Screening tenants is one of the most important parts of what you do as a landlord. The process can often seem as daunting as applying for your first job or choosing which stock to invest your money into. And for good reason.
Having the right tenants in your properties is an essential part of running a rental property business successfully, and you need to have the right objectives in mind when screening tenants in order to accomplish this goal. But your objectives are not the only things that you need to consider.
You also need to consider the HUD guidelines for screening tenants. HUD, the Department of Housing and Urban Development, has a set of guidelines that must be followed when you are determining whether or not someone will be a suitable tenant for your property.
If you break these rules and deny someone access to your property for an invalid reason, you could be facing a large penalty and a lot of trouble. For that reason and for the sake of being a good landlord, it is essential that you know the HUD new guidelines for screening tenants at any given time.
A Table of Contents for HUD Guidelines for Screening Tenants
- HUD Screening Guidelines
- What’s Changed Recently
- How To Screen Your Tenants Safely
- Why Screening Tenants Matters
HUD Screening Guidelines
The guidelines maintained by HUD are known as the Federal Fair Housing Laws. The Fair Housing Act, put in place in 1968, helps to ensure that landlords cannot legally deny an applicant for being part of a protected class.
Protected classes are defined as follows:
- Ethnic background/National origin
- Familial status
- Mental/Physical disability
You cannot ask for detailed information about any of these topics on a rental application, and you cannot use your knowledge of a potential tenant’s background in any of these areas as a reason to deny them access to your property.
Doing so is illegal, and you will be granted a hefty fine.
Over the years, that fine has increased dramatically, and it has continued to do so:
|Second Offense (+ 5 years)||$49,467||$50,276||$51,302||$52,596|
|More Than Two (+7 years)||$98,935||$100,554||$102,606||$105,194|
What’s Changed Recently
One of the most recent memos released by HUD to clarify their policies about screening was released in April of 2016. This memo sought to clarify some aspects of the FHA’s Fair Housing Policies that prevent landlords from discriminating against rental applicants.
Chiefly, this memo was aimed at those with criminal records.
For a long time, there was no type of protection for applicants with criminal records when it came to tenant applications and screening processes. While some cities, such as San Francisco, created their own protections for specific housing types, those policies are limited in scope.
This HUD memo came about after a 2015 US Supreme Court case. This case played out in such a way that proved landlords could be indiscreetly leaving a protected class out of renting their properties by blocking a commonality of that class. For example, a landlord might refuse to rent to those who live in a certain area that is predominantly populated by one race.
Following the steam of this court case, the HUD memo stated the following position:
- Landlords that include a “no arrest or conviction” rule on their tenant application are incidentally preventing Hispanics and African Americans from renting because they are arrested at much higher rates than white people.
- A landlord should never feel the need to reject an applicant with an arrested-without-conviction status because this status does not prove any wrongdoing or potential threat.
- This urging to never deny based on an arrested-without-conviction applies to all races.
- The memo doesn’t suggest to ignore criminal history for applicants with convictions. Instead, it urges landlords to consider the severity of the conviction and the time passed since the occurrence.
Remember, you can still consider criminal records as a part of your decision when you are screening potential tenants. However, you must make that decision because you are concerned about safety for your property, neighboring tenants, or yourself.
For example, an applicant with a conviction four years ago for fighting with his neighbor could reasonably be denied, while an applicant with a conviction for petty theft 10 years ago could not reasonably be denied. That distinction is very important to consider.
Overall, the key point that the memo is trying to reiterate to landlords is that an arrest is not a conviction, and a blanket no arrest or conviction ban can deny those who deserve a fair chance at housing. Instead, you should consider a criminal past in a more nuanced and careful way when working through housing applications.
A Memo Is Not Law
It should be noted that while this memo is not law – it has not been passed as such, and it has not been officially been adapted into part of the Fair Housing Act just yet, however, that does not mean that it should not be taken seriously.
Despite not having the legal weight of some other rules about tenant screening, the support and the judgment needed to see that this type of consideration is necessary when approaching your tenant screening practices is there.
As such, this memo and its guidance should be applied to your tenant screening process.
How To Screen Your Tenants Safely
Now that you know more about the Fair Housing Act and updates released by HUD that should be taken into consideration when you are screening potential tenants, you can more readily put together a screening procedure.
While you can get the best information about this topic from our Landlord’s Guide to Tenant Screening, we’ll give you an overview of a safe and sure procedure to follow here.
Step 1: Give Property Information
Make sure that you give a lot of information about the property and your expectations of the property at the beginning of the application. Include the cost, address, included amenities, smoking policy, pet policy, and all other non-negotiables up front. If a tenant does not agree to these, they will be able to know that from the get-go.
Step 2: Collect Rental History & Employment Information
Require that the applicant give you both rental history and employment information. This information will make it possible for you to verify with their employer and previous landlord that they are trustworthy enough to rent to.
Additionally, you can use these factors to help you determine if the credit score of an applicant in combination with their history and job information is enough to be worth the risk.
Step 3: Collect Personal References – And Call Them
In addition to rental background, it is always a good idea to collect a few personal references and give those references a call. You can find out a little bit more about the applicant’s reliability through these calls.
Step 4: Background & Credit Check Approvals
Gather the information that you need from the applicant as well as their permission to run basic background and credit checks. The information that you get from both of these checks will help you to see a more complete picture of the applicant’s responsibility.
Why Tenant Screening (The Right Way) Matters
Tenant screening is important for a number of reasons:
- Finding great tenants leads to a more successful business.
- Great tenants are less likely to miss payments.
- Great tenants tend to stay longer and treat properties better.
- Screening tenants properly protects you from lawsuits.
- Screening tenants properly helps to ensure you find the right fit.
Both you and the tenant want to be sure that the rental agreement will work out in the end; the screening and application process helps both parties to determine if the agreement will work out favorably.
Without proper vetting, those who seem like they might be very nice people can end up being the worst tenants that you can possibly imagine, and no one wants to end up in a rental eviction situation!
To avoid that risk, make sure that you thoroughly and equally screen all applicants so that you can choose the best tenant for your next rental property.
Make Tenant Screening Simple
We know how overwhelming tenant screening can be. In fact, we’ve created an entire platform to help landlords simplify this complex process.
Using our tools, you can easily run credit and background reports on any tenant that you are considering, and this will make the entire process go a bit more smoothly when you are trying to get your property rented as quickly as possible.
While cutting corners on the tenant screening process might seem like a good idea when you’re in a hurry, you don’t want to risk missing a big red flag. Take the time to invest in the right tenant screening, and you’ll be rewarded with the security of your choice.