How to Screen Tenants to High Standards Without Violating the Law

How to Screen Tenants Thoroughly While Staying Compliant With Fair Housing Laws

When you need to fill a vacancy, screening potential tenants is one of your most important tasks. An efficient tenant screening process can protect your property, prevent missed rent payments, and avoid costly evictions. However, if you set your standards too high without following the law, you could end up violating federal Fair Housing laws. 

Here’s what you need to know about finding a good balance between a thorough vetting process and staying legally compliant.

1. A property manager will protect you

A reliable property manager is your first line of defense against accidentally violating federal and local fair housing laws. Professional property managers are experts in landlord-tenant laws and stay up to date with federal, state, and local requirements. Their expertise can serve as a safeguard against accidental violations.

Property management companies have well-established, effective tenant screening systems in place. For instance, Green Residential, a Round Rock property management company in Texas, helps investors fill vacancies by treating every applicant consistently and fairly. As a result, property owners get high-quality tenants that meet their qualifications.

The last thing you want is to be named in a Fair Housing complaint by a rejected tenant. To avoid making mistakes, it’s best to have a pro do your tenant screening.

2. Know the law

If you can’t or don’t want to hire a property manager to screen your tenants, you’ll need to know the law inside and out. This can be tricky. The only reliable source for landlord-tenant law is a lawyer. Before advertising or accepting applications for a rental, consult an attorney to find out what you can and can’t do throughout the process. Don’t blindly trust advice online, even if someone claims to be a lawyer. Laws vary by state, and only a licensed attorney can provide you with legal advice.

3. Establish your screening criteria legally

Creating the criteria applicants must meet takes some consideration. For example, some landlords require income equal to three times the monthly rent, but others only require 2.5 times. In some areas, if your income requirements are too high, it can be hard to rent a property.

It’s perfectly acceptable to require a credit score of 600+, no evictions in the last five years, and a clean landlord reference. However, it’s not legal to deny someone just because they have a criminal record. In order to deny someone on the basis of a criminal record, the conviction needs to be a direct threat to the safety and security of the property or other tenants/neighbors.

To avoid violating fair housing laws, it’s crucial to consult an attorney first and enforce screening criteria equally for all applicants.

4. Use legally-compliant applications

There are laws that govern what you can ask on a rental application. For instance, you can ask for basic information, like the person’s name, address history, Social Security number, and photo ID. You can require income verification, like pay stubs and tax returns. However, you can’t ask about race, religion, disability, children, or immigration status.

To get permission to run a background check, your application should include clear language providing consent for both credit and background screening. If you ask additional questions, it’s important to ask the same questions of every prospective tenant and make your decisions based on the same (legal) criteria.

5. Avoid using AI

While artificial intelligence (AI) can be a wonderful tool, it can cause problems for you as a landlord. Companies using automated systems to score tenants are already being sued for violating the Fair Housing Act. One lawsuit was recently settled for $2.3 million.

6. Use FCRA-compliant services

You’re required to use background check services that follow Fair Credit Reporting Act guidelines. There are a handful of background check services available online that don’t qualify, so make sure you verify FCRA compliance.

7. Use discernment

When checking a credit score, use discernment to evaluate the context of a poor score. For instance, someone with a bad credit score caused by medical bills is not the same as someone with a bunch of accounts in collections.

8. Follow all advertising laws

Some landlords are exempt from Fair Housing laws, but that doesn’t apply to marketing a property. For example, if you’re exempt from the federal Fair Housing Act and are renting a bedroom or a unit with shared living spaces, you can deny applicants based on gender, but you can’t specify a preference for gender in your ads.

Stay legal

Tenant screening is important, but mistakes can result in lawsuits. By consulting with an attorney, sticking to objective criteria, and following fair housing laws to the letter, you can find high-quality tenants without risking your business.