The U.S. Department of Housing and Urban Development (HUD) recently issued new guidance (FHEO-2020-01, dated January 28, 2020, sometimes referred to as the “Assistance Animal Notice”) clarifying how housing providers can comply with the Fair Housing Act (FHA) when assessing a person’s request to have an animal in housing to provide assistance because of a disability. The Assistance Animal Notice replaces HUD’s prior guidance on housing providers’ obligations regarding service animals and assistance animals.

A reasonable accommodation is a change, exception, or adjustment to a rule, policy, practice, or service that may be necessary for a person with a disability to have equal opportunity to use and enjoy a dwelling, including public and common areas.

Housing providers have certain obligations under the FHA with respect to animals that individuals with disabilities may request as reasonable accommodations. There are two types of assistance animals: (1) service animals, and (2) other trained or untrained animals that do work, perform tasks, provide assistance and/or provide therapeutic emotional support for individuals with disabilities (referred to in the guidance as a support animal). Persons with disabilities may request a reasonable accommodation for service animals and other types of assistance animals, including support animals, under the FHA.

The guidance provides best practices for housing providers to providers for FHA compliance when assessing requests for reasonable accommodation to keep animals in housing. Included in the guidance is information that a housing provider may need to know from a health care professional about the individual’s need for an assistance animal in housing. In particular the guidances provides a set of best practices regarding the type and amount of documentation a housing provider may ask an individual with a disability to provide in support of an accommodation request for a support animal including documentation of a disability or a disability-related need for a support animal when the disability or disability-related need for the animal is not obvious and is unknown to the housing provider.

Housing providers may be subject to the requirements of several civil rights laws, including but not limited to the FHA, Section 504 of the Rehabilitation Act (Section 504), and the Americans with Disabilities Act (ADA). The guidance does not address how HUD will process complaints against housing providers under Section 504 or ADA.

The Fair Housing Act makes it unlawful for a housing provider to refuse to make a reasonable accommodation that a person with a disability may need in order to have equal opportunity to enjoy and use a dwelling. A common request for reasonable accommodation in housing is an accommodation to a provider’s pets or no pets policies so that individuals with disabilities are permitted to use assistance animals in housing including common use and public areas.

Assistance animals are not pets. An animal that does not qualify as a service animal or support animal is a pet for purposes of the FHA and may be treated as a pet for purposes of the lease and the housing provider’s rules and policies. A provider in its discretion may exclude or charge a fee or deposit for pets subject to local law but not for service animals or other assistance animals.

The HUD guidance helps housing providers distinguish between a person with a non-obvious disability who has a legitimate need for an assistance animal and a person without a disability who wants to have a pet or avoid the costs and limitations associated with a pet as imposed by the provider’s pet policies. The guidance may also help persons with a disability who request reasonable accommodations for the use of an assistance animal in housing.

Most reasonable accommodation requests involve a single animal. However accommodation requests can sometimes involve more than one animal. As examples, a person has a disability-related need for two animals or two persons living together each have a disability-related need for separate assistance animals. The decision making process in the guidance can be used for all requests for exceptions or modifications to a provider’s rules, policies, practices, or procedures so  persons with disabilities can have assistance animals in the housing where they reside or seek to reside.

The FHA requires housing providers to make exceptions to policies governing animals when it may be necessary to permit persons with disabilities to utilize animals. Because HUD interprets the FHA to require access for individuals who use service animals, housing providers should initially follow the analysis that the Department of Justice has determined is used for assessing whether an animal is a service animal under the ADA.  ADA regulations generally require state and local governments and public accommodations to permit the use of service animals by an individual with a disability. For support animals and other assistance animals that may be necessary in housing, housing providers must comply with the FHA which does provide for access, although the ADA does not.

A service animal under the ADA means any dog that is individually trained to do work or perform tasks for the benefit of an individual with a disability, including a physical, sensory, psychiatric, intellectual, or other mental disability. The work or tasks performed by a service animal must be directly related to the individual’s disability. Other species of animals, whether wild or domestic, trained or untrained, are not service animals for the purposes of this definition.

