The Landlord’s Guide to Effective (& Legal) Tenant Screening

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The word “discrimination” has gained a bad flavor in American mouths in the past fifty years or so — but stop and think about it.

We celebrate it when a chef has a discriminating palate or when a business man has a discriminating taste in suits. To discriminate literally just means, “to decide which of something is preferable.” We use “discrimination” as a negative word when we use it in a legal sense because we’re almost always talking about kinds of discrimination that have been outlawed because they’re based on factors that aren’t actually relevant (or fair).

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What a Landlord CAN’T Legally Discriminate Against

Federal housing laws make it illegal for a landlord to discriminate based on:

  • Race
  • Religion
  • National origin
  • Age (with an exception made for senior-citizen communities)
  • Family status
  • Physical or mental disability
  • Gender

Further state laws make it illegal in many places to discriminate based on:

  • Martial status
  • Sexual orientation and gender identity
  • Source of income (almost always in the form of “you must accept welfare as a valid source of income” — it’s always valid to discriminate if you have a strong reason to believe that someone’s income comes from an illegal source.)

Finally, as one last little catch in the whole discrimination question, all rental applicants must be asked the same set of questions. (Obviously, that set of questions is allowed to evolve over time — you just can’t ask a question of applicants A, B, and D while asking C something you didn’t ask the other three.)

Related: How to Handle an Untimely Tenant Death as a Landlord

What a Landlord CAN Legally Discriminate Against

So with all of those things off the table, is there anything that a landlord IS allowed to discriminate against? Absolutely — in fact, as we implied in the beginning, discrimination is the entire purpose of a rental application.

You can and should use your applications to discriminate based on:

1. Financial Means

You can’t discriminate against where the money comes from in some states, but you can always discriminate based on total amount of income. If a potential applicant isn’t making enough to satisfy for screening requirements, you can “discriminate” against them – as long as you apply the same requirements to all applicants.

2. References

Even the best tenants can experience a change in their life circumstances that will have them acting like utter loons. One of our longterm, high-satisfaction tenants just up and disappeared without warning one day, only to return almost two months later explaining that her mother had almost died, and she had left in a panic.

From that day forward, we have insisted that all of our tenant give us contacts that will know where to find them in a pinch — preferably their parents if they’re still alive — because if you can’t find a missing tenant, you lose money fast. So discriminating against people who can’t show you their connections to other living, breathing people is not just allowable, it’s downright wise.

3. Bad Behavior

A criminal record isn’t always an automatic decline — some people are still bearing the cross from something they did decades ago and haven’t ever repeated.

Related: Your Complete Guide to Effectively Handling Tenant Evictions

But if a prospective tenant has a criminal record, a bad reference from a previous landlord, and comes across as shifty and nervous during the interview, s/he’s hit the trifecta, and we pull the plug in a hurry.

4. Potentially Destructive Habits

Smoking, excessive drinking, cooking meth — there are lots of things an applicant could do with their time that would make them unfit to rent to, and it’s part of your job as a property manager to figure those things out before they become a problem. The best time to do that is before you ever let them sign a lease — so use the application and screening process to expose as much of their potentially destructive behavior as you can.

Conclusion

In the end, the reason why we property managers screen our tenants comes down to a simple overriding responsibility: the responsibility we have to turn our clients’ properties into money in their pocket.

If we put lousy tenants in our clients’ properties, we’re going to reduce the value of their investment — and that goes against everything a property manager should stand for.

What’s your tenant screening criteria? Is there anything you’d add to my lists?

Jump in on the comments below!

About Author

Drew Sygit

Drew is the manager of Royal Rose Property Management, a fairly high-tech solution for Detroit Metro area property owners & investors.

22 Comments

      • James W.

        Got a link to an example of the “formatted decline” by chance? I’m curious how in depth it goes… for example, I had an email earlier today. I rented a place to a couple, then received an email from my craigslist ad on the property before I could remove the CL ad.

        I responded with “Sorry, already rented”.

        I’m assuming I’m safe there, but it never hurts to double check your assumptions.

        Thanks for the article!

        • Drew Sygit

          @JAMES W.: there’s a difference between a prospect and an applicant. What you mention seems to be a prospect, in which case they wouldn’t require a formal decline.

  1. If a prospective tenant asks whether the landlord takes Section8 and can the landlord state that he/she doesn’t want Section8 bec of all the inspections/fixes trouble to deal with the State code (i.e. in Texas)?

    • Drew Sygit

      FF_LOVER: We’ve never gotten a clear answer on this issue and haven’t explored it fully as we accept Section 8. The two answers we got: 1) You can’t discriminate against Section 8 as a source of income. Opposing 2) You can discriminate due to the regulations and paperwork. State laws may also come into play so check with a local real estate attorney and get their answer in writing!

      • Currently in Maryland is it still legal to refuse to accept a housing voucher, and the required third party bureaucracy. Laws proposed to end this were defeated in each of the last few years. This will vary from state to state.

  2. Most credit report services offer not only criminal but eviction history background checks. Shows if the tenant ever had court for non payment of rent. The best reference comes from another professional management company. Check address history on credit report for potential A+ references.

    Thank you for the info on formatted decline!

  3. We use a screening company that yields credit, tenancy court, and criminal results. It also provides us with an adverse action letter template for us to use for declined applicants.

  4. Frankie Woods

    This is a great breakdown of the type of discrimination that will and won’t get you into trouble! The screening process is all about discrimmination in a way that protects the investor without stepping on the rights of the tenet. Great stuff, and I’ll be sure to use some of these as a transition into the scary world of landlording!

  5. Joshua Caplan on

    Can I openly discriminate against students in favor of professionals?

    Can I openly discriminate against unrelated roommates in favor of related roommates?

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