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April 11, 2024

An Easy Guide to Tenant Screening Laws

Noah Goldman
Chief Operating Officer

Becoming a landlord or property manager can be a gratifying endeavor. Yet, it comes with specific responsibilities, including ensuring that you choose renters who are reliable and responsible and will treat your property with respect.

Tenant screening is a crucial checkpoint in the process, but knowing the ins and outs of the laws is key to sidestepping legal headaches down the road. Let’s dive into our detailed guide on tenant screening laws for a smooth and hassle-free renting experience.

What are tenant screening laws?

Tenant screening is the process of evaluating potential renters based on factors like credit and rental history, income verification, and criminal background checks. While property managers and landlords have the right to screen interested tenants, they must do it the right way – which means within the confines of the law – to avoid discrimination and ensure fairness.

When do they apply?

These laws standardize the process by which landlords can screen potential renters for elements like credit history, criminal background, rental history, and income verification. The specific requirements and limitations vary by jurisdiction. However, generally speaking, tenant screening laws are designed to prevent discrimination and ensure fairness during the rental process.

Here are some common scenarios where tenant screening laws apply:

The application process: Landlords must follow specific steps when collecting and reviewing rental applications – this includes getting consent from the prospective renter to conduct background checks.

Background checks: You may be restricted in the information you can consider when conducting background checks, such as limitations on credit scores or using criminal history as the sole factor for refusing an applicant.

Privacy protection: Tenant screening laws often require property managers to treat renter applicant data securely and confidentially, protecting sensitive information from unauthorized access or disclosure.

Notification requirements: You may be required to give tenant prospects specific disclosures regarding their rights and the factors used for tenant selection.

Adverse action notices: Suppose you deny a rental application based on information obtained from a background check. In that case, you may be required to give the applicant an adverse action notice detailing the reasons for denying them.

What are Fair Housing Laws?

One of the most important elements of tenant screening laws is compliance with fair housing regulations. These crucial laws prohibit discrimination against people based on characteristics including race, color, national origin, religion, sex, familial status, or disability.

In a nutshell, it’s illegal to deny housing to a renter or treat them differently based on any of these protected characteristics.

Here’s a quick cheat sheet to ensure you are abiding by Fair Housing Laws:

  • Don’t ask questions related to these protected characteristics during the screening process
  • Base your decisions solely on objective criteria like rental history, creditworthiness, and criminal background
  • Treat all prospective tenants equally

What are exemptions to Fair Housing Laws?

Some exemptions to Fair Housing Laws allow for specific types of discrimination in certain circumstances. These exemptions range based on the jurisdiction and the particular law being applied. Here are some of the more common exemptions to fair housing laws:

Owner-occupied housing: In some situations, fair housing laws may exempt owner-occupied housing with four units or less from certain anti-discrimination provisions. This exemption usually allows owners who rent out a portion of their property to discriminate selecting renters based on elements that would otherwise be prohibited under fair housing laws.

Religious groups: Some fair housing laws offer exemptions for religious organizations or groups that provide housing based on religious practices. This exemption may allow religious organizations to give preference to people who share their faith or are part of a specific religious group.

Senior housing: Some laws allow for exemptions for housing specifically designated for seniors. These exemptions may allow property managers or landlords to impose age restrictions and offer services customized to the needs of older adults without violating fair housing laws.

Who is protected from rental discrimination?

Rental discrimination laws protect people from being discriminated against based on certain characteristics when searching for rental properties.

The specific protected groups vary based on the jurisdiction and the particular fair housing laws in place. Here are some common protected categories:

  • Race and color
  • National origin
  • Religion
  • Sex
  • Familial status
  • Disability
  • Sexual orientation and gender identity
  • Marital status

FCRA Guidelines for Tenant Screening

If you are a landlord preparing to conduct a credit check as part of your screening process, complying with the Fair Credit Reporting Act (FCRA) is critical.

This law regulates how consumer credit information is collected, used, and shared. Property managers and landlords must get written consent from rental applicants before accessing their credit reports. They must provide adverse action notices if they decide to deny an applicant based on their credit history.

There are a few key points to consider to ensure FCRA compliance. Be sure to:

  • Get written authorization from interested renters before running credit checks
  • Give applicants copies of their credit reports (if requested)
  • Provide an adverse action notice If rejecting an applicant based on credit history – this should highlight the reason for your rejection and details on how to dispute the information’s accuracy

State and local laws to be aware of

Landlords and property managers must be familiar with federal and local laws regulating tenant screening.

While federal laws – like the Fair Housing Laws set basic standards, many states and localities have further codes of practice, such as:

State Fair Housing Laws: Many states have their own fair housing laws that may allow for extra-protected classes or impose stricter regulations than federal law. For example, some states include protections based on sexual orientation, gender identity, source of income, and more not covered under federal law.

Ban-the-Box Laws: These restrict when and how property managers or landlords can inquire about an applicant’s criminal history. Some states and cities have “ban-the-box” laws prohibiting asking about criminal history on rental applications or delaying questions until later in the screening process.

Eviction and Rental History Laws: Some states have laws regulating the data landlords can consider regarding a prospective tenant’s eviction or rental payment history.

Tenant Screening Fees: Many areas nationwide regulate the fees you can charge for tenant screening, including application fees and background or credit check fees.

Privacy Laws: State laws may impose additional requirements related to collecting, storing, and handling potential renter information.

What happens if you don’t follow these laws?

Failure to adhere to tenant screening laws can result in a wide range of legal consequences and penalties for property managers and landlords, such as:

  • Civil lawsuits
  • Government investigations
  • Loss of rental income
  • Revocation of licenses or certifications
  • Injunctions or court orders
  • Legal costs and attorney fees  
  • Reputational damage

Overall, the consequences of not following tenant screening laws can be harsh and may have dramatic financial, legal, and reputational repercussions for landlords. As such, it’s critical to understand and comply with applicable fair housing laws and regulations to avoid these possible risks.

Final thoughts

Tenant screening is an essential process for landlords and property managers, but it’s crucial to comprehend and comply with the laws that govern it.

By educating yourself about fair housing regulations, credit reporting laws, and best strategies for conducting criminal background checks, you can ensure a fair, legal screening process while finding dependable renters for your property.

The key is staying informed and respecting the law – it will protect your tenants’ rights and safeguard your interests as a property manager.