As a best practice, housing providers are provided with criteria for assessing whether to grant the reasonable accommodation request. There are observable and non-observable disabilities. Under the FHA, a disability is a physical or mental impairment that substantially limits one or more major life activities. While some impairments may seem invisible, others can be readily observed. Certain impairments, however, especially including impairments that may form the basis for a request for an emotional support animal, may not be observable. In those instances, a housing provider may request information regarding both the disability and the disability-related need for the animal. Housing providers are not entitled to know an individual’s diagnosis.

Information about a disability may include:

• A determination of disability from a federal, state, or local government agency.
• Receipt of disability benefits or services (Social Security Disability Income (SSDI)), Medicare or Supplemental Security Income (SSI) for a person under age 65, veterans’ disability benefits, services from a vocational rehabilitation agency, or disability benefits or services from another federal, state, or local agency.
• Eligibility for housing assistance or a housing voucher received because of disability.
• Information confirming disability from a health care professional – e.g., physician, optometrist, psychiatrist, psychologist, physician’s assistant, nurse practitioner, or nurse.

A determination that an individual does not qualify as having a disability for purposes of a benefit or other program does not necessarily mean the individual does not have a disability.

While housing providers will be unable to observe or identify some of these impairments, individuals with disabilities sometimes voluntarily provide more details about their disability than the housing provider actually needs to make decisions on accommodation requests. When this information is provided, housing providers should consider it.

Some websites sell certificates, registrations, and licensing documents for assistance animals to anyone who answers certain questions or participates in a short interview and pays a fee. Under the Fair Housing Act, a housing provider may request reliable documentation when an individual requesting a reasonable accommodation has a disability and disability-related need for an accommodation that are not obvious or otherwise known. The guidance provides that in HUD’s experience such documentation from the internet is not, by itself, sufficient to reliably establish that an individual has a non-observable disability or disability-related need for an assistance animal.

One reliable form of documentation is a note from a person’s health care professional that confirms a person’s disability and/or need for an animal when the provider has personal knowledge of the individual.

For non-observable disabilities and animals that provide therapeutic emotional support, a housing provider may ask for information in order to conduct an individualized assessment of whether it must provide the accommodation under the Fair Housing Act. The lack of such documentation in many cases may be reasonable grounds for denying a requested accommodation.

If the animal is a dog, cat, small bird, rabbit, hamster, gerbil, other rodent, fish, turtle, or other small, domesticated animal that is traditionally kept in the home for pleasure rather than for commercial purposes, then the reasonable accommodation should be granted because the requestor has provided information confirming that there is a disability-related need for the animal. For purposes of this assessment, reptiles (other than turtles), barnyard animals, monkeys, kangaroos, and other non-domesticated animals are not considered common household animals.

If the individual is requesting to keep a unique type of animal that is not commonly kept in households as described above, then the requestor has the substantial burden of demonstrating a disability-related therapeutic need for the specific animal or the specific type of animal. The individual is encouraged to submit documentation from a health care professional confirming the need for this animal.

While this guidance does not establish any type of new documentary threshold, the lack of such documentation in many cases may be reasonable grounds for denying a requested accommodation. If the housing provider enforces a no-pets policy or a policy prohibiting the type of animal the individual seeks to have, the housing provider may take reasonable steps to enforce the policy if the requester obtains the animal before submitting reliable documentation from a health care provider that reasonably supports the requestor’s disability-related need for the animal. A housing provider may refuse a reasonable accommodation for an assistance animal if the specific animal poses a direct threat that cannot be eliminated or reduced to an acceptable level through actions the individual takes to maintain or control the animal.

Housing providers’ pet rules do not apply to service animals and support animals. Thus, housing providers may not limit the breed or size of a dog used as a service animal or support animal just because of the size or breed but can limit based on specific issues with the animal’s conduct because it poses a direct threat or a fundamental alteration.

Before denying a reasonable accommodation request due to lack of information confirming an individual’s disability or disability-related need for an animal, the housing provider is encouraged to engage in a good-faith dialogue, called the interactive process, with the requestor. The housing provider may not insist on specific types of evidence if the information which is provided or actually known to the housing provider meets the requirements of the Notice. Disclosure of details about the diagnosis or severity of a disability or medical records or a medical examination cannot be required.

If a reasonable accommodation request, provided under the framework of this guidance, is denied because it would impose a fundamental alteration to the nature of the provider’s operations or impose an undue financial and administrative burden, the housing provider should engage in the interactive process to discuss whether an alternative accommodation may be effective in meeting the individual’s disability-related needs.

