Benefits with The Local Choice

How to Screen and Select Tenants FAQ

Check tenants' credit and avoid legal trouble over discrimination.

What's the best way for landlords to screen tenants?

Savvy landlords should ask all prospective tenants to fill out a written rental application that includes the following information:

• employment, income, and credit history
• Social Security and driver's license numbers
• past evictions or bankruptcies, and
• references.

Before choosing tenants, landlords should check with previous landlords and other references; verify income, employment, and bank account information; and obtain a credit report. The credit report is especially important because it will indicate whether a particular person has a history of paying rent or bills late, has gone through bankruptcy, or has ever been evicted.

To avoid trouble with fair housing laws, be sure to be consistent and fair in your screening. For instance, make it your policy to require credit reports from all applicants. For more information, see Nolo's article Choosing Tenants: Avoid Fair Housing Complaints and Lawsuits.

Are landlords or property managers allowed to pull a prospective tenant's credit report?

Yes, you are allowed to obtain a credit report on a prospective tenant. If you turn down an applicant because of negative information on a credit report, you must send the applicant an "adverse action" letter, which informs the applicant of three things:

• the reason you rejected the applicant
• the name and address of the agency that reported the negative information, and
• the applicant's right to obtain a free copy of the report by requesting it from that agency within 60 days.

To run a credit check, you'll need a prospective tenant's name, address, and Social Security number or Individual Taxpayer Identification Number (ITIN). You can order a credit report from a credit reporting agency, which will get the report from one of the three major national credit bureaus:

Equifax: www.equifax.com

Experian: www.experian.com

TransUnion: www.transunion.com

To find a credit reporting agency that operates in your area, look in the Yellow Pages or type "credit reporting agency" in your browser's search box.

Are landlords required to use written rental applications?

Asking prospective tenants to fill out written applications can protect you from lawsuits filed by irate applicants that you rejected as tenants.

For example, suppose you talk to six applicants before renting one of your units. You pick Applicant #3 because you feel he is most likely to reliably pay the rent. Two weeks later, you get a call from a lawyer representing Applicant #5, who claims she was discriminated against because she is African-American and a single mother. If you aren't willing to pay $10,000 to settle the matter, you'll promptly be sued in federal court for $50,000.

Because you have no written documentation explaining how you picked Applicant #3, your insurance carrier proposes to pay the rejected applicant $10,000. After all, the insurance company points out, it looks bad that you picked a white male with no children, especially since it turns out that the African-American single mother has a higher-paying job.

Had you been able to produce all the candidates' comprehensive written applications, their credit reports, and references from previous landlords, the result would likely have been different. You would have had good written documentation supporting why you picked Applicant #3 his credit history and job stability were far better than that of Applicant #5, who (despite her current good job) had recently declared bankruptcy and had poor references from previous landlords.

For more information, see Nolo's article Choosing Tenants: Avoid Fair Housing Complaints and Lawsuits.

What types of discrimination are illegal when choosing a tenant?

Fair housing laws specify illegal reasons to refuse to rent to a tenant, such as rejecting an applicant because of race, religion, ethnic background, sex, or because the applicant has children or a disability.

In addition, some state and local laws prohibit discrimination based on a person's marital status, sexual orientation, or age.

Landlords are legally free to choose among prospective tenants as long as their decisions comply with these laws and are based on legitimate business criteria. For example, a landlord is entitled to reject someone with a poor credit history, insufficient income to pay the rent, or past behavior such as damaging property that makes the person a bad risk. A valid occupancy policy limiting the number of people per rental unit one that is clearly tied to health and safety can also be a legal basis for refusing tenants.

Landlords must apply selection standards, such as requiring a minimum income and a good credit report, equally to all tenants.

What kinds of subtle actions might be illegal discrimination by the landlord?

The Fair Housing Acts prohibit landlords from taking any of the following actions based on race, religion, or any other protected category:

• falsely denying that a rental unit is available to some applicants
• advertising that indicates a preference based on group characteristic, such as skin color
• setting more restrictive standards, such as higher income, for certain tenants
• refusing to reasonably accommodate the needs of disabled tenants, such as allowing a guide dog, hearing dog, or other service animal
• setting different terms for some tenants, such as adopting an inconsistent policy of responding to late rent payments, or
• terminating a tenancy for a discriminatory reason.

For More Information

To learn more about attracting, screening and selecting the best renters available, see Every Landlord's Guide to Finding Great Tenants, by Janet Portman (Nolo).