Tenant Screening Laws: A Complete Overview & Compliance Check
As a landlord, you know how challenging it can be when you get a bad tenant in one of your rental units. Whether the tenant isn’t paying their rent or isn’t following the rules in the lease, it’s nothing but a hassle for you as the landlord.
If you need to remove the tenant for non-compliance, it can be expensive and take months and months.
In addition to caring for your properties, filling them with quality tenants is the highest priority to avoid these kinds of problems.
As property managers, you need the tools to conduct the necessary tenant background checks while still abiding by the tenant screening laws of the area.
It is something many landlords know to do, but not many actually follow through with the necessary thorough checks. Landlord-tenant screening allows you to make sure your home, business, or rental property is being cared for.
Read on to learn more about tenant screening laws and how you can make sure you’re following them to get the best tenants in your properties.
What Are Tenant Screening Laws?
Tenant screening laws are in place to protect and assist the landlord, property manager, and tenant, too.
As a landlord, you know you have certain expectations about the tenants you want in your property. Your goal is to protect your property by getting the best possible tenants.
This means you want a tenant who has the ability to pay the rent and a tenant who has a track record of behavior that indicates they will abide by the rules you put in your lease.
As a potential tenant, the laws in place are intended to make sure you aren’t discriminated against unfairly. Does it mean that all landlords must rent to every tenant who shows up asking to live in a property?
No, but it does mean that a landlord can’t unfairly decide not to rent to a tenant for arbitrary reasons.
Both the tenant and the property manager are protected through these laws. The tenant gets assured they won’t be unfairly turned down for a rental for discriminatory reasons.
The landlord gets protected because they can ask important questions and check to make sure the applicant will indeed be a suitable tenant.
Applying Tenant Screening Laws
Since the tenant screening laws intend to protect both parties, they apply in a variety of situations.
In most cases, the laws expect the landlord or property manager to behave in a certain way so they don’t unfairly treat a potential applicant for a property.
For example, a property manager must be careful how they advertise a property. The property should be advertised based on the qualities of the property, not the qualities of the tenant who might live there.
Likewise, a property manager can’t deny information on a listing to a potential renter based on certain criteria. This means as the property manager starts the screening process for an applicant, they can’t choose to discriminate against certain groups of people.
For example, they can’t opt to only rent to someone with a certain skin color or even religious affiliation.
While a landlord can have qualifications to rent a property, those qualifications must be consistent. The landlord can’t have one set of qualifications for applicant A and then a different set of qualifications for applicant B.
A property manager can’t threaten, harass, or disregard the rights of a tenant under local fair housing laws and regulations.
Federal Fair Housing Laws and Why They Matter for Tenant Screening
The Civil Rights Act of 1866 might have attempted to ensure the rights of all citizens. They had the right to inherit, purchase, lease, sell, hold, and convey real and personal property. However, the reality was often much different.
In 1968 the Fair Housing Act was created to address key areas where tenants were often discriminated against.
The Fair Housing Act is federal protection to ensure that rights and protections for applicants and tenants are in place. It covers seven protected areas.
While there are a few exceptions to rental properties, most get covered under the Fair Housing Act. If an applicant feels like they have not been treated fairly through the application process, they can file a claim with the FHA.
It’s important for a landlord not to show an unfair preference to one applicant over another based on the protected areas of the Fair Housing Act.
Protected from Rental Screening Laws
The Fair Housing Act protects seven areas, which include the following:
- National Origin/Ethnic Background
- Familial Status
- Mental/Physical Disability
The demographics of each area are intended to prevent landlords from screening using these criteria.
For example, a property manager can’t use race or skin color to decide whether an applicant is suitable for a rental.
Religion is interesting for landlords to understand. A landlord can’t screen against someone who practices a certain religion. At the same time, they also can’t screen and prevent a rental because someone who does not have a certain religious practice.
The sex of an applicant also can’t be used as a screening tool, including if the applicant doesn’t conform to basic gender stereotypes.
A landlord also can’t opt to screen and prevent a rental to non-English speaking applicants. While the language isn’t protected, national origin is protected. Since an applicant might not be a proficient English speaker, they are protected because of their national origin.
The family status of an applicant is also protected. A landlord, in most cases, can screen based on the applicant having children or being pregnant. Senior citizen complexes may have some exemptions based on age.
A landlord also can’t screen a tenant based on physical or mental disabilities. If the applicant is seeking help for a drug problem and is in an active program for recovery, they also can’t be screened.
