Am I creating a potential discrimination claim for myself?

Question

I have one rental property - a house that I used to live in for 5 years. Each of the past tenants have been great and I have been very transparent with them - we're looking for the right fit, someone that will take care of the place, not be a headache, etc. Basically out of all the people that were interested, I have chosen the people I liked/trusted the most.

The unit is coming up for rent again soon and I'm wondering if I am opening myself up for a claim of discrimination with this process - where a tenant who is not chosen could claim that I rented to someone else based on their (fill in the blank of protected class)?

Any tips on how I should potentially navigate this differently? but also, I really like being able to hand pick my favorite from a pool of applicants.

James Wise · Answer

I had to look it up, but yes there are some exemptions related to people with 4 or less who aren't using Agents. Obviously not something people like you or myself run into during our business activities but I remembered hearing that exemptions where out there during some continuing ed course some time ago.

https://www.hud.gov/program_offices/fair_housing_equal_opp/fair_housing_act_overview#:~:text=In%20very%20limited%20circumstances%2C%20the,that%20limit%20occupancy%20to%20members.

James Wise · Answer

He only has 1 rental & isn't a Broker / Agent. I think he's exempt from fair housing isn't he? Isn't it people with 4 units or less are exempt?

Bill B. · Answer

It sounds like you could be accused to discrimination unless the protected part was the same among all applicants. If they are all the same race, same sexual orientation, family situation, handicapped or not, etc etc you’d probably be fine. You can discriminate against jerks or slobs, but if that jerk/slob thinks it was because they were a disabled, gay, POC you could be in trouble. Even if you ended up renting to another person with some of those features. You are not “treating everyone equally” as required by law. So make sure the reasons aren’t protected reasons and be prepared to defend those reasons to the government.

Is there no way you can hand this off to a professional PM? This is one of the many reasons I use one. I don’t want to be accused of discrimination, I won’t keep up on local law changes, I might be reluctant to charge late fees and with their knowledge of going rents and rent increases they usually pay for themselves. Not to mention taking care of repairs same day. Not saying you should, just saying why I did.

Matthew Morrow · Answer

It's great that you've had positive experiences with tenants and value finding the right fit. However, your concern about discrimination claims is valid. To navigate this, consider implementing a standardized application and screening process that focuses on objective criteria, such as income, rental history, and credit checks. This way, you can still have a personal touch in your selection but ensure that your decisions are based on measurable factors rather than subjective preferences. Document your process and the reasons for your choices to further protect yourself. If you have any doubts or questions, it’s always best to consult an attorney to ensure you’re compliant with fair housing laws.

Melanie Thomas · Answer

It's advisable to thoroughly document your application and screening procedures, ensuring consistency for every applicant. This approach helps protect against potential complaints. Good luck & happy investing!

Craig McCarter · Answer

Thank you all for the insight!!

Andrew Weiner · Answer

I don't believe that there is an exemption, they just might just might not get picked on because they are too small.  I do know an independent landlord in our area that has one duplex and a fair housing organization filed a suit against him two years ago and he has had to defend it.

Andrew Weiner · Answer

You probably are violating some fair housing rules if you don't have a full vetted process.  Your criteria should not include anything that would violate someone's rights as a protected class.  That being said your feelings probably correlate to things that are not discriminatory and if you can explain your decision that way you should be able to defend yourself.  An example would be credit score, if that is what makes your trust someone that is completely fine.

When you do business someone can make a claim even if you didn't actually do what your being accused of, its about having process and documentation to prove that you were not in violation.

Touching base with a RE attorney might be a good idea to make sure there isn't anything specific locally that you don't want to violate.  For example in my area there are specific municipalities that have passed ordinances that prevent you from denying an applicant because they have a housing voucher (section 8).

Am I creating a potential discrimination claim for myself?

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