Real Estate Articles » Landlord

Avoiding The Appearance Of Discrimination

By: Brendan O'Brien
Submitted: 09:11AM on Tuesday 09 September 2008

You know the feeling of embarrassment you get when you say the wrong thing at a party or other social event? When you’re talking to tenants or prospective tenants, the potential damage from saying the wrong thing is much higher – it could cost you thousands in legal fees and damages, as well as the loss of your reputation.

I believe landlords and property managers are far more likely now to get in trouble for the accidental appearance of discrimination than for the real thing. Most of us know better than to knowingly discriminate based on gender, skin color, religion or other protected distinctions. It’s not just that we’re good people – actual discrimination is also bad business. If we discriminated, say, against people from a different background, we’d be turning away money from potential tenants who might turn out to be great. If we only rented to people who “looked like us,” we’d quickly find that some of those folks are simply awful.

There’s no doubt that actual discrimination in rental housing does exist, however. There are also people who aggressively hunt down rental housing discrimination even when it doesn’t exist. Some of these people are tenant lawyers. Others work for HUD or your local or state housing agency. If they start looking at your business, they’ll do so with very keen eyes.

They don’t expect landlords to say things like “we don’t rent to people like you” or “no (white, black, male, female, whatever) people allowed.” Even the actual bigots are far too smart to use those lines. Instead, the tenant lawyers look for subtle patterns, subtle messages, and inconsistent treatment.

With that in mind, here are a few pointers for avoiding the appearance of discrimination. Even if you apply these rules, you may still be investigated (and possibly even sued!) but you will be far more likely to win.

First, document your tenant background checking process as well as the rules you would use to determine if someone qualified. Unfortunately, this takes away some of your flexibility, but your rules don’t have to be absolutely hard and fast. You can create a scoring system that lets you assess all of each prospect’s qualifications fairly and combine the results. Give each prospect a copy of the scoring system and criteria at the start of the process. Make sure they know you will not make any exceptions.

For example, you might say that a qualified prospect needs a score of at least 25. They get seven points if they have at least three years in the current job, four points if they have one year in the current job. They must have at least one year in the current job OR a qualified cosigner OR at least $12,000 in cash assets.

This kind of system is complicated to create, but easy to use. It is also completely transparent and fair. Don’t include any subjective criteria – e.g. was the person well-dressed? And don’t ever make an exception for somebody who scores lower than your minimum.

One problem you will have is that your system must evolve over time. If you find that your tenants with limited work experience are working out as well as those with lengthy experience, change the system. Document the change and don’t look back.

Second, when advertising rental housing, don’t describe it in a way that makes it more attractive to certain groups than to others. The California Craigslist lawsuit makes a very good example for this. An Orange County landlord wrote in his ad that an apartment would be “well-suited for one or two professional adults.” This is not the same as saying “no kids,” but it could be (and was) taken that way.

Don’t suggest who the unit would be suitable for. Saying that it would be good for a certain type of person (a young single, for example) is as dangerous as saying whom it would not suit.

Suppose you have a prospect who, in a phone interview, describes herself and asks if the unit is suitable. You’re on dangerous ground here! I had this happen with a physically disabled prospect. I answered literally and honestly - the apartment was on the second floor, and could only be reached by climbing about 20 stairs. I left the decision up to her.

Third, when you reject prospective tenants, give them, in writing, one or more clear reasons for the rejection that are a) not discriminatory and b) consistent with your rules for qualifying tenants.

Fourth, if you get a name off a tenant watch list, confirm and document the reasons why that prospect was placed on the watch list. If someone with legal authority asks why you rejected a prospect, “he’s on the watch list” is almost the worst possible answer you can give.

A special circumstance arises when you have two or three prospects who are all interested in the vacancy, and are all, by your objective criteria, qualified. How are you going to decide? You have to come up with a good reason and be able to explain it. The first tiebreaker is the score (if you use the scoring system as described above). In the earlier example, I set a minimum score of 25. Suppose one prospect scores a 28 and one scores a 30 – it’s perfectly reasonable to rent to the person who scored 30. The second tiebreaker is the date and time the qualified application was received. The person who got back to you earliest wins.

In the bad old days when there was much more real housing discrimination, landlords would often tell a prospect they didn’t want that there was no unit available. This could be easily proven to be a lie. However, you might give the appearance of this sort of discrimination by accident. Suppose you have a qualified prospect who has told you, “I’ll be in at 3 p.m. to sign the lease and give you my check.” Then, another prospect asks about the unit – and you say “it’s no longer available.” Then, you get a call from the first hot prospect – they can’t take the unit after all.

At this point, you’re in trouble, because you told a prospect that a unit wasn’t available, but it is! If that prospect suspects you rejected him because of his ethnic background, you’ll be hearing from the local fair housing group soon.