The process of choosing a tenant is fraught, especially when the landlord and tenant do not share the same characteristics: race, sexual orientation, etc.
There's a lot advice out there on how landlords can effectively screen prospective tenants, while avoiding the perception of discrimination, and the potential of related lawsuits.
Why is tenant screening so important?
The flip side of renting out real estate is not renting out real estate, i.e., vacancies. When you have a vacancy, no one is paying for that empty space but you, through your mortgage, insurance, and all the expenses that go with making sure the place does not collapse through neglect. But filling a vacancy is easy. Filling a vacancy with a tenant who will pay the rent on time, not annoy neighbors, and keep the property in decent shape is not so easy.
In order to weed out prospects that are likely to become headaches in the future, you need a plan. This plan is your system for screening the prospects. Without a plan you are just taking a shot in the dark. In addition, given the current state of the law, it is illegal to treat applicants differently on the basis of race, sex, religion, and other characteristics. A plan that you follow consistently will help you avoid getting into difficulty for doing this, or seeming to do it.
I don’t want to rent to certain kinds of people, how do I avoid renting to them legally?
None of us want to rent to certain kinds of people, such as those who have a history of not paying their bills or of damaging their rental units. If you want help avoiding these kinds of persons, read on and be sure to explore the rest of our site thoroughly. We will point you in the right direction.
If you have something else in mind, then stop reading; you are wasting your time so you might just as well leave now. We support compliance with the Fair Housing laws and all other laws. We may complain about them or even ridicule them from time to time, and we may counsel our visitors to work for needed changes, but we urge compliance, even if not cheerful, with all laws, and do not counsel efforts to evade them. You will find nothing here to help you engage in invidious discrimination.
Can I refuse to rent to someone just because I don’t like him or he makes me feel uncomfortable?
Initially, you decide who you should rent to, and who you should not rent to, and at what rent. You may use any criteria you desire to make these decisions, provided they are not the wrong criteria. The wrong criteria are those that are proscribed by law, and they vary from state to state. Prohibited in all states is the refusal to rent because of ethnic background, race, religion, sex, sexual proclivity, age, marital status, or income source. You should check the laws of your individual state to see what other criteria may be prohibited. You can do this in the landlord law section.
In the abstract, provided the source of your discomfort is not one of the prohibited criteria, we see no legal reason why you could not refuse to rent to someone because of a general anxiety about the person. But while this is metaphysically true, it is practically false. If you make a screening decision based on a criterion as vague as the one you describe, then you open yourself up to a charge of invidious discrimination, whether you intended it to be so or not. The person disqualified, if he is a member of one of the protected classes, should he learn that you rented to one financially or otherwise less qualified, will naturally be inclined to ascribe the refusal to rent to him to his protected class status. In the absence of a concrete reason, you will be very hard pressed to justify your decisions on other grounds. You could well be held liable for discrimination on prohibited grounds even though the belief you so discriminated is mistaken, only because you look so guilty.
If this is a serious concern to you, particularly if you are thinking of renting out a portion of your residence to another, you might want to consult with a lawyer who can tell you what you can and cannot do. Many jurisdictions have exemptions for small landlords, or those who share their residences with others. While this does not justify racial or other immoral discrimination, and we do not condone it, it does give you a little more freedom to indulge gut instincts such as you describe.
Where do I look for laws about screening prospects?
Those laws that most heavily affect tenant screening are the Fair Housing laws, general anti-discrimination laws, and the credit reporting laws. In addition, in some jurisdictions, there are laws that control what type of rental arrangement you may demand of a prospect, which may limit, say, your ability to compensate for marginal qualifications with an increased deposit or advance rental payment. Because of our system of government, laws and regulations concerning these can be enacted by the Federal government; the 50 state governments and the District of Columbia, plus Puerto Rico and other territories; the 3000+ county governments; and who knows how many regional, city, town, village, and borough governments.
Federal and state laws can be found using the search engines and other materials in our Landlord Law section. For the lower levels of government, you will need to resort to local law libraries, other Internet resources, direct contact with the relevant governing bodies, and attorneys.
Do not rely on books designed for a national audience. These are much to general to be of help in your particular jurisdiction. Do not rely on your local apartment association or real estate persons unless you know they have consulted with an attorney on the subject. Even then, be skeptical.
Because of all of the permutations of such requirements, due to the number of jurisdictions involved, we are, regretfully, unable to put all the requirements on this site.
landlord.net » How do I choose among qualified prospects without being accused of breaking a law?
In the first place, keep in mind what your standards are. Your standards are the minimum requirement for entry into your property. Meeting them does not guarantee a prospect that you will rent to him.
Assuming you are in the happy position of having several qualified applicants from which to choose, there are three ways to make the final decision that make sense:
1. use some arbitrary or random method, or
2. have the applicants bid against one another, or
3. select the most qualified applicant.
