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Tenant Screening Laws For Landlords and Tenants

This is role 2 of our Landlord's guide to Tenant Screening. If you've landed here directly, don't worry — we've got everything you nee

d to know about agreement tenant screening laws below.

It's pretty common for a tenant to become upset about something is written in their lease. That's because they didn't actually pay attention or read it, to brainstorm with, and they feel blindsided.

Virtually landlords tend not to accept sympathy for the tenant who uses ignorance as an excuse.

The same is true for a judge when a landlord says they weren't enlightened of tenant screening laws.

Information technology only takes one bad experience with a problematic renter for landlords to look into tenant screening laws.

One innocent error where tenant screening laws are ignored can cost tens of thousands of dollars in fines and legal fees.

That's why it's imperative to take the time to read this page in its entirety. One ounce of prevention could be worth $ten,000 of cure.

Nosotros'll educate you on exactly what you need to know so you're within your legal rights when screening tenant applicants.

What are Tenant Screening Laws?

Landlord-tenant laws and regulations govern the business dealings and interactions between landlords and tenants. There are laws that regulate everything from keeping a property habitable to the steps needed to evict a tenant.

The tenant screening process is no exception.

The laws are in place to protect both landlords and applicants during the fact-finding part of identifying the applicants with the well-nigh potential to come across the rental standards you've set for your holding.

Landlords demand to understand the laws regulating the process so they can stay compliant. Even if you didn't discriminate intentionally, you are still subject to the laws.

Federal and land laws can differ, and it'south crucial you lot understand both.

This is a great question that came up in our individual Facebook Group.

Harry Heist is an agile fellow member of our community and an attorney in Florida who represents big belongings direction clients.

Information technology's important that you understand the federal laws and then how your state and local municipalities interact with those laws.

Let'southward get started with the federal laws…

Understanding Federal Off-white Housing Laws

The vast bulk of landlords are governed by the laws of the FHA. There are some exemptions only it'south best that y'all follow these laws regardless of your state of affairs —you and many other landlords in the Us of America are subject to the Fair Housing Act of 1968.

This comprehensive federal legal protection covers rights and protections for applicants and tenants to ensure they get fair consideration. The Department of Housing and Urban Development, or HUD, administers and enforces the Fair Housing Act.

The 7 protected classes listed in the Fair Housing Human action are:

1. Race
2. Colour
3. Religion
4. National Origin/Ethnic Background
5. Gender
6. Familial Status
7. Mental/Physical Disability

Unfortunately, thousands of fair housing claims center on the application and screening process.

Landlords may show a preference for a detail type of bidder and put others at a disadvantage.

Another example is when landlords set different terms for 1 applicant over another. When some landlords accept stricter standards for certain applicants than others, information technology can go them into trouble with the law.

The Fair Housing Deed applies to millions of properties across the country with few exceptions.

Simply how tin yous find out whether or not the Off-white Housing Human activity applies to your rental properties and your tenant screening practices?

Ane notable exception to federal fair housing laws include buildings with fewer than five units where 1 is occupied past the property owner.

This is known as the "Mrs. Murphy" exemption and is covered later in this chapter.

Other exemptions include religious organizations, private clubs, senior housing and single-family homes where a banker is not involved in the sale or rental.

Yet, even if your property is exempt from the Fair Housing Act, many state and municipal fair housing laws may utilize to your belongings.

If you want to manage your rental property business successfully, y'all need to empathize and be compliant with the federal off-white housing laws, specially every bit they utilise to tenant screening.

The law states that landlords cannot discriminate against an applicant in a protected class. In other words, the Fair Housing Act prohibits landlords from gathering and using certain information equally a basis for selecting a tenant.

What Is The Mrs. Murphy Exemption?

We hear this from landlords many times as an excuse to discriminate in their screening practices because they are in an owner-occupied rental.

"Mrs. Murphy" is not a existent person but a hypothetical grapheme. She is painted as an elderly landlord that lives in an owner-occupied rental.

The FHA exemption states that if a dwelling has iv or fewer rental units and the owner lives in i of those units, that home is exempt from the FHA.

This is not true in every state, and state laws take precedence over national laws.

Take a look at this map on Mrs. Murphy at the state level.

If you're in a cerise state, this means that the exemption does not apply in your state whatsoever.

If y'all're in a yellow/orange country, at that place are actress conditions added to the FHA exemption.

If you're in a green state, this means that the state laws mimic that of the FHA.

For detailed information on your state, you tin can visit this resource from foxrothschild.com

We would caution yous to still await up your state laws as that link above is dated 2013 and some states may accept inverse their status on the exemption.

Can Landlords Discriminate Confronting Felons?

One area of tenant screening police force that is disruptive to many landlords centers on the bidder'south criminal background check.

The Fair Housing Human activity doesn't include criminal history as a protected class, and therefore applicants with such a background are non condom from bigotry.

However, HUD recognizes the growing discriminatory practices of landlords making decisions based on an bidder'due south criminal background.

The graphic below shows that the U.s.a. makes up about 4% of the globe's population but around 22% of the earth'south prisoners. This according to Wikipedia as of Oct 2013.

