Fair Housing compliance when screening tenants is so important on many different levels – legal, ethical, and business.
However, it is not difficult to avoid problem tenants before the lease is signed and still be fully compliant with Fair Housing regulations.
It is vital to set and clearly communicate your rental criteria and building standards upfront when screening applicants. If you do get phone inquiries, make sure that you provide each inquirer the exact same information and keep any conversations strictly to the property itself.
Most importantly, the residency requirements must be prominently displayed at the beginning of your application.
Unqualified applicants will typically screen themselves out of the application process if they don’t qualify for your residency requirements and are required to pay an application fee.
Fair Housing compliant standards and criteria can include
- Rent to income ratio
- Prior evictions
- Bill payment history
- Criminal history
(Please note that state and local fair housing laws can add other protected classes or have regulations that vary from federal laws, so check with your state and municipal housing authorities to make sure you are compliant where your rental properties are located.)
Finally, keep good records of each applicant or inquiry in case you do need to provide documentation if a complaint arisies.
This post is for guidance purposes only and is not intended as legal advice. If you have any questions regarding fair housing laws, please consult an attorney or the proper regulatory agency.
Taking the first person showing up with a check is one of the worst mistakes you can make when considering a rental applicant. Many times this is the last money the landlord will see. And that is only part of the problem. Problem tenants can result in much more than just lost rents.
There is also –
- The time and money expended to collect on back rent.
- The time consuming eviction process and the associated legal fees
- Many cities are now levying fines and penalties to the landlord for nuisance tenants, including charging for police time when answering a problem tenant call.
- The repair costs for property damage as problem tenants typically don’t leave the property in good shape.
It is not difficult to avoid problem tenants before the lease is signed and still be fully compliant with Fair Housing and Fair Credit regulations.
The 4 critical steps you need to take to reduce problem tenants and the headaches they bring –
- Pre-screen tenants by clearly communicating residency standards
- Require complete applications and require each co-applicant to complete their own individual application and collect an application fee.
- Conduct a comprehensive background screening for every applicant and co-applicant 18 years or older that includes credit, criminal and eviction results
- Pay attention to the results
Next – Fair Housing and Fair Credit compliant tenant screening
This Not This
I met with a group of property managers and landlords from a neighborhood association that consisted of more than 150 duplexes built between 60 and 80 years ago. What makes this neighborhood particularly interesting is that these homes were designed to look like single-family homes.
There have been two troublesome trends that have had a negative impact on the neighborhood over the past five years or so.
The first is that the number of absentee landlords has increased to 55%. The other is that the quality of tenants has noticeably declined.
Many of the landlords in attendance had more than 20 years of experience.
They shared stories with me about the “good old days” when tenants were accepted with a handshake and many times they didn’t even collect a security deposit. One landlord told me that it wasn’t unusual for the property to be in better shape after the tenant moved out.
Today, the number of problem tenants has increased dramatically and these landlords are trying to figure out what they can do. A big part of the problem is that they are small landlords and not aware of the tools that are available to them or only know about property management software and credit screening providers that cater to large property managers.
Background screening has become a crucial step in helping assure the quality of potential tenants. An industry rule of thumb is that 80% of a landlord’s tenant headaches can be eliminated if applicants are properly screened.
Finding a background screening and credit check provider can be a daunting task. Many that are readily available can be difficult to understand and to figure out how to use to properly evaluate an applicant. Landlords must also be aware Fair Credit Act compliance issues involved when using a credit report.
Next… What to look for in a tenant screening provider.
For the past five years I have met with more than a thousand real estate agents and landlords regarding residential rentals and tenant screening.
I have heard many horror stories and really good tips on keeping bad tenants out before the lease is signed while staying compliant with Fair Housing and Fair Credit regulations.
Someone a lot smarter I am once told me that it is good to learn from your mistakes but a hell of a lot better to learn from someone else’s mistakes.
The purpose of this blog is to provide a resource to landlords and real estate agents to learn from others about applicant and tenant management best practices.
Please feel free to contact me at email@example.com with any of your stories or ideas for topics.