Many advocate the first method as a means of avoiding invidious discrimination claims. Indeed, some in the civil rights industry claim it is legally mandated, although no one has ever been able to point to anything specific on the subject. Basically, one avoids being accused of making an illegal decision by abdicating the decision making process to some event outside of the landlord’s control. Examples might be first to apply or a coin flip. While this is certainly a method of resolving the problem, it is no guarantee that you will be safe from claims of discrimination. It only shifts the debate to the method you used to decide among the qualified applicants. Use it if you like, but it is not a substitute for keeping good records and understanding the discrimination laws. It has the distinct disadvantage that you might by the luck of the draw have to accept a marginally qualified Caucasian applicant and reject a highly qualified one of African descent who then charges discrimination, leaving you with the worst of both worlds.
A second way to make this decision is to use good old capitalist methods. This would be to inform the applicants that there are several who have qualified and that you will rent to the one who makes the best offer of rent, security deposit, and length of lease, not less than that advertised. This has been done, usually in very tight housing markets, but we know no one who has done it. It has pitfalls that should be obvious, and we mention it only for the sake of completeness.
The third way to make this decision is to compare the qualified applicants, then rank the applications in the order of their qualifications, and select the most highly qualified. We know of no legal reason not to do this, and it makes a lot of sense. It is analogous to the hiring process. You must be sure to document with a memorandum exactly how you arrive at the final decision.
In all cases, you should keep all applications, even the ones you rejected, as a record of what you have done.
Should I screen relatives and friends?
Yes, definitely. It is a cliché that the nastiest disputes are between relatives and former friends. You will need the information you verify through credit checks, etc., whether you are friends with the prospect or not. Whether you lower your standards to help out a friend or relative is up to you, but at minimum you should have the information on hand, just in case.
How long should I take to screen my prospects?
This is a balancing act. You do not want to be rushed into making a decision or out of verifying information, but at the same time you are trying to close sale, so you do not want the prospect’s enthusiasm for the unit to wane, and it will, with time.
First, try to turn your applications around within about two days. Most people will be willing to wait at least this long. Tell those who, on the face of their applications, are not qualified as soon as possible, so they can look elsewhere.
Second, if you are going to do something like leave applications open for a week or so, in order to accumulate a selection of applicants, tell the applicants that, and give them an estimate of when they can expect to hear back. Most people don’t mind waiting a little while as long as they know what is going on. A person who would not stand for waiting a week or ten days in the dark might be quite willing to do so if he knows that there is a reason for it and what is going on.
Under no circumstances should you cut corners in order to save time. If some information on an application turns out to be unverifiable within a reasonable time, decide if that information is really important to you. If it is, reject the applicant and tell him the reason. He may be able to resolve the problem for his next application.
Do I need to worry about illegal immigrants?
At present – April, 2002 – there is no requirement for a landlord to make any sort of inquiry into a prospect’s residence status as there is for a prospective employer. Indeed, many more radical local jurisdictions may take the view that such inquiry is a veiled form of ethnic discrimination. Some countries, such as Singapore, do require such inquiry, and such a requirement may be on the way since 9/11. However, current law does proscribe knowingly harboring illegal immigrants.
There is such a thing as TMI (Too Much Information). As of now, our best opinion would be not to ask at all, and stick to checking ID. If the ID is not in order, that is a compelling reason to refuse even to accept an application. Let the applicant go in peace. If you come to suspect later that the tenant is illegal, then you will have to decide whether to inform the INS or keep your suspicions to yourself. That is your call, and under the present state of the law we cannot say that you are under any duty to make such a report. If you are really concerned about this, then have a consultation with an immigration lawyer because immigration is a specialty unto itself. Otherwise, call the INS for advice, although this is definitely a second best option. Either way, be sure to document the advice you receive.
Should I do a criminal background check on my prospects?
Opinion on this is not unanimous. Some landlords do them and some do not. Here are the pros and cons.
It is certainly nice to know if your prospect is a registered sex offender or has a background of violent behavior that has led to arrest and conviction. It is a service to other, law abiding prospects and the prospect of having such a check done may deter many with criminal records, and force others to be forthcoming about their past.
Criminal background checks are not a cure-all, however. In the first place, there is no centralized national database, as there is for most credit transactions, that can be viewed by those not engaged in law enforcement. This means that a background check has to be done on a county-by-county basis, in most cases. In order for the background check to be useful, you must have a handle on what county the prospect has lived in and check not only that but surrounding counties. Felons do not usually restrict their activities to their home counties. For this and other reasons, criminal background checks also take a long time compared to credit checks, which can often be done in minutes or hours.
There is also the question of TMI, Too Much Information. In at least some states, such as California, it is unlawful to discriminate against an individual for criminal convictions that do not relate to the thing being applied for. For example, it would be justified for a bank to refuse a teller position to one who was convicted of embezzlement, but it would be harder for a landlord to justify a refusal to rent for this reason. By doing a criminal background check, you might open your self up to a claim of discrimination if you reject the applicant, even if it is for another reason.
The jury is still out on the utility of criminal background checks, and while we spent more time on the cons than the pros, you should not take this as an indication that we recommend against them. You need to find your own comfort zone, and if doing criminal background checks makes you more comfortable and feel more diligent, then you should do them.
What is “steering” and how do I avoid it? Why should I avoid it?