This next prototype shows the likelihood of a male person being incarcerated based on ethnicity in 2009.

These types of statistics are why HUD has enacted new guidelines in 2016 to limit the disparate impact.

Disparate impact refers to practices in employment, housing, and other areas that adversely affect 1 group of people of a protected characteristic more than than some other, fifty-fifty though rules applied past employers or landlords are formally neutral (source Wikipedia).

Basically… if a landlord has a blanket policy of no criminal history it is much more probable to punish a Hispanic or black male than a white male.

HUD has enacted new guidelines in 2016 to help landlords navigate this tricky area and end them from issuing blanket policies about a criminal record.

Landlords may be breaking the law when they refuse to hire to applicants with criminal records.

To determine whether or not a landlord'south criminal history policy is discriminatory, HUD looks at several different criteria:

• Does the landlord's criminal history policy have a discriminatory effect?
• Is the landlord using the same criminal history criteria for every applicant?
• Has the landlord made exceptions for some tenants with a criminal history?
• Does the criminal history policy legitimately protect other tenants and the property?
• Does the landlord include specific examples of criminal behavior that threatens the safe and not just rely on coating statements about arrests and convictions?
• Does the criminal history policy make a distinction between arrests versus convictions?
• Has the landlord included specific requirements for the type of crime, history of criminal activity, how long since the criminal activity and testify of rehabilitation efforts?

Landlords have the right to deny an awarding based on a person's criminal history, in accord with the federal police force.

Many of the guidelines back up landlords in refusing to rent to those with specific criminal backgrounds such every bit drug manufacturing and dealing, sex crimes and violent crimes.

This fashion, landlords tin rely on their comprehensive rental policies that deny housing to applicants with these specific criminal convictions to go on other tenants and their property safe and secure.

Of form, different states and municipalities may have more strict laws in place concerning discrimination confronting those with a criminal groundwork.

The bottom line for you lot and your rental holding business organisation with regards to tenant screening laws and criminal history is just a person's arrest record is no longer a valid reason to deny an applicant.

Yous are not immune to include a blanket statement that all applicants with a criminal history will be denied.

HUD wants to piece of work with landlords to ensure that they are able to prove why they deny an bidder based on criminal convictions (drugs, sexual activity crimes, etc.) for safety and security reasons.

Ignorance is No Excuse For Tenant Screening Laws

When discovering what constitutes discriminatory behavior during tenant screening, landlords, owners and property managers often don't know or don't care about the laws that regulate the procedure.

Some landlords who discriminate accept aggressive political or social agendas and willfully deny housing to qualified applicants.

While this does happen, there are also thousands of cases where landlords are but not enlightened of the federal, state and municipal tenant screening laws.

Here are some examples of how landlords break the constabulary during the tenant screening procedure, whether willfully or inadvertently:

• Holding some applicants to stricter standards than others, such as a higher credit score for single mothers.
• Asking questions that allude to an applicant's marital status or familial status, such every bit whether their kids are excited about the upcoming holidays.
• Querying what an applicant's starting time language is.
• Including discriminatory questions on the rental application.
• Request an applicant's references virtually their background, such equally what country they came from or if they are gay.
• Trying to guess the ethnicity of an bidder, such as whether they are Korean or Japanese or what Native American tribe they are from.
• Request in what land an applicant was born.
• Mentioning that there is a church or synagogue nearby that the applicant might similar to attend.
• Advertising for a specific type of applicant or against others, such as saying that the property is in a skilful Christian community or information technology'south for single people only.
• Refusing a service dog because of your no pets policy.
• Discreetly asking an applicant if they are gay.
• Asking for a higher security eolith from applicants with kids.

Even if you don't ask questions of the bidder directly, you tin still go into trouble if your rental application course includes sure types of questions.

You must ensure that your rental application form in no style includes questions virtually things like a person's disabilities, marital status or race.

A rental application should only ask for information on things like bankruptcies, prior evictions, piece of work status, references and similar issues that reflect whether or not they would be a good tenant and able to pay the rent on time and in total.

Create a Rental Policy for Off-white Tenant Screening

The best style for y'all to stay compliant with the Federal Fair Housing Act when it comes to tenant screening is to create a written rental policy (we refer to this as a tenant screening criteria in the side by side chapter).

This document outlines the adequate criteria that are necessary for any landlord to approve an applicant for their rental property.

Think of tenant screening like a Math vs. Art Teacher grading your work

With an art instructor, it'southward a little vague as to why your project was better or worse than the next.

Yous don't want to class tenants like an art instructor. You want to have an answer key as a Math teacher would and you lot do this past creating a tenant screening criteria.

Landlords must treat every applicant exactly the same way and apply the criteria to everyone equally.

Y'all tin use your tenant screening criteria every bit the legal standard for selecting your next tenant.

FCRA Laws for Tenant Screening

The provisions outlined past the Fair Credit Reporting Act, or FCRA, protect every consumer's information and ensure as much accuracy as possible.