All housing providers covered by the FHA are advised to conduct their own due diligence regarding housing providers’ obligations and compliance under the Assistance Animals Notice.

As more local and state governments enact new laws to prohibit employers from requesting salary history information from job applicants, many employers have had to revise their hiring policies and practices to bring them into legal compliances. Until recently, requesting an applicant’s salary history was a standard practice for many employers in their hiring process. However, with current legislative trends toward equal pay, bans against gender pay disparity, and prohibiting use of salary history as a basis in applicant screening and job compensation are causing employers to reconsider their hiring policies and practices in light of future legal requirements.

Past salary history information could be used as a screening tool to eliminate applicants from a hiring pool as being over-qualified or under-qualified compared to a budgeted job salary range. Some employers have used an applicant’s past salary information as the basis to set the compensation for the open job position. This can contribute to the gender pay inequity between male and female applicants and minority applicants. Equal Pay Laws have been enacted in many states similar in nature to the federal Equal Pay Act to prohibit pay discrimination.

Salary history bans can apply to all employers, private and public, state agencies, city and county agencies and departments, employment agencies, or employers’ agents, or others as specified in the state, city, or county laws. In general a salary history ban prohibits employers from asking about current or past salary history from an applicant, the applicant’s current or former employer, an agent of the applicant’s current or former employer or other sources for the purposes of obtaining salary history information. In some jurisdictions an employer may be prohibited from searching public records or public reports for the purpose of obtaining an applicant’s current or past compensation information.

Some employers have revised their hiring policies and practices to be more transparent to job seekers. By posting job descriptions, hiring criteria, and salary ranges for open job positions, the employer provides potential applicants the opportunity to determine the level of experience and expertise required for the job. Potential applicants can self-assess their qualifications and salary expectations relative to job requirements before deciding to apply.

Employers in those locations with salary history bans should review and revise hiring policies,   practices, and procedures to ensure compliance with the specific law governing their location. Provisions and prohibitions by law must be incorporated into the employer’s hiring policies and practices, recruitment, the interview process, and the screening process. All job applications, whether in printed form or available online, and other types of hiring documents must be reviewed and revised to ensure those documents do not contain any requests for applicants to disclose their salary histories during the hiring process. Recruiters and hiring managers must receive education and training on compliance issues to identify questions they can ask and questions that cannot be asked during prospect and applicant interviews and applicant screening. Hiring personnel must ensure they are not asking or prompting an applicant to disclose salary history information. The focus of the employer’s hiring procedures should be to hire a qualified applicant with requisite skills, education, and experience.  Salary ranges should be commensurate with experience and skills.

In general an employer can provide an applicant with information about the salary and other benefits offered in relation to the open job position. In some jurisdictions an employer can ask the applicant his salary expectations to determine whether the applicant’s expectations are within the offering salary range of the open position. An employer should not use the applicant’s salary expectations to determine whether to offer employment or as basis to set compensation. The information cannot be used to offer a lower salary to an applicant.

What should an employer do if the applicant volunteers his salary history? It may depend upon the state, city or county applicable law. In general an employer cannot rely on the applicant’s stated pay history and should refocus attention on the job requirements and applicant qualifications. It may be advisable for employers to include disclosure in their hiring policies and practices and during interviews that the employer does not rely on information about an applicant’s current or past salary or compensation in the employer’s decision for employment or in future compensation decisions.

In some jurisdictions the employer may ask an applicant about salary history but only after an offer of employment is made. However a better practice may be to avoid collecting such information in order to avoid potential claims in the future that the employer relied upon the information to set compensation.

The following state and local laws are examples of some current state and city salary history bans. Employers should always research applicable laws for their location and determine specific requirements.

State Salary History Bans

Illinois

Illinois’ Salary History Ban prohibits employers from screening job applicants based on their current or prior wages, salary, benefits, or other compensation. Employers are prohibited from requesting or requiring applicants or their current or former employer disclose information about the applicant’s salary history as a condition of being interviewed, considered for employment, offered employment, or offered compensation.

An employer is not prohibited from providing an applicant with information about compensation, salary or benefits offered in relation to the open job positon. An employer can discuss with the applicant the applicant’s expectations in respect to compensation, salary, and benefits for the position. If an applicant voluntarily discloses current or past salary, compensation or benefits, an employer may not consider that information when making an employment decision or a decision on compensation.