Steering is the practice of driving a tenant to a particular unit because you believe he is best suited for it, or discouraging him from a unit he is interested in because you do not think he is well suited for it. It is usually understood that the motivation for the steering is some basis that makes the prospect part of a protected class, such as race, religion, and the like, but this is not always so.
There are two sound reasons for avoiding steering. The first is that it is just, plain arrogant. Let the prospect decide what is best for him. The second reason is that it is illegal, if done for illegal reasons, that is, because of the applicant’s race, family arrangement, sexual preference, disability, and so on. Examples would be steering a blind applicant away from an apartment with a view, or trying to get a wheel chair bound individual to take a ground floor apartment.
Avoidance of steering, however, does not mean you cannot show off what you have available, or use the information you have about a prospect to show units you think will be most attractive. By all means, tout the features and benefits of your available units in a way best calculated to sell the prospect. The key is to let the prospect decide, and highlight the features and benefits, not the prospects disabilities, or race, etc.
Do I need to run a credit check?
Yes, always. Even if you are renting to a friend or relative you need to run a credit check. For one thing, you should treat all of your prospects alike to avoid claims of invidious discrimination. For another, even the tightest friendships and relationships may break down. Even if you have decided to rent to a relative regardless of credit status, you do not know what your relationship will be, say, a year from now, and you may need the information in the report to help collect unpaid rent.
It goes without saying that if you need to run credit for friends and relatives, you need to run it on total strangers. Even if you do not take credit blemishes too seriously, the information you develop in a credit report is a valuable cross check on the information given in the balance of the application, and can verify it for you, or show you your prospect is lying.
What if the credit check shows a delinquency?
A credit check needs to be read, as you would read a book or magazine article, and the information considered as a whole. There are not many people who do not have any credit blemishes. Even if you have a prospect who has none, his obligation to pay rent to you might end up being his first. The credit history will show a pattern, as most such things do. Does the pattern show over-all responsible use of credit and a reasonable history of paying voluntary obligations on time? If there were delinquencies, did the applicant cause them, or did something unforeseeable put him in a tight spot from which he has recovered? View the applicant’s credit history, and delinquencies, if any, in this light.
How do I find out how my prospect acted as a tenant in the past?
There are two good sources of information on this. The first is former landlords, and the second is an agency that checks for a history of evictions, something that does not always appear on a credit report.
You should discount heavily what a current landlord has to say about your prospect. The current landlord may be giving a glowing reference because he wants the tenant out, or he may be damning your prospect with faint praise because he does not want him to move. The best source is a previous landlord. These are people and companies that no longer have any interest in seeing the prospect stay or leave, and so are more likely to be objective. You should also be aware that some companies always give a neutral reference, or refuse to give one at all, as a matter of policy.
Checking on your prospect with an agency that reports eviction proceedings is a good policy if there is a reliable one for your area. As with criminal background checks, this sort of report has not become as institutionalized as have credit checks. Also as with credit checks, they must be considered as a whole. It is not automatically the tenant’s fault if an eviction proceeding is filed against him. Not only are there bad landlords out there, but there are also bad laws. In some jurisdictions, such as San Francisco, an eviction proceeding might be filed purely as an insurance policy under their rent control law, even if the tenant is cooperating to vacate the premises to make it available for a relative of the landlord or for renovation, for example. Also, lawsuits like this are checked at the court clerk’s office, and are identified by name, not by Social Security number, as are most credit accounts. It is not only possible, but also common, for an individual to have evictions appear on his report only because his name is similar to the person actually evicted. When you obtain such a report and it shows a match, you should call the landlord who initiated the proceeding and verify you are talking about the same person.
How can I be sure about an employment reference?
This is a difficult problem. It is fairly easy to fake an employment reference. Some employers will not give them at all. Others will give only employment status as of the time you call, and will omit any further information, such as a pending resignation, etc. As a precaution, we recommend you not dial a “direct” number to the individual’s supervisor. It is too easy to scam this procedure through prearrangement with someone who actually does work at the company. If told to contact a supervisor, do so, but do it through the switchboard. Contact the personnel office, if possible, also. Of course, in small businesses the switchboard, personnel office, and immediate supervisor might be one in the same. In this case, you need to play it by ear. You can also ask to see recent pay stubs.
What is the best application form to use?
There is no best application form. The one you should use is the one that gives you all the information you need to feel comfortable renting to the prospect, and not a bit more. If you routinely accept applications with blanks, then you are asking for more than you need, and you should stop asking the questions you can do without.
We have application forms available in our eForms section. They have been prepared by experienced property managers and reviewed by experienced lawyers.
Why do I need to keep all the paperwork I generate?
Most of the people who apply for your rental unit are going to be disappointed, and some of those will be mad. You need a record of everything you did to make the decision to rent so that if anyone should claim you acted for an illegal reason you can show you did not.
You also will need to refer to the information in the future. Decision points will come even in the best of landlord-tenant relationships. Having reliable information on your tenants at your fingertips will make decision making easier and less error prone.
How long should I keep the paperwork?
Forever.
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