Choosing Between Qualified Tenants

| October 1, 2012 More

Applicants for Rental

By Tracey March

Having multiple qualified applicants vying for a rental unit is great, but it can also be a trap for the unwary. The Fair Housing Act makes it illegal to refuse to rent based on an applicant’s race, color, national origin, religion, sex, family status, or disability.

In addition, many states have laws that include other statuses, such as sexual orientation and marital status. The key to avoiding Fair Housing Act issues is to have a clear policy that is fairly and consistently applied.

First, set minimum qualification criteria, and apply the criteria equally to all applicants.

Before you advertise your rental property, create a document listing your qualification requirements. Keep this in front of you when you’re conducting phone screens, and give printed copies to applicants when showing the property. This will help ensure that you apply consistent standards when interviewing potential tenants. Typical criteria include:

  • Rental history: A landlord’s most valuable information is an applicant’s rental history. A good reference from a past landlord and a history of on-time rental payments shows that the applicant would likely make a good tenant.
  • Credit score: Having a low credit score doesn’t always mean that an applicant would be a bad tenant. However, if you consider one tenant with a low credit score, you can’t eliminate other applicants with similar scores for that reason alone.
  • Income: A minimum income requirement is easy to understand and easy to verify. Many landlord’s and property managers require that rent should be no more than one third of an applicant’s gross income.
  • Employment history: Having a stable job makes it more likely a tenant will pay his or her rent. Consider establishing a minimum time at the current job. This will be difficult for people new to the area to show, but if you change the requirement for them, be sure to change it for the other applicants also.
  • Criminal background: Some states do not allow you to discriminate against people convicted of a crime, unless the nature of the crime reflects on their ability to be a good tenant. For example, you could reject an applicant with a history of violent crimes and drug convictions. Keep in mind that you cannot ask an applicant if they have ever been arrested—being arrested for a crime and being convicted of a crime are very different.

Some applicants won’t meet the criteria. In those cases, list the reason(s) why on the application.

Next, if multiple applicants meet the criteria, choose a fair method of selection.

First come, first served. One way to handle multiple qualified applicants is to sort the applications based on when each application was submitted, and offer the property to the first qualified applicant. While this method is the simplest, it may mean the most qualified applicant doesn’t get the rental.

Sort based on strength of the application, then accept the first one that is verified. You may prefer one qualified applicant if he or she exceeds certain minimum requirements. For example, one applicant might have an outstanding rental history, long-term stable employment and a higher income than the other applicants. In that situation, you may offer the lease to that applicant. Make sure you document your file with the reason he or she was more qualified than the others. If a few applicants are equally qualified, then choose the one who submitted her application first.

Finally, send a letter to the applicants who did not get the rental unit.

If an applicant was denied based on credit report information, the Fair Credit Reporting Act requires that you give notice of the denial to the applicant, along with other information. Typically the credit-reporting agency will provide you with specific language.

Let the other applicants know in a simple letter why they were rejected (for example, failure to submit a complete application, failure to meet a specific criteria, another applicant ahead of them was qualified or there was another more qualified applicant). Again, make sure that your files clearly document the decision-making process. If those reasons are legal and any application denials are not based on any person’s membership in a protected class, you should be in compliance with the Fair Housing Act.

The Fair Housing Act can be confusing. As always, be sure to check with your attorney if you have any questions or concerns before you make any decisions.

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Category: Property Management, Tenant Screening, Tenants

Comments (1)

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  1. Damian Galvin says:

    In my opinion, if you have multiple qualifying tenants, you haven’t tried hard enough – keep digging!

    You have every right to know who you lend your home to & the more you ask, the more likely you are to find out that one of the seemingly otherwise perfect contenders in fact has 4 motorbikes (as I do), 5 cars in various states * and loves drumming.

    Happy home making…

    Damian Galvin
    http://www.whitemountain.ro/property_management

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