Do you have written rental criteria for which tenants you accept, which you do not, and why? That is this month’s article by veteran real estate investor and property manager David Pickron.
By David Pickron
Hypothetically, let’s say that last week an individual named Javier applied at one of your properties. His credit score was low and payment history showed a lengthy history of difficulty in keeping current with his obligations. The results of the criminal background check showed various drug and theft charges. Your call to his previous landlord alerted you to the fact that he was currently being evicted even as he was applying for your property. Like most landlords, you would analyze the situation and reasonably conclude that “there is no way he is living in my rental.” You decide to provide an adverse action letter to Javier and move on to the next applicant.
In the week that follows, you receive a phone call from an attorney with Fair Housing asking why you denied the applicant. Was it because of his ethnicity? No, but you explain all the negative history you found relating to the applicant and the risk he would be to your property and investment. The attorney then asks a series of questions: Did you tell the applicant that you did not accept people with evictions? No. Did you tell him he needed a certain credit score to qualify? No. Did you lay out your requirements in relation to criminal history? No. Can you provide a copy of your rental criteria that details how you treat every applicant the same? I don’t have one. The attorney then drops the hammer with the final question: Is possible that you treat every applicant differently as a result of not having a written, base-qualifying criteria? Javier believes he was disqualified based on his ethnicity and subsequently reported a potential violation.
Imagine how different this scenario looks for you as a landlord if prior to showing the property to Javier, you handed him a criteria sheet with crystal-clear information about credit, criminal, collection, and eviction history qualifying parameters. It also had income and residential history requirements as well as your policies regarding no smoking or pets on the property. If after seeing the property and performing your due diligence there was disqualifying information, it is easy to indicate to your tenant applicant exactly which part of the criteria was not met. If the phone call then comes from Fair Housing or the attorney general’s office, you have the ability to clearly show the reason for denial based on behavioral history alone.
Simply said, if you do not have a written rental criteria, then everyone qualifies. That’s right, everyone qualifies. As a landlord, you know that is a recipe for disaster.
The box below has some examples of rental criteria that have been strategically written to protect you, broken down by category. These should be reviewed and modified by your local attorney to represent what is legal in your specific jurisdiction. (Email email@example.com and if you would like an all-inclusive criteria sample.)
About the author
David Pickron is president of Rent Perfect, a private investigator, and a fellow landlord who manages several short- and long-term rentals. Subscribe to his weekly Rent Perfect Podcast (available on YouTube, Spotify, and Apple Podcasts) to stay up to date on the latest industry news and for expert tips on how to manage your properties.