Written by Chris Majerle, PCAM on April 8, 2020 – Updated April 2020
Rental Management Edition
It is pretty well known that discrimination is not only illegal but is a crime that will draw a significant punishment. Even in large metropolitan areas, however, it is not easy to find is a landlord, be it an independent landlord, rental manager, or a real estate agent who dabbles in rentals, who has a clear and accurate definition of discrimination. Before reading on, think about it for a minute…what do you have to do to be in compliance with Fair Housing Laws?
You probably came up with something like, “I rent to people regardless of race, color, religion, or national origin.” Well, nothing could be further from the truth. In fact, when you include Federal, State, and local protected classes, there are some 19 groups of people who are protected against discrimination in housing. Some of the others include the presence of children, familial status, sexual preference or orientation, source of income, personal appearance, physical or mental handicap. Even those who know the list of protected classes often have substantial misunderstandings of the meaning. Setting a limit of 4 people in a 3-bedroom home may be considered discrimination against families with children. Requiring earned income rather than subsidized income may violate source of income laws. None of these discrimination prohibitions means you must accept an applicant. They merely mean that you may not reject on the basis of the condition. For example, you can reject that Section 8 family if you have a policy of always checking with prior landlords and you talk to this family’s prior landlord who says they trashed his property…but only if that is a criterion contained in your policy.
Unlike other US laws, fair housing is one in which the accused stands guilty until proven innocent. If accused, you have to prove you did not discriminate on the basis of whatever the accuser says you did. Assuming you did not, the best method of proving innocence is to establish a pattern. You should have a written qualification policy that spells out any and all criteria you will use in tenant selection. In essence, you are setting the minimum standard below which you will automatically reject. Set your income level. State whether you will accept less-than-perfect credit and what level of less-than-perfect is acceptable. How many people will you permit in your property? What is the deposit and will a larger deposit offset any particular negatives in the tenant screening? Do you accept pets? If so, are there any limitations? Will you check previous rental history, and if so, what would prevent you from accepting an applicant?
Once you have developed this detailed policy, you must apply it to all—that is 100%—of the applicants. If you have an income requirement, for example, and you always reject if the income is less than the required amount, even if by $1, then you should be able to show that this applicant was not rejected because of race, handicap or other issues but that it was because the income was short of the requirement. If, however, a nice, clean, perfect (whatever those terms mean) applicant comes by tomorrow and just seems like there’s no better tenant in the world and they’re only $5 per month short on income, you had better not take them. They didn’t meet the criteria and you are shooting for 100% compliance.
Do you think this is not serious? If there is an allegation of discrimination, you will receive a call from a Federal investigator. They will ask for your qualification policy. If you have one, they will be shocked since most do not. If you do not have a policy, how could you possibly show that you had any basis for denying an application? Then, you will be asked to provide copies of rental applications. They will want a mixture of approved and denied with the approved applicants belonging to the same protected class as your complainant and who did not have the denial condition and they will want a batch of denied applicants, not belonging to the same protected class, who had the denial condition. In other words, they will want 50 or more examples of how you approve all people who don’t have the problem and deny every person who does. If they find even a single case, the matter will be referred for trial in Federal court.
Do your homework. Consult an attorney who specializes in this stuff. You will run into quirks, particularly with state and local jurisdictions that will limit the amount of security deposit (no matter what other names you give it). They may require that you reduce the rent, for qualification purposes only, by the amount of government subsidy, and qualify the applicant on the remaining rent. They will certainly tell you that an assistance dog is not a pet, but neither may be the kitty who keeps the elderly woman from sinking into depression. In the end, you want a legal policy that you apply to every applicant so you can always point to the reason for rejection and you never deviate. Can you still be charged? Of course, but you’ll probably be able to successfully defend even without employing counsel. It takes a bit of work, but remember, fair housing violations are civil rights violations and there is no cap to the amount of punitive damages a jury can award.