The word “discrimination” has gained a bad flavor in American mouths in the past fifty years or so — but stop and think about it.
We celebrate it when a chef has a discriminating palate or when a business man has a discriminating taste in suits. To discriminate literally just means, “to decide which of something is preferable.” We use “discrimination” as a negative word when we use it in a legal sense because we’re almost always talking about kinds of discrimination that have been outlawed because they’re based on factors that aren’t actually relevant (or fair).
What a Landlord CAN’T Legally Discriminate Against
Federal housing laws make it illegal for a landlord to discriminate based on:
Age (with an exception made for senior-citizen communities)
Physical or mental disability
Further state laws make it illegal in many places to discriminate based on:
Sexual orientation and gender identity
Source of income (almost always in the form of “you must accept welfare as a valid source of income” — it’s always valid to discriminate if you have a strong reason to believe that someone’s income comes from an illegal source.)
Finally, as one last little catch in the whole discrimination question, all rental applicants must be asked the same set of questions. (Obviously, that set of questions is allowed to evolve over time — you just can’t ask a question of applicants A, B, and D while asking C something you didn’t ask the other three.)
Related: How to Handle an Untimely Tenant Death as a Landlord
What a Landlord CAN Legally Discriminate Against
So with all of those things off the table, is there anything that a landlord IS allowed to discriminate against? Absolutely — in fact, as we implied in the beginning, discrimination is the entire purpose of a rental application.
You can and should use your applications to discriminate based on:
1. Financial Means
You can’t discriminate against where the money comes from in some states, but you can always discriminate based on total amount of income. If a potential applicant isn’t making enough to satisfy for screening requirements, you can “discriminate” against them – as long as you apply the same requirements to all applicants.
Even the best tenants can experience a change in their life circumstances that will have them acting like utter loons. One of our longterm, high-satisfaction tenants just up and disappeared without warning one day, only to return almost two months later explaining that her mother had almost died, and she had left in a panic.
From that day forward, we have insisted that all of our tenant give us contacts that will know where to find them in a pinch — preferably their parents if they’re still alive — because if you can’t find a missing tenant, you lose money fast. So discriminating against people who can’t show you their connections to other living, breathing people is not just allowable, it’s downright wise.
3. Bad Behavior
A criminal record isn’t always an automatic decline — some people are still bearing the cross from something they did decades ago and haven’t ever repeated.
Related: Your Complete Guide to Effectively Handling Tenant Evictions
But if a prospective tenant has a criminal record, a bad reference from a previous landlord, and comes across as shifty and nervous during the interview, s/he’s hit the trifecta, and we pull the plug in a hurry.
4. Potentially Destructive Habits
Smoking, excessive drinking, cooking meth — there are lots of things an applicant could do with their time that would make them unfit to rent to, and it’s part of your job as a property manager to figure those things out before they become a problem. The best time to do that is before you ever let them sign a lease — so use the application and screening process to expose as much of their potentially destructive behavior as you can.
In the end, the reason why we property managers screen our tenants comes down to a simple overriding responsibility: the responsibility we have to turn our clients’ properties into money in their pocket.
If we put lousy tenants in our clients’ properties, we’re going to reduce the value of their investment — and that goes against everything a property manager should stand for.
What’s your tenant screening criteria? Is there anything you’d add to my lists?
Jump in on the comments below!
The post The Landlord’s Guide to Effective (& Legal) Tenant Screening is property of The BiggerPockets Blog. and is Copyright © 2014 BiggerPockets, Inc. All Rights Reserved.