Dealing with a bad tenant is an experience that landlords look to avoid at all costs. Usually, it means lost income, wasted time, and damaged assets. Screening tenants is one of the best steps you can take to protect yourself, your properties and your sanity. But, tenants have ways to protect themselves too. This past year, the U.S. Department of Housing and Urban Development (HUD) published new inflation-adjusted civil penalty amounts for individuals who have violated housing-related laws under the Fair Housing Act. According to these revisions, an individual can be charged a civil penalty of up to $20,111—and that’s just for their first violation. Housing violations come with high costs and consequences. It’s critical that you implement a system and policy to avoid fair housing discrimination when screening tenants.
A quick note: Innago does not provide legal advice. This article is meant to be informative, but is not guaranteed to be accurate in a court of law. Be sure to consult with your attorney before making any decisions you believe could be affected by Fair Housing Laws.
History of the Fair Housing Act (FHA)
By definition, fair housing is the right to choose housing free from unlawful discrimination. Primarily as a result of the Civil Rights Movement of the 1960s, the Federal Fair Housing Act (FHA) was written into law in 1968, one week after the assassination of Martin Luther King Jr. The act is enforced by the U.S Department of Housing and Urban development (HUD) and was created with the belief that every person has the right to rent or own a home without fear of discrimination due to their membership in a certain class of people. As amended to date, the FHA prohibits discrimination in the sale, rental, or financing of a home as well as protection for other housing-related transactions. Within the FHA, the federal government defines seven protected classes:
Race: People cannot be treated unfavorably due to personal characteristics like skin/color complexion, hair texture or facial features.
Color: Even though race and color may sometimes overlap, they’re not necessarily synonymous. Color discrimination may occur in people of various races or ethnicities. This includes pigmentation, skin shade, tone, color characteristic etc.
Religion: This law is not just limited to people who belong to traditional and organized religions like Buddhism and Christianity; it also protects those who have other ethical or moral beliefs that may not be “justified” by a particular religion.
National Origin: Included are those who are from another country, another part of the world or who have a certain ethnic background or accent are protected.
Sex: This class protects discrimination against sex and gender. Today, protection is provided to sexes regardless of sexual orientation, transgender status and other gender roles and identities.
Disability: In this class, landlords are prohibited from asking whether a person has a physical or mental disability or illness. Landlords are also prohibited from asking to see a person’s medical records. As a landlord, it’s your responsibility to provide a tenant with reasonable accommodations, even if it is at your own expense.
Familial Status: This term refers to the presence of at least one child under the age of 18, and also protects tenants who are pregnant or are in the process of adopting a child
What are the Penalties of Fair Housing Discrimination?
Beyond Federal Fair Housing Laws, many state and local governments give additional rights to renters and impose other obligations on landlords. State and local protections include things like citizenship, age, marital status, veteran status, sexual orientation, source of income, etc. It’s important that you work with a local legal professional and contact your state fair housing agency to understand how these rules can impact your business.
If you are not aware of these rules and inadvertently violate them, a tenant may file a discrimination complaint, initiating a tedious and costly process for you. After a complaint is filed, respondents have 20 days to decide whether to have the case tried before a Federal District Court judge or heard by a HUD Administrative Law judge (ALJ). If the ALJ concludes that a violation of the Fair Housing Act occurred, you can find yourself faced with first violation fines and attorney fees around $16,000.
Even worse, if the case is taken to Federal Court, additional punitive damages and penalties can go as high as $100,000. Not only does this incident cost you a lot of money, but it costs you a considerable amount of time spent defending such claims.
How to Avoid Discrimination in Tenant Screening
If you’re a good landlord, you’re probably not intentionally violating the FHA. However, it’s easy for common conversation to be misinterpreted as discrimination. Having a reliable screening process ensures that you don’t engage in any communications that have the potential to be misunderstood.
There are a few keys ways that you can avoid fair housing violations during tenant screening. First, make sure that you treat everyone who responds to one of your vacancy advertisements in the same manner. You should establish a procedure in which the interview process is consistent and follow it precisely every time. You can do this by preparing a standardized application or set of questions to ensure that applicants are never asked anything related to the protected parameters under the FHA.
Second, it’s important to establish your own set of criteria by which applicants can be qualified to rent one of your properties. To verify that you are complying with the law, it may be useful to create a written document listing the principles by which you measure a prospective tenant.
Next, even though you are legally allowed to decline to rent to individuals with bad credit, insufficient income or consistently late rent payments, you must be careful asking questions that do not pertain to these questions. It is acceptable to ask for financial information, job history and previous rental experience, but shy away from inquiries on your rental application that could be construed to relate to any of the above protected terms.
Finally, since it is a violation to “steer” people into certain properties or parts of a building during a showing, ALWAYS inform an applicant of every vacancy in your portfolio. Even if you think a property may be out of a prospective tenant’s reach financially, do not act on this assumption. Failing to make your inventory fully available to all tenants could be interpreted as discrimination.
Choosing the Best Renter
If your written policy is that all applicants must have a credit score equal to or above 650, denying a tenant with a score of 600 is clear and defensible – no risk of a discrimination issue. But what if one applicant has a score of 700 and another has a score of 715? What are the rules surrounding denial of a qualified tenant?
As a landlord, it is your right to choose the most qualified applicant. However, you need to be careful here. It is possible that criteria you believe to differentiate one qualified applicant from another may not be construed in the same way by your applicants. You may have a solid basis for your position, but even if you would ultimately win the law suit, the legal process can be time consuming and expensive.
Because of this, many landlords simply implement a first come, first served policy among qualified candidates. But like many things in rental housing (and in law) this is not one-size fits all. First, make sure you understand the information provided by credit checks and criminal histories. Also ensure you have a strong understanding of your market and the types of applicants you would expect to see. If you believe and can justify additional criteria to determine who among qualified candidates is most qualified, write it down just like you did with your screening standards and stick to it.
Keeping all of the above in mind, the absolute best way to avoid a Fair Housing violation is to be consistent in the way you treat applicants. You may think you’re doing an older person, disabled individual, or single mother a favor by offering them a break on the security deposit or rental amount, but doing so could get you into a lot of trouble. If you want to avoid spending time and money in court, every prospective tenant must meet the same standards – period. Having a well thought out screening process streamlines your management and makes life easier for you, but it’s also a legally acceptable way to turn down a bad tenant without the risk of discrimination.
For more interesting articles on managing your properties, be sure to subscribe to our blog and Like us on Facebook. And don’t forget to share your thoughts in the comments!