Washington

Washington amended the Equal Pay and Opportunities Act to prohibit employers from inquiring about an applicant’s salary history. Washington state law prohibits all employers from seeking the wage or salary history of an applicant for employment, either directly from the applicant or from a current or former employer, and requiring that an applicant’s prior wage or salary history meet certain criteria. Employers can confirm an applicant’s wage or salary history only if the applicant has voluntarily disclosed his wage or salary history or if the employer has already negotiated and made an offer of employment to the applicant that includes an offer of compensation.

City Salary History Bans

Kansas City MO

Kansas City employers are prohibited from asking job applicants about their salary history information, including prior compensation and benefits. The ordinance prohibits an employer from inquiring about a job applicant’s salary history or screening job applicants based on their current or prior wages or other benefits. Employers are prohibited from relying on an applicant’s salary history in deciding whether to offer the applicant employment or in determining the applicant’s salary, benefits or other compensation during the hiring process or negotiation of an employment contract.

Employers are required to remove salary questions from any hiring forms, such as job applications, online applications, candidate questionnaires and background check forms; update their interview and negotiation policies and procedures; and train hiring managers, recruiters and interviewers on the legal requirements.

The law applies to all conversations between interviewers and applicants. Employers can discuss an applicant’s salary expectations, but interviewers should be aware of legal restrictions. Asking about salary expectations in such a way that is intended to solicit salary history information or pressures an applicant to disclose such information could violate the ordinance’s requirements.

Cincinnati OH

Cincinnati’s ordinance prohibits employers from screening applicants based on wages, relying on salary history for hiring decisions, or refusing to hire an applicant who does not provide his salary history. Asking job applicants about their salary history or current earnings is an illegal discriminatory practice for city employers.

Job applicants in Cincinnati must be offered employment and compensation based on job responsibilities and level of experience rather than on salary history.

Atlanta GA

The city of Atlanta will not ask for salary history on its employment applications, in applicant interviews, or in employment screenings.

Whether for a single rental property, multi-family properties, or multiple properties, landlords need to keep a variety of records for all applicants, current tenants, and past tenants.

Tenant Records

Maintaining complete, detailed, and current tenant records is essential to document the individual’s tenancy, the landlord’s compliance with legal obligations, and important to prove a defense against a tenant’s claim of discrimination or to show cause in a landlord’s court action for tenant eviction.

All documentation related to filling a vacancy including rental inquiries, property showings, applications (withdrawn, rejected, and accepted), tenant screenings, selection, and tenancy records should be retained according to the appropriate retention period. Records should be kept that show calendar periods when vacant properties were available and when vacancies were filled.

As a good business practice, any form of landlord-tenant interaction should be documented in writing to provide a paper trail of discussions, agreements or events between the landlord and tenant.

Rental Unit Records

Records detailing income and expenses including repairs, maintenance, and upgrades should be maintained for each separate unit if a rental property. This information will be used for financial analysis and tax purposes.

Rent Roll

A rent roll records the date rent was received, the amount paid, the check number or other specifics of payment, and the name of the account holder. The typical rent roll lists the address with building/unit number, type of unit and square footage, tenant name, move-in and move-out dates, lease term and expiration date, security deposit amount, rent amount, other income such as parking fees, other charges (such as late fees), amounts paid, and balance due.

A landlord is expected to have a receipt and deposit system for all collected rents. The system should be able to trace all deposits and track what happened to rents received.

Maintenance Log

A landlord should keep good records for all maintenance and repairs to the property. A maintenance/repair log should record when the work was done, who did the work, what materials were used/purchased, and the manner of payment. The landlord should document tenant requests for maintenance and keep all correspondence regarding maintenance and repair work.

A record of tenant maintenance requests and timely resolution can reduce the amount of legal costs in the event of accidents to tenants or their guests on rental property. Good maintenance records also help prove landlord compliance with habitability laws and property inspections.

In general a liquidated damages provision in a contract is used to specify a predetermined amount of money that must be paid as damages when one party to the contract breaches the contract (fails to perform to contract terms and conditions). Boiler-plate language to that effect can be found in generic, pre-printed lease forms provided by various sources.

