As we’ve discussed in previous posts, Jason Hartman’s strategy of creating a stable retirement income from rental property depends on several factors, including the type of property you own, the maximum rent you can charge for the market, and the demands of general upkeep on the property. This also depends on finding and keeping stable tenants for a long-term relationship. But many ways to “screen” tenants are downright illegal, and as a landlord you’re obligated to observe the guidelines of fair housing legislation and avoid discrimination in advertising and selecting tenants.
The US Fair Housing Act was first enacted in 1968 and prohibited landlords from using race, color, religion, sex or national origin as factors in denying or allowing the rental of housing. In 1988, additional prohibitions were added, protecting renters, except under certain circumstances, from discrimination on the basis of disability or family status such as having children under 18 in the house.
Specifically, the Fair Housing Act prohibits:
Refusing to rent a dwelling to anyone because of their inclusion in one or more of the protected classes. Landlords are outlawed from asking questions about these things on rental applications or in person, or from making changes to the property that might prohibit a person from renting it for these reasons, such as removing a ramp intended for handicapped access.
Discriminating on the basis of these factors in the terms of a lease, or rental agreement. In other words, landlords can’t include language in a rental agreement or establish provisions in the lease that relate to a renter’s race, religion, or other factors protected by the Fair Housing Act.
Advertising a rental based on a preference for tenants of a particular race, sexual orientation, religion or other protected factors. This includes seemingly innocuous language such as saying a house is located close to churches or mosques, or stating that the place is great retirement living.
Interfering with a person’s exercise of their housing rights for discriminatory reasons, or retaliating against people aiding those who are attempting to exercise those rights. In other words, if a landlord has rented to a member of one of the protected classes, that landlord is prohibited by law from using any kind of coercion or unfair practices to compel them to vacate the property – or to obstruct their right to seek assistance to file a Fair Housing claim.
The Fair Housing Act is enforceable by law, and renters or potential renters who believe they have experienced discrimination can file a claim with the US Department of Housing and Urban Development’s Office of Fair Housing and Equal Opportunity. If a claim is upheld, the offending landlord can face hefty fines and court orders to make the rental available to the complainant.
Finding the right tenants for your property depends on their ability to pay rent and maintain the property as stipulated in the lease or rental agreement. It’s legal to ask tenants about employment history or a criminal record, to run a credit check, or require references. You can deny housing to people for any reason that isn’t protected by the Fair Housing Act, such as smoking or pet ownership, and you can limit the number of people who can live in the house. You can also charge renters additional fees related to these things, such as pet deposits or cleaning fees.
In general, as the landlord, you can rent to whomever you feel is a good fit for your rental and your long-term goals. The landlord tenant relationship is just that: a relationship you create — as long as there’s no violation of the provisions of the Fair Housing Act. (Top image: Flickr | twicepix)
The Heroic Investing Team