Tenant Screening: Avoiding Discrimination Lawsuits

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Last week I discussed the importance of screening tenants.  I noted that tenant screening was perhaps the key to being a successful landlord.  This week I want to follow up on that article by discussing methods to screen your prospective tenants to avoid a discrimination lawsuit.

What is discrimination?
A quick Google search defines discrimination as “Recognition and understanding of the difference between one thing and another.”   It is pretty simple.  We humans discriminate between things all the time.  We may choose a blue shirt over a red one or a blonde over a brunette or any of a myriad of other criteria that fill our everyday lives.

Protected Classes in Housing
Federal law defines seven protected classes of people that you cannot discriminate against.  You cannot discriminate or base your tenant selection upon a person’s race, skin color, sex, national origin, religion, disability or familial status.  In other words, you cannot choose to rent an apartment to someone because they are or are not black for example.  You cannot even ask questions about these terms without appearing discriminatory. 

Do not for example put a space for someone to list their spouse on your application; just provide spaces for all adults.  These seven criteria have no basis in determining if a person has the ability to qualify for your property as far as the federal government is concerned.*

Be forewarned that there are federal testers out there who randomly call for rent ads to “test” landlords.  I recently saw an ad in my local paper looking to hire such testers. 

To avoid a federal discrimination lawsuit, here are some must do’s:

  • Treat everyone who responds to an advertisement or calls about available rentals in the same manner.  Ask everyone the same questions and provide everyone the same information.  You may even want to have a script prepared.
  • Never, never, never ask questions relating to the seven protected classes mentioned above.  Do not ask about age, or where a person is from or if they are married, etc.  These things have no bearing on the ability of someone to rent your property in the eyes of the federal government.  You may ask how many adults (18+) will be living in the property as you will want to screen every adult.  It can be so easy to slip up here and appear to be discriminatory.  So just stick to the facts about the property.
  • Keep your rental application form neutral and simple.  Do not ask questions about anything related to the above mentioned protected classes.  Do ask about jobs, previous addresses, income and references.
  • Never try to guide anyone to a particular property or part of town.  When someone responds to an ad you have placed and they ask what else you have available, tell them about everything you have available.  Do not try to steer a person towards or away from a particular property, even of you know they cannot afford it.  If they want to see a property or apply for a property, show it and let them apply and go through the application process.  Otherwise it may appear that you are being discriminatory even though you are actually just trying to help and save everyone’s time.
  • You must develop a set or written criteria or standards that everyone has to meet in order to be able to rent one of your properties. These standards can be based upon just about anything other than the 7 protected classes.  Write it down folks and keep it handy in a file.  These written criteria could be a real lifesaver to you if you are every accused of being discriminatory.

In sum, do not discriminate.  It is wrong and just plain stupid.  Plus, it can get you into a world of trouble.  Every once in a while federal testers will descend upon an area, find some ignorant landlord and make a prime example of him or her with fines in the five figure range.  Also keep in mind that local jurisdictions may add other classes to the list, such as age or sexual orientation.  So do keep up with your local laws as well.

Finally, remember to treat everyone equally.  Tell everyone the same information about every property you have available.  Don’t ask discriminatory questions on your application and have a set or written criteria for applicants available for inspection.  What should your criteria be?  I will save that for a later post.

Until next time, happy investing.

* There are some very specific exceptions such as and all female dormitories or an over 65 retirement community.  If you run such a facility, seek competent legal advice on setting up a tenant screening process.

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About Author

Kevin Perk is co-founder of Kevron Properties, LLC with his wife Terron and has been involved in real estate investing for 10 years. Kevin invests in and manages rental properties in Memphis, TN and is a past president and vice-president of the local REIA group, the Memphis Investors Group.

13 Comments

  1. Everyone always make such a big deal about this.

    I’ve often found that when given the response “I’m sorry, but another application was accepted”, prospective tenants do not continue the conversation much further. If they do ask about your criteria, the response “all applications are evaluated holistically in the order they are received” pretty much shelters you from any liability.

    Since your actual reasoning in tenant selection and the reasoning given to a prospective tenant do not have to be the same, why would anyone ever put themselves in a position to be threatened by a lawsuit? Tenants are typically not sophisticated enough to make the distinction between stated preference and revealed preference.

    • Kevin Perk

      Jake,

      Thank you for reading and commenting.

      People make a big deal about discrimination because it is a big deal.