The FHA laws provide protection for these protected classes. So, when screening for a new tenant, the landlord can’t use these classes to screen and prevent a person from renting from them.
Who Is Mrs. Murphy?
No, Mrs. Murphy is not your best friend’s grandma. The proverbial Mrs. Murphy relates to one of the exceptions in the Fair Housing Act rules.
The Mrs. Murphy exemption applies to small rental properties with four or fewer units in them. The owner of the property, the hypothetical Mrs. Murphy, must also live in one of the units.
When a property meets these criteria, they can be exempt from the FHA. However, state and local laws also must be followed, and often those follow the FHA requirements.
For example, Alaska, Nevada, Wisconsin, and Ohio are states where the exemption doesn’t apply. Other states mirror the FHA laws. Many states follow the FHA rules with some variations.
If you’re not sure of your state laws and have a property that fits the criteria for Mrs. Murphy exemption, you should check.
There are times when other exemptions apply. These include religious organizations, private clubs, senior housing, and single-family homes where a broker is not involved.
State and Local Laws for Tenant Screening
While it’s important and necessary to know the federal laws regarding tenant screening, you also need to know your state and local laws as well. Often these laws mirror federal laws.
In many cases, the laws can be more strict than the ones in place at the federal level. As a landlord, when you’re screening, you’ll be held accountable for following all of the laws in place.
Often, local laws include the following:
- Veteran or military status
- Sexual orientation
- Gender identity or expression
- Genetic information
- Source of income
- Criminal history
- Student status
- Physical appearance
- Political beliefs
- Gender identity or expression
If you manage property in multiple places, it’s important that you know the applicable laws. Often, they go beyond the tenant screening process and might also include tenant-landlord relationship, non-payment of rent, and eviction processes.
Checking a Criminal Background
One thing that is important for landlords to understand is that a criminal history is not part of the protected classes in the Fair Housing Act. An applicant with a criminal history might not be protected from discrimination in the tenant screening process.
Having said that, in 2016 the Department of Housing and Urban Development (HUD) developed guidelines related to tenant screening when the tenant had a criminal history.
These guidelines address the disparate impact of screening for a criminal background for African Americans and Hispanics who’re incarcerated at rates disproportionate to other population groups.
This means that some with a criminal background may fall into the protected groups of race and national origin, even with a criminal history.
It’s important to consider the criminal history of the applicant and how it might impact them and others if they became a tenant.
Were they incarcerated or just arrested? How recent is the criminal history? Does their background put others in the rental in potential danger? Does their background put the property in potential danger?
You might also consider if there were multiple offenses. Did the offenses happen close together or do they show a pattern of behavior that might create a problem with them becoming a tenant?
Federal Trade Commission’s Fair Credit Reporting Act and Tenant Screening
In addition to background checks, most landlords and property managers also want to do a financial screening on the applicant. This includes checking the applicant’s credit background.
The Federal Trade Commission’s Fair Credit Reporting Act (FCRA) has several things you must do to remain in compliance when doing a financial background check. These include the following:
- Get the tenant’s permission with a signature to do a financial screening
- Notify the tenant orally that you will take adverse action against them based on the financial background report
Should the background check come back and have concerning information, the FCRA says the property manager can require a co-signer on the lease.
The property manager is also required to provide the name and phone number of the credit reporting agency being used as part of the financial screening process.
Get Help With Tenant Screening
As property managers, you want to work with prospective renters, follow the tenant screening restrictions, and still make sure you’re protected.
It can be a real challenge to do all the screening and make sure you’re not inadvertently renting to someone who will in the end be a bad tenant.
But you also have an obligation to be fair and keep up with the required federal, state, and local laws.
Often, the best way to do this is to use a product like what RentSafe offers to create the screening tool you need. You can work from one dashboard and make sure what you want to watch for in the screening process is actually addressed.
Without a screening tool, you’re left with attempting to check background, criminal history, and even credit checks on your own. It makes more sense to use a screening tool that helps streamline the screening process to find you the best tenants.
You also don’t want to find yourself in trouble as a landlord because you haven’t followed laws for tenant screening.
Know the Tenant Screening Laws in Your State
While your ultimate goal might be to land great tenants who will pay their rent and abide by the lease, you have rules and laws to follow too. Tenant screening laws are in place to prevent discriminatory practices by landlords and property management companies.
The good news is that it doesn’t have to be a difficult process for you to screen your tenants. Our product can help you with the tenant screening process and keep you in compliance with US and state laws.
Contact us today to learn more about how we can help you find the right tenants for your property.