Just Say No
Just Say No
In filling vacancies, there are times when the best business decision you can make is to say NO. Saying “no” can be a difficult decision for some landlords either because they desperately need to fill the vacancy or they get caught in the emotion of the applicant’s situation.
There are also those landlords who believe they cannot say no without risking a violation of fair housing laws. While it is true that fair housing laws offer protection to certain classes of individuals, it is not true that you cannot legally discriminate.
As the landlord, you should set your rental policies based on sound business criteria. Those business criteria, if developed and implemented correctly, give you the right to say no to unqualified applicants.
The key is to understand that filling vacancies is a business decision. The decision you make will either make you money or cost you money. Is this applicant worth the risk? You need to make sure your no is reasonable and justifiable. If you say no to everyone you won’t be able to fill your vacancy, whereas, if you say yes with even the slightest doubt, you need to be sure you can accept the risk.
Screening is a way to evaluate the degree of risk that the applicant represents. Too often we think that screening only starts with ordering a credit report. However, with the first response to your marketing efforts, you make the first decision, yes or no. The caller asks if pets are allowed. Your rental policy says no. The open house visitor has a rent budget of $500. Your unit at fair market rent is $650. You say no. The applicant hands you an application that is obviously incomplete. Should you accept it? The business decision should say no.
What are the reasons you can legally reject an applicant? It is usually not illegal to reject an applicant under the following circumstances:
Personal Identification – If the applicant cannot furnish proof of his identity, do not accept his application. It is reasonable to require that an applicant furnish at least two forms of personal identification, with one being a current photo identification document.
Social Security Number – While it may be possible to conduct various tenant screenings without the applicant’s Social Security number, do not make exceptions. Require that all applicants furnish a Social Security number or other taxpayer identification number in order to run applicable screenings.
Refusal to Sign Application or Consent – While unlikely that an individual applying for housing will refuse to sign the application, it can happen. If the individual signs the application, but refuses to sign the consent for screening, you probably can conduct screenings, but why take the risk that later the applicant/tenant contests your right to gather information. If the applicant refuses permission for screening, you should say no.
False or Misleading Information – Your rental policies should contain a statement that any false information given or discovered during the course of application and screening would be grounds for rejection of the application. If you determine that the applicant has provided false or misleading information on his application or through his references you should say no.
Cannot Meet Deposit Requirements – If the applicant’s income is apparently sufficient, but he requests an accommodation of the deposit amount or a deferred deposit payment schedule, you may want to rethink this applicant. If you say yes to this, be very sure it is a business decision and not a preferential or discriminatory reason. The best decision is to say no if the deposit amounts cannot be made before lease signing.
Is Not of Legal Age – You cannot have a valid lease agreement if your applicant is not of legal age or considered an emancipated minor according to your state’s law.
Exceeding Occupancy Limits – If there is a valid reason to limit occupancy, such as for health and safety reasons or due to limitations of the unit’s mechanical systems, you can say no. However, be careful that your occupancy limit can be supported.
No Employment – You want the applicant to be able to meet rent payments. Without employment or some other verifiable source of income, there is no reason to assume the applicant can make the rent.
Insufficient Income – You want a tenant who has enough income to pay the rent and his other living expenses.
Cannot Meet Terms of Lease – Your rental policies state your lease terms and conditions. You should also re-state them when you accept an application. If the applicant requests negotiation of certain terms, or cannot meet the lease terms, think again of the risk and claims of possible discrimination if you alter such terms.
Insufficient Rental History – Are you willing to accept first time renters, students and others with a limited history, or former homeowners now re-entering the market? If they don’t meet the requirements of your policies, say no.
Guarantor or Co-signer – A co-signer or other conditional acceptance requires more time, effort and money to process and monitor throughout the tenancy. Do you really want to offer this option? Once the policy is set, stick to it.
Bad Landlord References – Did the applicant gave sufficient notice before moving and generally adhere to the terms of the lease? Would they rent to this individual again? Rent payment history, property damage, and whether full deposit was returned provide clues for future rental performance. If the landlord who knew your applicant doesn’t give a positive endorsement, you should say no.
Bad Employment References – If possible, ask the supervisor if the applicant is considered a good employee. Is there a history of tardiness? Behaviors at the work place can also be indicative of actions taken outside of work.
Bad Credit History – Credit management history is clearly shown in credit reports. With a history of late payments, missed payments, or debt obligations that burden the ability of the applicant to meet current or future debt, you should say no. You should say no if public records indicate the individual has uncollected items, liens, judgments.
Credit Score – While there is no magic number, there is indeed a range that indicates potential trouble. Become familiar with credit scoring models and set your rental policies so that the minimum acceptable score is consistent with the location and condition of your property.
Evictions – Most landlords do not want a tenant who has been evicted. Some landlords think of this condition as a make or break deciding factor. Other landlords place less of an emphasis on evictions if the eviction occurred in the distant past.
Bankruptcy – You have the right to say no to an applicant who has filed bankruptcy. However remember that once discharged, applicants cannot file again for a certain number of years, the number depending on the chapter filed. Past problems may have taught the applicant a valuable lesson.
Criminal Record – A criminal conviction can be reason to say no if the nature of the crime presents a future threat to the safety of others or damage to property. Ex-convicts are not a protected class with one exception – individuals with convictions for past drug use. Past drug addiction is considered a disability under fair housing laws. Individuals with convictions for sale or manufacture of drugs or who currently use illegal substances are not protected under fair housing laws.
Sex Offender – Megan’s Law requires persons convicted of violent sexual offenses and sexual offenses against children to register with law enforcement officials in the state where the person lives. While most states have online databases where such information can be searched by the general public, you should be aware that in some states there are restrictions on whether this information can be used to deny rental housing. If your state’s law does not prohibit such actions and you are reasonably certain that the person poses a current, direct threat to your other tenants, you can say no. You may also wish to consult a competent attorney regarding the matter.
Pets – If your rental policy is “no pets,” then you can say no to an applicant who also wants his dog to move in. However, be aware that in the case of service animals you must accommodate the tenant’s request.
Smoking – Since smokers are not a protected class, you may prohibit smoking in your unit or on your property.
Has Water-Filled Furniture – If your rental policies say no water-beds, then say no to applicants who have one.
Has Home-Based Business – Many individuals are self-employed and do work from home. Be sure you know your local regulations regarding zoning, know any HOA restrictions, and understand related insurance issues before saying yes.
As a final note, do not assume you can legally discriminate for any reason that is not mentioned by name in federal, state, or local fair housing laws. Courts in some states have ruled that discrimination on the basis of personal characteristics constitutes arbitrary discrimination and is illegal. You may think you can say no to an applicant because of his occupation (e.g. attorney). If the applicant was otherwise qualified, you could find yourself defending a fair housing claim based on your arbitrary decision not to rent to attorneys. Be very thorough in your evaluation of applicants and base any decision on facts that can be supported based on business principles.
If there is a business reason to say no, you can legally say no. However do not use a business excuse to disguise illegal discrimination.
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