What Every Owner Should Have to Protect Themselves from Discrimination Lawsuits – by Cristine Tablante, AOA Advisor

With permission from AOA (Apartment Owners Association)

Do you have a written Qualification Criteria list?  A Qualification Criteria is a list of requirements of what you expect from an applicant and what will qualify them to rent from you.  To protect you from a possible discrimination lawsuit, it should be in writing and handed out to all applicants along with the application to rent.

AOA has provided a template – form 100Q (Qualification Criteria for Renting) to help you design your list to fit your building’s requirements.  (Yes, you may have different lists for different buildings!) 

Occupancy Standard – AOA suggests you use the “2+1 Rule” in determining your occupancy standards to avoid discrimination complaints.  Occupancy standards that are too limiting could be misconstrued as discrimination against familial status.

Age Requirements – Anyone over the age of 18 or older must fill out an application in full and comply with the Qualification Criteria.

Identification Requirements – NOTE:  Do not ask for Military cards.  The law does not allow us to copy this identification card for records.  

Income Requirements – You must look at the combined household income instead of individual income.    You should avoid requiring only one way to prove income – for example, “pay stubs only.”  Income can be in many forms – child support, spousal support, social security, etc.  For those who are self-employed, you may ask for the past few years of tax returns.

Credit Requirements – Choose a FICO score you are comfortable with. Just keep in mind, the higher the rating, the better the applicant; but also the longer it might take to rent your vacancy.  Keep the demographics in the area of the building in mind when making this decision.  AOA has it pre-filled with 650, but you may adjust as you see fit for each property.

Sometimes, your applicant’s credit score meets your criteria, but they have excessive collections accounts or other derogatory markings.  We’ve suggested in the criteria that the applicant have no more than 25% derogatory accounts.  You may adjust as needed, same as you did for the FICO score.

Residency Requirements –If your applicant has been named in any evictions with just cause (non-payment of rent, breach of contract, etc.), they should be automatically denied.

Criminal History – On April 4, 2016, HUD released guidance for all housing providers (not just those who are HUD subsidized) regarding how the use of criminal background checks could potentially violate fair housing laws.  As stated on the Qualification Criteria, criminal history may be considered and may be used to determine whether applicant will be accepted or denied residency based on:

  • the nature of the offense and/or charge;
  • whether the final disposition resulted in a guilty verdict or plea; and,
  • the amount of elapsed time from the date of final disposition (e.g. applicant was released from prison, probation, or parole).

It is suggested that convictions older than 7 years not be considered to deny housing. It is also suggested to tailor your criminal history requirements to focus on protecting resident safety and/or property, rather than a blanket “no felonies allowed” policy.  Also, do not deny based on arrest records – arrest records do not prove someone was guilty of a crime.

At this time, the only conviction you may deny without running into Fair Housing issues is for convictions for manufacturing or distributing controlled substances. 

Application Fee – Keep in mind, you should only charge for your out-of-pocket expenses and your time to process the application (“administrative fee”), so keep your application fee reasonable.  Be fair and act in good faith.

Security Deposit Requirements – This section allows you to state that ALL monies that must be paid before move-in. AOA suggests getting a money order or cashier’s check to guarantee the move-in funds.

Renter’s Insurance – (Optional) Our Qualification Criteria states that the prospective resident provide you with the “Declaration Page” of their policy and the policy should have:

  • Minimum liability coverage of at least $100,000.  Policy term equal to or greater than the term of their lease, and renew it as they renew their lease or yearly, as long as they have coverage while they are residing in your community.
  • The property and address (and/or owner) needs to be added as additional insured.  If they cancel their policy mid-tenancy, the insurance company will notify the additional insured to inform them of the lapse in policy.  This will alert you to contact your resident and let them know they are in breach of contract, and you would be able to serve a 3- Day Notice to Cure the Violation, if needed.

Smoke Free Policy – (Optional)

Checkboxes and Highlights: Some sections on the Criterial List have a checkbox and are highlighted yellow.  These are items that your applicant must submit to you with their application.  You may want to point these out to your applicant to ensure they return with all of the required paperwork/documents.

 

Cristine Tablante is an advisor and Membership Department Supervisor with AOA and has had over 15 years of experience in the property management field.  This article is not intended as legal advice.  

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