Fair Housing Threat
by Vena Jones-Cox
Q: I recently rejected a potential tenant’s application to rent because her
previous landlord told me that she had people in her apartment at all hours of
the day and night and he was constantly getting complaints from the other
residents. When I told the applicant she couldn’t have the unit, she threatened
to sue me for discriminating against her because she had 5 kids. Am I in danger,
and what should I have done? P.S., Seattle, Washington
A: Fair housing law was put in place with the goal of ending discrimination in
housing, and to assure equal access to housing for members of “protected
classes.” What fair housing law basically says is that your willingness to rent
or sell housing to a particular person cannot be based, even in part, on that
person’s race, religion, color, sex, handicap, nationality, or familial status.
Lately, I’ve seen an unfortunate trend in applicants threatening to file
discrimination suits against landlords who refuse their applications for any
reason. It’s unfortunate both because these applicants are abusing the laws put
in place to protect them, and because landlords are becoming more and more
fearful of dealing with people in protected classes. However, the fact that
someone threatens you with a suit or complaint doesn’t mean they will actually
follow through, and the fact that they do file a suit doesn’t mean they’ll win.
The key to staying safe is to have clear criteria for renting (or selling) to an
applicant, and then sticking to them. These criteria should be objective, easy
to quantify, and unrelated to the applicant’s membership (or non-membership) in
a protected class. You should use criteria that you have found to be good
predictors of the tenant’s ability to fulfill the requirements of the lease—that
is, to pay the rent on time every month and keep the unit in good condition. The
criteria don’t need to count equally; you can choose to give some more weight
than others.
Examples of criteria that I’ve seen used include: whether the applicant earns at
least 3 times (or in some cases, 4 times) the amount of the rent or rent plus
utilities; whether the applicant has ever been evicted; whether the applicant
has any unpaid judgments; whether the applicant has a dog; how long the
applicant has been on the job; how many places of residence the applicant has
had in the last 2 years; and whether the applicant lied about rental history,
employment or income. These are all safe criteria, because they can be
independently verified through sources like courthouse records, credit services,
and so on.
Slightly dicier are criteria that depend on opinion, such as reports by previous
landlords. I ask previous landlords 4 simple yes/no questions: “Did they pay
$xxx in rent?” (based on what the applicant has told me), “Were they always on
time with rent payments?”, “Did they leave the unit in good condition?” and
“Would you rent to them again?” You can select any criteria you like, as long as
it is not discriminatory. For instance, one landlord I know will not rent to
smokers.
Whatever your criteria, it’s crucial that they be in writing, that they be
applied equally to all applicants, and that rejected (and accepted) applications
be kept on file for at least 5 years with the details of why the application was
disposed of in the way that it was. Furthermore, you should be certain that you
investigate each applicant to the same extent, and not go further in digging up
dirt on one applicant vs. another. Assuming that you do not in fact discriminate
against members of protected classes, most fair housing suits will go away when
“testers” employed by your local fair housing agency find that you treat
everyone equally and when your written records back up this fact. So write down
your reasons for rejecting this applicant, put together some criteria for the
next one, call your local fair housing agency for additional advice, and don’t
be cowed by people who try to use the law as a bludgeon .
Bio:
Vena Jones-Cox’s real estate business focuses on finding great deals on 1-3
family homes, then lease/optioning them to homeowners or wholesaling them to
investors and renovators. All told, she buys and sells about 50 properties per
year.
Vena is a frequent guest lecturer at real estate investment groups throughout
the country, and particularly enjoys working with new investors. Vena frequently
authors articles on real estate investment and the regulatory environment for
various newsletters and publications, including The Real Deal, her own monthly
newsletter. She has been a guest speaker at the Cato Institute in Washington,
D.C., lecturing on the effects of lead-based paint regulation on small
investors. And in her spare time, Vena hosts a popular weekly call-in radio
program on public radio. Real Life Real Estate Investing can be heard throughout
the Midwest and throughout the world on the Internet (WNKU.org) Wednesdays from
5:00-6:00 PM EDT.
Vena Jones-Cox is a past president of the Real Estate Investor’s Association of
Cincinnati, the Ohio Real Estate Investor’s Association, and the National Real
Estate Investor’s Association. She intends to form the International and,
eventually, Pan-Galactic Real Estate Investors Associations so she can be
president of those, too. Vena Jones-Cox has been featured in publications such
as The Cincinnati Enquirer, Smart Money Magazine, Money Magazine and Reader’s
Digest in articles about successful real estate entrepreneurs.