept his or her application for one of these reasons, he or she could sue you. If you can present a clear and compelling argument showing you rejected this person’s application for valid reasons, you're much likelier to have a successful outcome in court.

While you cannot deny renters for protected reasons mentioned above, there are many valid reasons you may turn down their rental application. You can legally deny renters for inadequate income, some criminal records, bad references from current or prior landlords, “bad credit” or a high debt-to-income ratio.

While you can and should take income into account when green-lighting renters, you cannot take family size into account. A single renter earning $36,000 might comfortably afford a $1,000-per-month apartment; while a single parent who earns $36,000 and has two small children will have a more difficult time affording the same apartment. Nonetheless, you cannot accept a single renter who earns $36,000 but deny the single parent earning a comparable salary. To do so could place you in jeopardy of potential adverse litigation.

When you perform  tenant screening, you can avoid these sorts of discrimination claims and uncover red flags, so you do not accidentally rent an available property to problem tenants.

Best Practices to Screen Tenants Legally

Best practices for tenant screening, acceptance and rejection focus on setting clear guidelines, applying them uniformly, and keeping comprehensive records for all your rental properties.

As a best practice, it's wise to accept the first qualified applicant for your open apartment. This typically means the first applicant who passes your credit and background check, has good references and can afford the rent using the income guidelines. By adopting this best practice, you can protect yourself from discrimination claims. Even if someone from a protected class tries to sue you for discrimination in housing, records that show your consistent and fair approach will demonstrate your compliance with fair housing laws.

Best practices recommend you consider ahead of time the reasons you would deny applicants, keep written records, and use a third-party tenant screening service to check renters’ backgrounds. Make a written checklist of your screening process and rental criteria. Then, use the checklist along with the background check results to make decisions. This way, you can point to the specific reason you denied a renter (i.e., failed to pay the rent on time at his or her last apartment) if someone tries to sue you.

How to Screen Tenants Legally

Having all renters complete the same application for an apartment is one easy way to show you are not discriminating against a particular type of applicant.

Your rental application should gather all the information you need to screen tenants legally and evaluate whether an applicant is a good candidate. To perform a background check, you'll need an applicant's full name, address and Social Security number as well as income and reference information if you will be contacting prior landlords.

You may require tenants to pay for their credit checks. If you decide to charge tenants for credit checks, it's worthwhile to pre-screen applications and deny anyone who is not a qualified renter. If you plan to reject anyone who does not earn at least three times the rent (a suggested best practice for landlords), why go through the time-intensive background check when you already know you'll deny him or her?

Simply letting applicants know you will check their credit can help you avoid problem renters. An applicant who knows he or she has poor credit, a prohibitive criminal history, a recent prior eviction or another “red flag” listed in your screening policy may not bother applying for your available rental at all!

A tenant screening service can check the credit and background of rental applicants, providing you with transparent reports. These reports show whether tenants have any evictions or criminal convictions, their debt-to-income ratio, their history of debt payments, and other relevant information specific to your rental criteria. As you review this information, you can determine whether applicants meet your criteria and are suitable renters for your properties.

Knowing that a problem tenant can potentially damage your property, reduce your income, and leave you no choice but to hire a lawyer to pursue eviction, don’t let a problem renter cause you any needless pain and suffering! If you don't screen your tenants, it's not a matter of if this happens to you, but when. A comprehensive tenant screening policy and program makes being a landlord a much easier proposition, especially in a competitive rental market.

If you need help with tenant screening, Global Verification Network can help. Contact us for more information.




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