USING RENTAL CRITERIA TO AVOID FAIR HOUSING VIOLATIONS
The violation of Federal
Fair Housing laws can result in the loss of thousands of dollars in both civil
and punitive fines, in addition to the repercussive expense of legal fees and
the phenomenal expenditure of time and effort that is required of any court
process.
Fair housing claims occur
commonly as a result of the resident screening process, but that need not be
the case. One easy way to avoid Fair Housing violations is to establish clear
(written) rental criteria and then to consistently follow those criteria.
TIPS FOR ESTABLISHING RENTAL
CRITERIA:
-Occupancy guidelines: In
general most follow the 2 people per bedroom or the 2 people per bedroom plus 1
rule. This is not a hard rule, however, and the layout of your property may
mean that it is appropriate to allow fewer (or more) occupants.
-Income to rent ratio: The
industry standard is that an applicant must make 3 times the asking rent
amount. This ratio is considered to offer good assurance that there are enough
funds available to pay rent and live comfortably. This ratio may be adjusted
depending on the area in which you are renting and what you feel is a
reasonable expected income. RSI also recommends
using an income to rent ratio which includes debt. Applicants should have at
least ¼ of their income remaining after accounting for any monthly debt and
your rent.
-Credit history: Consider
credit scores (averages are available for specific states), bankruptcy records
(for example, you may want to deny tenancy if they have had a bankruptcy in the
last 2 years), amount of delinquency or collection accounts. RSI offers a pass
or fail product that streamlines this whole process for you; providing a clear
outline of your specific requirements for you to present to your applicants.
-Criminal history: This is
not a protected class, however, given recent discussion around disparate
impact, we recommend that you be as clear and consistent as possible when
establishing criminal history criteria. You may want to utilize a general
statement such as “tenancy will be denied for any criminal history which, had
it been conducted on the property, would have been a threat to the property,
its residents, or the community”. Other options include, denying based on the
severity of the conviction (no felony convictions, for example) or the amount
of time that has passed since the conviction. Bear in mind that each state has
its own limitations on reportable criminal history, and you may be limited as
to how far back you are legally allowed to consider convictions. Also, note that you should never base your
decision on arrest records but convictions alone.
-Rental history: You may
require that the applicant provide rental history for a given period of time (2
years). Generally, we would recommend verifying rental history with the past 2
property owners in addition to checking for any evictions. It is a known fact
in the industry that once a person has had one eviction they are more likely to
have another. Consider a rental criterion that denies tenancy for balances left
owing, judgments, or evictions.
-Pets: Establish if pets are
allowed on the property and if there are limitations on the type, number or
size. Any additional deposits or fees should also be noted. Service and
companion animals fall into a separate category and are exempt from these
additional fees.
-Smoking policy: This has
become a very popular (and important) issue in the rental industry given recent
legislation. Be very clear about your smoking policy. A no smoking property
would mean no smoking (of any kind).
-You should outline the
application process, application fees, deposits, and required identification.
Some states have fee caps in place or require that you charge only the actual amount
of the background screening. Be sure to confirm what regulations are in place
for your specific location.
-Clearly state that you
adhere to all applicable fair housing laws.
It is important that you
keep good records on each inquiry from prospective residents. Implement a log
or system with utilizes guest cards to track relevant information such as
date/time of showing, property shown, prospective move-in date, etc. in
addition to any calls received or made. Also, keep records on any changes to
property availability.
Applications received need
to be kept for a minimum of 60 months, even if that applicant is denied tenancy
or does not end up renting the property. Adverse action letters should be sent
to any applicant denied tenancy. These letters are available on our website.
RSI is happy to discuss any
questions you may have about establishing best resident screening practices.
Call us at 1-800-628-6414 or visit our website www.erentalservicesinc.com for more
information.
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