Important Factors to Consider for Your Rental Criteria

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Rental housing laws regarding tenant screening, applications, and rental housing decisions are constantly evolving. Although it can be time-consuming and difficult to keep up, it’s important to make sure your written rental criteria adapt to the latest regulations. Updating your rental criteria annually is the best way to ensure you’re following all the guidelines – while avoiding actions that could cause legal issues. Here are some key factors to keep in mind to ensure your rental standards stay up to date and in line with the latest laws; please note this is intended for informational purposes only and is not intended as legal advice.

What are Rental Criteria?

You likely already know what rental criteria includes, but here’s a quick refresher. Rental criteria refers to a set of standards that applicants are required to meet in order to be considered “approved,” “conditionally approved,” or “denied” tenancy at your property. Although rental criteria can vary, it typically includes the following:

  • Credit scores
  • Income requirements
  • Specific criteria regarding eviction records
  • Specific criteria regarding criminal convictions

Although you can adjust rental criteria to your own standards and personal preferences, you’ll need to check to make sure you’re following Fair Housing Laws to avoid anything that could be seen as discriminatory. Likewise, it’s best to review your local laws to make sure your criteria don’t conflict with regulations regarding factors like criminal or eviction records.

If you choose to include criteria that involve current or previous landlords, or personal references, be cautious about the source. For example, it’s possible an applicant could provide the number of a friend or relative instead of a landlord. Tenant verification also less objective than credit history, for example, but it’s often the best first step to see if you’re interested in screening the applicant further. If you’re planning to include tenant verification in your criteria, save yourself some time and hassle by ordering yours from TSCI.

Key Factors for Creating Your Rental Standards

As you establish your written criteria and audit them annually, here are some important factors to keep in mind:

  1. Always Base Your Decision on Objective Data

Although some landlords and property managers investigate prospective tenants by looking at their social media or other subjective methods, doing so is a good way to potentially find yourself in legal trouble. Your leasing process should always use objective data, like credit, criminal, and eviction history.

A good way to make sure you’re not going out-of-bounds is to work with data from a tenant screening service, like TSCI. Screening reports provide objective, legal information to help you decide whether the applicant might be a liability.

  1. Avoid Blanket Standards

Blanket standards, also called bright-line standards, include overly broad language in your written criteria. This means the standards don’t factor in the differences between federal, state, and local laws. Blanket standards can increase your liabilities, as one may be able to argue that they’re discriminatory.

One example of this would be saying one of your requirements is “no felonies.” A rule like this doesn’t take into account that what one state considers a felony may not be considered a felony in another state. In some states, it’s considered a felony to possess marijuana; in others, it’s completely legal. Blanket standards could potentially bar a good applicant from meeting the criteria without considering why they were convicted.

  1. Local Laws

Write up a rough draft of your rental criteria, including the requirements for meeting “approved,” “denied,” and “conditional.” After that’s done, take a look at your local laws. These can significantly affect which information you’re allowed to use to make a decision on an applicant’s eligibility. For example, in Cook County, Illinois, landlords and property managers may only consider criminal convictions that have occurred within the past 3 years. In Seattle, Washington, the only criminal record you’re allowed to consider is the National Sex Offender registry.

This is especially important because many screening companies have an industry standard of criminal records going back 7 years. If you weren’t aware of a local law stating you can only consider the past 3 years, and you make a rental decision based on a conviction that happened 5 years ago, you could end up in legal trouble. Fortunately, TSCI follows all current local regulations regarding criminal and eviction records, so you aren’t provided with any information you can’t legally consider.

  1. Protected Classes

As long as you’re basing your rental decisions on objective data, considering protected classes shouldn’t be an issue – but it doesn’t hurt to review it anyways. As an added precaution, you should check to make sure your criteria don’t infringe on any federally or state-protected classes. This includes discriminatory language or criteria based on:

  • Race
  • Color
  • National origin
  • Religion
  • Sex
  • Familial status
  • Disability.

Depending on your state, you may have additional protected classes, such as source of income, sexual orientation, gender identity, or gender expression.

  1. Adjust Your Standards Based on the Property

It wouldn’t make sense to have the same rental standards for a luxury apartment as you would a small studio on the outskirts of town, so when creating your criteria, think about the types of applicants your property is likely to attract. If you have more than one rental, consider tailoring your criteria to each property individually. This could mean adjusting your income requirements or credit scores required for approval, or sorting your properties by type, and create a set of criteria for each category.

Apply Your Rental Criteria Equally

Once you’ve determined your leasing criteria, you’ll need to make sure you apply them equally to each applicant. Every applicant should be subject to the same qualifying questions, screening process, and rental standards. Even though your properties may have separate standards, make sure each applicant is treated equally within the property’s criteria.

This is one important reason to have your rental criteria written out. Whether you’re training a team at a property management company or you’re an independent landlord, written criteria give everyone a clear checklist, so to speak, that can easily be referred to. Without this, it’s easier to make exceptions or unintentionally overlook an important legal consideration.

For more information on vetting applicants, writing leases, and other helpful tips, visit our blog.

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