Doing a background bank check on someone reveals all kinds of information about their consumer habits and life skills and experiences.

It helps lenders, employers and landlords determine if the applicant is going to be able to fulfill the requirements of the loan, job or rental agreement.

People or companies are only immune to access this information when they have a permissible purpose.

The study tin simply exist used for the stated purpose, which is to qualify for renting a unit, and for nothing else.

When landlords use background checks that include credit reports to assess rental property applicants, they must follow the laws that regulate apply every bit well as reporting information.

When a landlord is using a consumer written report to make a decision nigh an bidder, there are several essential compliance steps outlined by the FCRA.

Collect a Completed Rental Application

Landlords need to starting time the procedure by collecting a completed rental application form from the applicant.

This document is the starting betoken for running a background bank check and provides the landlord with vital information like a Social Security number, full name, birthday and more.

A completed rental application shows that the person is interested in becoming a tenant and provides the landlord with a reason to start a background check.

Verify an Applicant's Signature

The FCRA is extremely protective of every consumer'due south information, therefore not just anyone has admission to the report. A landlord must obtain written permission from the applicant to prove that they are allowing their background information to be shared.

Most landlords and property direction companies include a signature line on the rental application that grants permission for them to move forrad.

Complete a Credit Admission Application

Landlords, investment property owners, and property managers are approved by the FCRA to legally access an applicant's credit written report every bit long as they have consent. However, they must complete a credit access application that establishes their legitimacy.

The application generally requires a signed rental application and sometimes a re-create of a business organisation license or holding management understanding. If landlords use a credit reporting agency, this step is oft part of opening an account with them.

Adverse Action Observe, If Applicable

If the landlord makes a decision that is not favorable toward the bidder based on information found in the consumer report, information technology is an adverse action.

Agin action includes requiring a co-signer, requiring a larger eolith, raising the rent or outright denying the application.

If whatsoever activity is taken, the landlord must provide the applicant with an adverse action notice. This is written documentation of what the landlord is doing and why.

Landlords must provide data about the consumer reporting company that created the report and the applicant's right to dispute any information on the report, amid other things.

Nosotros recommend using a generic adverse action letter of the alphabet because yous're not required to give specific details of why y'all denied the applicant. Less is more than when it comes to issuing adverse activity to a denied applicant.

Properly Dispose of a Consumer Written report

The FCRA requires anyone that has requested a consumer report to securely dispose of the information when they are finished. For paper reports, shredding or burning is sufficient.

Electronic reports must exist deleted and not stored on any backups.

At RentPrep we store all reports digitally and handle all compliance. If you were to impress your screen to keep a copy of the report, you are opening yourself up to unnecessary issues. Some landlords similar to have a hard copy of the study, just we strongly urge against this.

Landlords can also choose to report information to a reporting bureau under the FCRA Furnisher Rule.

However, they are non nether any obligation to do so. Your responsibilities as a furnisher are clearly spelled out.

They include working to ensure the accuracy of the information you are providing.

The virtually mutual affair that landlords do as furnishers are to written report delinquent accounts.

Y'all must provide accurate data and include the month and the year of the delinquency.

At that place are other rules regarding what happens if the consumer disputes the information landlords provide. In that case, you take an active role in the investigation.

Federal vs. State Tenant Screening Laws

The federal off-white housing laws confer many rights onto renters that belong to one or more protected classes.

Many land and municipal laws get across the federal fair housing laws to confer additional rights to applicants.

Every state has fair housing laws that either meet or exceed the federal standards set by the Fair Housing Human action. It is up to y'all to know most your own state and municipality when it comes to tenant screening laws.

State laws typically oversee that of the FHA. Usually, this ways additional regulations or restrictions placed on the landlord.

The protected classes under the federal law include race, organized religion, sex, color, national origin, familial status and mental/physical disability. State laws must consist of these protected classes, but they can add additional protections to specific groups.

Here are some of the nigh common state and municipal protections that you might encounter:

• Age
• Sexual orientation
• Gender identity and expression
• Citizenship
• Veteran condition
• Source of income
• Medical condition

Just equally with federal off-white housing laws, at that place are backdrop that don't qualify for state off-white housing laws as well.

Every bit a landlord, you need to too look at additional tenant screening laws and discrimination laws on the county or city level.

In many areas, counties, cities, and municipalities likewise have tenant screening and rental bigotry laws that encompass additional protected classes beyond what the federal and state law encompass.

To do more research on the laws and regulations of your state, y'all can follow links from this HUD website. https://world wide web.hud.gov/states

You tin can also enter your state and the words "fair housing" into a search engine to detect websites that provide details on your state laws. For example, a landlord in Oregon would simply blazon "Oregon fair housing" to discover links to land regime websites that outline the laws and regulations.

To find more nigh your county, urban center, and municipality, the best thing to do is conduct an online search.

Simply enter the name of your state, metropolis, canton, and municipality along with "fair housing." For example, a landlord could enter "Miami-Dade County fair housing" into a search engine to larn more than about the laws in that area.

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Source: https://rentprep.com/tenant-screening/tenant-screening-laws/