Screening, Qualifying and Turning Down Potential Tenants

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Screening and qualifying applicants for your rental properties are two of the most important things a landlord can do.

Many of the problems that landlords complain about, such as nonpayment of rent, excessive damage to a property, etc, can often be remedied by not letting potentially bad tenants in your property in the first place. Your screening and qualifying process should involve checks on a potential tenant’s income, job history, credit history, criminal history, etc.

When a potential tenant has applied to rent one of your rental units, you have a legal obligation not to be discriminatory in your qualifying of that application. Usually if the applicant is accepted as a tenant, there is no problem, but what about the applicants that get turned down? These applicants are your potential problems and are the ones that have to be handled a bit more carefully.

Let’s look at the process every landlord should have in place to protect themselves when reviewing and qualifying tenant applications.

Develop Rental Qualifying Criteria

The first step in qualifying tenant applicants is to develop a set of tenant qualifying criteria.

Related: Are You Still Struggling to find Great Tenants? Struggle No More!

These criteria can include items such as minimum credit score, minimum income, eviction history, criminal history, smoking, pets, etc. Your local market conditions and preferences will determine what your criteria should be. Be aware however that your criteria cannot include anything related to the seven federally protected classes which are race, gender, familial status, age, color, national origin and religion.

Whatever tenant screening criteria you select, write them down and place them in a file. You may need them later on if you ever get accused of being discriminatory in your application and qualifying procedures.

Evaluate Every Applicant Using Your Qualifying Criteria

Does the applicant meet your minimum credit score?

Do they have enough income to afford the rent? Have they ever been evicted or filed bankruptcy? Do they have a criminal past? Do they have a pet? Were they rude to you?

Develop a checklist to rank applicants against your criteria. Use that same checklist for every applicant and keep them on file.

What To Do With Those You Deny

If you choose to deny an applicant, it is best if you communicate with them why they were denied.

This communication can be verbal at first, but you should follow up with something written. For example, if they were denied due to poor credit history, write them a letter explaining such and directing them to the appropriate credit reporting agencies.

Send this letter to the address listed on the application you received and keep a copy in your records. You might be amazed at how many of these letters are returned as undeliverable (Yes, people lie on applications). If a denial letter is returned to you for some reason, keep that as a record as well.

Related: Tenant Screening: The Ultimate Guide

Conclusion

In sum screening, qualifying tenants and then denying a person housing can be a tricky business, especially if someone feels they were discriminated against.

To protect yourself, use the simple procedures outlined above. Use the same procedure with every applicant and document, document, document everything. That one piece of paper in your file could mean the difference between a clear record and a $20,000 fine.

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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.

7 Comments

  1. I rent to people I like. I don’t rent to people I don’t like. I have told that to judges. There is no law that says I have to rent to people I don’t like. Some people impress me – some people don’t. I have a very strict no animals of any kind policy. But I just rented a very nice house to a sweetheart of a couple (literally like rosy-cheeked poster children for clean living America) with two black labs. The dogs are better behaved than my children. They screened perfect and seemed like people I wish I could be.

    But I have told people: Sorry; I don’t like you. Good luck. I don’t see why that is a problem. You can’t like everyone, I intend to have a relationship with my tenants for many years, and Life is too short to deal with people you don’t like. Am I wrong?

    stephen
    ———–

    • Kevin Perk

      Stephen,

      I am no lawyer but…..

      “like” is a very vague term.

      I do however understand where you are coming from. If I were you I would try and nail down some of the criteria that you like. These could be things such as showing up on time to appointments, not being rude, using respectful language, not having trash piled up in their car, wearing clean clothes, not reeking of alcohol, having a steady job, etc, etc.

      Just think about what it is you like, write it out and go from there.

      Otherwise I think someone in our litigious society is going to assume that you did not “like” one of the seven protected classes (as Mike alluded to in his comment) and I think they might have a strong case in front of the right judge if you did not have what you “like” spelled out.

      Protect yourself Stephen, spell out your rental criteria.

      Thanks for reading and commenting,

      Kevin

    • Kevin Perk

      Cory,

      Generally no, we keep that private. But we will tell applicants how and why they did not meet our criteria and we will explain it upfront before they apply.

      Thanks for reading and commenting,

      Kevin

  2. Jennifer Kurtz on

    Definitely define your criteria. Have it in writing, in a picture frame on the wall in your office. Also include the resident selection criteria in your application and put a signature line under it stating they understand your selection criteria. As long as you do not violate any part of fair housing laws and treat everyone equally at all times, you are good to go. Do not do anything differently for anyone. I’ve heard of a situation locally where a manager really liked an applicant and wanted to call him to let him know there were no more available units and to apologize. That person, who happened to be disabled, sued and won – believing that he was treated differently because he was disabled. The manager went out of her way for an applicant when everyone else just received a standard form letter. While I can sympathize with her, the fact is that the court did believe he was treated differently due to being disabled, which is a protected class.

    Be clear. Be consistent.

    • Kevin Perk

      Jennifer,

      You can’t go out of your way, even of you are just trying to be nice.

      Begs the question “What have we become?”

      Thanks for reading and for the comment,

      Kevin

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