Legal Discrimination

Tenant Selection

As a property manager in Nevada, one of your responsibilities is to qualify tenants to rent your properties. We know we are prohibited by both state and federal Fair Housing laws from discriminating against a potential tenant because of his race, skin color, national origin, religion, gender, familial status (presence of children under 18), disability, or ancestry. Yet, is “discrimination” always illegal?

As humans, we discriminate on a daily basis.

In its most basic definition, to discriminate “is the process by which two stimuli differing in some aspect are responded to differently.” There are legal ways in which landlords determine the qualifications of prospective tenants.

Show me the money.

As property managers, our owner/clients expect us to verify prospective tenants’ income, employment and credit. We need to know whether the prospect pays his rent and other bills on time. We want to know whether he’s been evicted before. These factors are essential in determining whether a prospect is qualified to enter into a rental contract.

First things first.

Before running a credit check on a prospect, be sure you obtain the prospect’s written permission. You must disclose your intent to run a credit report, and the prospective tenant must agree to it.

If, because of something you see on the credit report, you either decline to rent to the prospect, or require a higher security deposit, or request a co-signer, your obligations under the Federal Fair Credit Reporting Act are to:

  • Provide notice to the prospect of your decision.
  • Provide the name, address, and phone number of the credit reporting agency who provided the report.
  • Inform the prospect of his right to obtain a free copy of the report by requesting it from the credit reporting agency.

In the property management industry, we typically call this notification an “Adverse Action Letter.”

Adding up the score.

It is vitally important for landlords to select tenants in an objective matter – only employing quantifiable criteria as a basis for decision. In the interest of objectivity, many property managers use some sort of scoring method to arrive at a decision.  You can find a sample of such a scoring method here.

Remember that, when your rental market changes, so will your criteria for accepting tenants in rental property. The more vacant properties you have, the lower the qualifying standard will be. When the market tightens, so will your qualification criteria.

TIP:          Be sure to date your tenant qualification criteria, and carefully track any changes you make to that criteria. If challenged, you must be able to prove you are selecting tenants in an objective manner, using the same criteria for all applicants for a given property, at a given time.

Do you have a tenant qualification process you’d like to share with us? Please do so by leaving a comment on this blog.


7 Replies to “Legal Discrimination”

    1. A bit o’ property management humor there, eh Robert? Actually, I can see how a statement like that might serve to sharply focus the prospect’s attention on what you’re about to say next, “This is how we will evaluate your rental application…” Thanks for reading and commenting!

  1. We explain it a LOT these days, because when people find out we look at their credit score, they’re afraid they won’t qualify. I tell them their score with *us* is what counts, and we base that on their credit score and about nine other criteria. We’ve rented to people with lousy credit or no credit at all, as long as everything else adds up. I think the secret is to score as objectively as possible. “I don’t like the cut of your jib,” really isn’t a good excuse not to rent to someone.

  2. Good point, Robert. In today’s economy, if we were to rely only on credit score, we’d have a tough time filling vacant units. I’m glad to hear you have a strong set of objective rating criteria, and that its use is allowing you to fill your vacant units and provide housing to those who need it and can afford to pay. Bravo!

  3. Is it legal to discriminate against smokers? Can I have a non-smoking policy for a rental unit (in my case a single family residence)?

    1. Hi, Zoe. Many landlords in Nevada have non-smoking rental properties – properties in which smoking is prohibited. Without a doubt, cigarette smoke can damage property. Smoking/tobacco use is not considered a “protected class” under either federal or Nevada state fair housing laws. That said, a good question to ask yourself is whether it is your aim to exclude someone who smokes, or whether you just want to make sure no one smokes inside your rentals. I advise you check with your attorney on the best language to use for a smoking prohibition in your rental agreement and/or rules & regulations. Thanks for reading!

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