Selecting the right tenants for your rental properties is one of the most important decisions you will make as a landlord. You always want to do your due diligence during this process. It involves checking potential renter’s credit history, criminal record, rental history, employment verification, and verifying references. Usually, you can deny a rental application for any of the reasons stated above. However, not all situations are the same and there are some instances when unexperienced landlords can face discrimination charges that could be devastating to your real estate business.
In order to find good tenants, you have to discriminate against certain potential renters. For example, a wise landlord will never approve a prospect who has a horrible credit history, no employment and, based on the reference from his prior landlord, practically destroyed the rental unit where he/she previously lived. There are some reasons that are not only legal in regards to discrimination, but it is also a good business practice. These reasons include poor credit, insufficient income, overcrowding, criminal record and others. The tricky part is that you could be discriminating for a seemingly legal reason and still be facing a discrimination lawsuit.
In general, the Fair Housing Act prohibits discrimination based on the following seven protected classes:
- National Origin
- Handicap Status
- Familial Status
There are also several classes that are protected from housing discrimination by the state of California:
- Lesbian, Gay, Bisexual and Transgendered Persons
- Marital Status
- Source of Income
- Military Status
Rental housing discrimination against these protected classes is illegal. We recommend that all property owners abide by the Fair Housing Act and never discriminate against these protected classes. However, not all situations with prospective renters are this straightforward.
Recently, I met a landlord (let’s call him John), who managed his properties on his own. John was well-aware of the protected classes of the Fair Housing Act and never intended to discriminate against potential tenants in the manner that would violate any laws. He was also committed to rent his property to a qualified candidate without criminal convictions. Normally, a landlord can discriminate against potential renters with a criminal record. It is also a landlord’s duty to protect the rest of the tenants against potential known harm. When John saw that an applicant had a criminal conviction for drug use dating two years back, he denied his application. He politely explained to the applicant that he does not rent to persons who have a criminal record, and because of the drug use conviction that the applicant had two years ago, he has no choice but to deny the application. Imagine John’s surprise when he was slapped with a law suit. John was sure that he could discriminate against potential renters who have a criminal record so he decided to represent himself in court and did not hire an attorney. John was even more surprised when he lost the case and was hit with a huge fine. You see, John didn’t know that under the Fair Housing Amendments Act a past drug conviction is considered a disability, which placed his applicant in a protected class. The applicant was able to show records of attending a drug rehab program and convinced the judge that he kicked the habit a year ago. John came to us seeking the help of a professional property management firm, he had several rental properties and was tired of running them on his own any way. The lawsuit was the last drop that convinced him to finally hire a professional.
The truth is that professional property managers deal with such issues on daily basis and usually have adequate expertise to help landlords avoid such situations. You should also note that unless your property manager is a licensed attorney, he/she cannot give legal advice. Tolo Realty teamed up with several professional law firms and is able to get quality legal advice in any unconventional situations. Please call or email (firstname.lastname@example.org) us if you have any questions regarding selecting qualified tenants or managing your property.