      Actually, the reasoning for disqualifying the tenant and the reasons provided to the tenant have to be the same. Plus, I hope you have some standards written down showing why the prospective tenant was disqualified, because one day someone is going to ask you to prove why they were disqualified.

      The maximum penalties are $16,000 for the first fair housing violation plus attorney’s fees and $65,000 for a third violation within 7 years. That will put a dent in your cashflow.

      I hope your words here never get before a judge. I think you might have a hard time explaining yourself.

      Kevin

  2. Good information,
    never thought that information on Job, income, could be discriminatory, nice to know. I had stopped putting previous residence and references on my apps a long time ago, figured, who in their right mind is going to put someone down that is going to give a negative response. Even if the previous landlord wouldn’t continue to rent to this person, they would probably give positive responses to get them out of their property.

    • Kevin Perk

      Geoff,

      Thanks for reading and commenting.

      I think you might have misread the post a bit. You do need to ask about job and income information. Otherwise how can you determine if they can afford the property? There is no problem with the federal discrimination laws if you ask about a person’s ability to afford a property (job and income). Just keep the questions neutral in regards to the protected classes.

      I like to ask for the previous residence. If things are bad with the previous landlord the applicant may lie on the application which is an instant disqualification. But you are correct that the current landlord may lie to you to get them out. You just need to dig deeper into the applicant’s past to find out what the past landlords have to say. Ther is often a long trail.

      Kevin

  3. Several years ago, when I was looking to rent a home near my mother, the lady who owned it (I think it was her only rental) told me that she did not really want to rent to me because I was a young, single male! At the time I just shrugged it off and thought the lady was crazy- I wasn’t that interested in her house after looking at it anyway. But it still stung a bit to be discriminated against in such a way. I did think it was probably illegal, and looking back I probably could have sued her or something :)

    Having been discriminated against because of my gender, marital status, and age, I know how people feel when it happens. I’m still not a big fan of big government coming to the rescue, but I do understand how others feel and would never do so to some one else. Of course, it is very important to not even appear to discriminate, as your post points out!

  4. One city where I rent has an ordinance–driven by their desire to avoid parking issues–that if I don’ t have off-street parking, I can only rent a property to a single person, family, or “a couple or couples in a significant relationship.” In other words, I am told I must discriminate against, for example, non-involved friends who just want to be roommates. Of course this can be fudged, but isn’t this ordinance illegal?

    I often check peoples’ records online while talking to them, or before answering emails. Sometimes I find the person is being evicted at that moment! I don’t want to tell them I know this–they’ll start giving fake names to the next landlord–but I do sometimes not reply to them (if it’s an email inquiry) or get rid of them politely by directing them to my secure online application, which saves me time. Sometimes I also just ask, “do you have any criminal record I should know about? Have you ever been evicted?” With online checking so easy now in most states, that helps narrow the field. You CAN discriminate based on those things.

    • Kevin Perk

      Thos,

      Thanks for reading and commenting.

      That city ordinance seems like it may be in conflict with a number of things, but I’m no lawyer or judge. I hope somebody challenges it one day.

      The internet had made so many things so easy, like checking criminal records while talking to your prospective tenants. Great job and great tip!

      Yes you can and have to discriminate on many criteria. Check out my next post for my thoughts on that.

      Kevin

  5. Discrimination is not illegal; illegal discrimination is illegal. Landlords must discriminate based upon employment and income, present and past landlords, credit and criminal history, etc. Just don’t discriminate based upon any federal, state or local protected classes. Be consistent in using your screening criteria to review all rental applications in the same manner.

  6. Many years ago, I raised the rent on 3 tenants at the same time. Their leases were up. Two were white, the other a young black girl. She had been a tenant for some time but was bad about paying rent. When I raised the rent, the 2 white tenants paid the new rent amount and went on. She paid the old rent amount and refused to pay the extra for the raised amount. After giving her many chances to catch up the rent, I gave the 3 day and then filed eviction. She still refused to move and was the very first tenant I ever set out, which cost me a lot of money.
    Then I received papers she had filed for discrimination. I filled out the papers and went to court. The judge told her that just because I raised her rent, I was not discriminating against her and she had the obligation to pay the new rent amount. Also, raising the rent of other tenants at the same time was a plus. Then she tried to say that I didn’t fix things (which I always did) and he told her she needed to put her rent in escrow with the correct people if she wanted to fight that battle. She tried to the last minute to catch up the rent and I refused to take her money. She was finally gone. Never take the money at the last minute to let them stay. You will have to start all over again.

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