FAQs – Screening And Selecting Tenants

Whether, you are a first time landlord or have been in the rental property business for, as long as you can remember, always, but always, check a tenant’s credit history, taking care to avoid legal trouble over discrimination. You may ask:

Ques. How can landlords best screen tenants? Is there a foolproof way to do so?

Ans. Yes, there is a foolproof way of screening tenants that requires a sharp business savvy landlord to have all prospective tenants fill out written rental application forms. The application form, apart from requesting other necessary information, also asks for the following:

1. Employment, income, and credit history.
2. Social Security and Driver’s License numbers.
3. Past evictions or Bankruptcies, if any, and
4. References.

What must be remembered is tenant selection should not be made before the screening process has been satisfactorily completed. A landlord needs to check previous landlord(s) and other references, as well as, verifying income, employment and bank account information. And, last but not least, do obtain a credit report for a prospective tenant. Especially the last, as a credit report is important from the point of view, it indicates, whether an individual has a history of paying bills late, or whether he / she has declared bankruptcy at any time, or else has been convicted of a crime, or even been evicted.

Ques. Do landlords or property managers have the right to obtain a prospective tenant’s credit report?
Ans. Yes, a prospective tenant’s credit report can be obtained, as long as, you have received written permission to do so. If, an applicant is turned down, due to negative information on a credit report, the applicant has to be informed of the following three things:

1. The reason for rejecting him / her.
2. As well, you are required by law to give them the name and address of the agency that has given the adverse report, as well
3. A landlord must inform the applicant that he /s she has the right to obtain a free copy of the report within 60-days from the agency that provided you with it.

Common knowledge, everyone knows, before a credit check can be run, prospective tenant’s name, address, and Social Security number is required. A credit report can be ordered from a credit reporting agency, and an agency like www.e-renter.com can help you obtain it from one of the three major national credit bureaus i.e. Equifax or TransUnion.

Ques. Is it a requirement for landlords to use written rental applications?
Ans. While, not really a necessary practice, requesting prospective tenants to fill out written applications is one of the best ways to protect yourself from lawsuits filed by rejected applicants.

For example, after interviewing six tenant applicants, you select the third to rent your rental property to, as you feel he / she is the most likely to be reliable about paying the rent on time. A couple of weeks down the road, you may get a call from a lawyer hired by one of the applicant’s, who claims she was racially discriminated against for being an African-American and a single mother, on top of that. You may settle the matter by paying $10,000/-, but if you don’t, you could end up being promptly sued in federal court for $50,000/- plus.

Having no written documentation that explains the reasons why you selected the single white male with no children as your tenant, over an African-American single mother, with a higher-paying job, may have your insurance company taking the easy way out and paying the rejected applicant $10,000/-. After all, as the insurance company points out, your selection over the other, does look like racial discrimination.

If, you had been able to produce all written applications of all the applicants, including credit reports, references from previous landlords, etc. the end result would most likely have been different. You would have written documentation to support your choice of tenant, his credit history, job stability, far better than the rejected applicant’s, who (despite her current high-paying job) had only recently declared bankruptcy, as well as, a previous landlord reference check did not incline you in her favour.

Ques. What are the illegal types of discrimination, when choosing a tenant?
Ans. A careful study of the Fair housing laws, which specify the reasons considered illegal, when refusing to rent to a tenant, such as, rejection of an applicant on the basis of race, religion, ethnic background, sex, or the applicant has children or suffers from a disability, is a decided necessity. In addition, some state and local laws prohibit discrimination based on an individual’s marital status, sexual orientation, or age.

While, it is legal to freely choose from amongst prospective tenants, a landlord’s decisions must comply with state or federal laws, and must be based on legitimate business criteria. For example, the law entitles a landlord to reject a prospective tenant, with a poor credit history, insufficient income to pay the rent, or past behaviour, such as, damaging property that makes him / her a bad risk factor.

It is also legal to reject on the basis of a valid occupancy policy that limits the number of people per rental unit for health and safety reasons. Landlords are required by law to apply selection standards, such as, minimum income and a good credit report requirements, equally to all tenants.

Ques. What kind of subtle discrimination is considered illegal?
Ans. Fair Housing Acts prohibit landlords from taking any of the following actions based on race, religion, or any other protected category:

• False denial of a rental unit made available to some applicants.
• Advertisements that subtly indicate a preference based on group characteristics i.e. colour of the skin.
• Setting more restrictive standards, such as, higher income, for certain tenants.
• Being unreasonable in refusing to accommodate necessary needs of disabled tenants i.e. guide dogs, hearing dogs, or other service animals a disabled person requires.
• Playing favourites among tenants i.e. setting different terms for some tenants, by adopting an inconsistent policy towards late rental payments, or
• Terminating a tenancy for discriminatory reasons.

To avoid expensive litigation, screen prospective tenants and employees, weeding out undesirable elements with past evictions or criminal pasts. Visit www.e-renter.com to avail their tenant screening and background check services.