A liquidated damages clause in a lease agreement has been used to provide the landlord with a preset amount as termination fees in the event of a tenant’s early departure or as a penalty when a tenant holds over in his lease. However the use of such a lease clause is not recommended in a landlord-tenant agreement. An amount specified as liquidated damages is set as an amount that is the best estimate at the time of the contact what the damages might be if there were to be a contract default. In the case of the landlord-tenant relationship, the amount set as liquidated damages might be a higher amount than the actual damage a landlord might suffer from a tenant default. The higher damage amount, unless very close to the actual damage amount, could likely be viewed by the court as a penalty and judged illegal. In many states the use of liquidated damages is prohibited by law. When a tenant moves out before his lease expires, in some states the tenant is legally responsible only for the actual losses that his early departure caused the landlord, such as the amount of rent the landlord lost. If a replacement tenant is found within a short time after the original tenant moved out, the landlord in some cases may not have incurred a significant loss in rents. The amount of liquidated damages may exceed the landlord’s expense in re-renting the unit. In some states the landlord is held responsible by law to mitigate loss, that is, to make reasonable effort to re-rent the unit in order to minimize the loss.

Some landlords have used a lease clause that made holdover tenants pay a higher rent in an attempt to prevent tenants from staying past the end of their lease term. This could be perceived as a form of liquidated damages since the landlord in effect penalized the tenant for the holdover. As well as being prohibited by liquidated damages laws in some states, such an action could be in violation of consumer protection rights.

States that are considered landlord-friendly are those states that have laws, rules, and regulations that can be more favorable for the landlord’s business.

For rental housing, state landlord-tenant laws regulate or restrict certain policies and practices in property management operations. As examples, a landlord-friendly state may have no limit on security deposits, allow a longer period for the accounting and return of security deposits, have no limitation on late rent fees, do not require a statutory grace period for rents, allow a shorter time frame for notices to cure a default or quit, allow unconditional quit notices for material lease default or repeated lease defaults, and have a faster legal process for eviction lawsuits.

A landlord should also pay attention to local government ordinances and regulations. There are cities that are landlord-friendly and cities that provide greater tenant protections. More cities have passed or have pending landlord-tenant rules and regulations on many issues that impact current policies for rental qualifications, tenant screenings, deposit requirements, and eviction actions.

When a good tenant declines to renew his lease, should a landlord ask why? Possibly a more important question for the landlord is to ask is what could have been done to retain the tenant. The good tenant who is leaving was a tenant qualified to rental standards, wanted to be a tenant, and fulfilled his tenant responsibilities. A landlord should be a little curious why the tenant decided to move. There are many reasons why a tenant decides to move on rather than renew; e.g., job opportunities, family matters, etc., but if the tenant is moving across town to another rental, there can be more to the story. No landlord wants to be caught off guard by something he didn’t know about his property but everyone else does.

There is a greater issue of landlord responsibility to provide a duty of care for his tenants to help protect their safety and security. If good tenants are leaving, good tenants that the landlord expected to renew, there is an obligation to determine whether there are reasons to be concerned about the non-renewal. If there are issues that materially affect the habitability and livability of tenants, a landlord has obligations to addresses those issues and take action to remedy problems. The landlord’s actions can prevent unnecessary future turnovers, and help ensure replacement tenants are protected.

A tenant who has made his decision to move rather than renew may provide straightforward feedback in answering the landlord’s questions during an exit interview. This is a good opportunity to turn a possible negative business impact into a positive opportunity for business improvement.

Asking for feedback from tenants who are not renewing is a good business practice to help improve and strengthen property operations. A potential downside to conducting an exit interview can be that the departing tenant declines to interview. That, itself, may provide some indirect feedback that a review of property operations might be in order. A landlord owes an obligation to his business to take all constructive measures to better his business. Although the exit interview should be a practice included in the landlord’s move-out procedures, a landlord should still respect a tenant’s wishes to not participate in an interview. The landlord could offer an alternative, such as a printed survey form, by which the tenant could communicate comments and concerns in a manner and environment that is safe and non-threatening.

A landlord should keep in mind that during an exit interview there can be unfavorable comments made about a number of issues, including comments about the landlord that could be taken personally. A tenant could use the interview as a forum to give a recital of complaints about neighbors, noise, or housekeeping items. There can be issues that a landlord can do something about as well as some issues that are out of the landlord’s control. The key, as for any interview, will be to remain professional, listen carefully, and not become defensive or take a retaliatory action. The purpose of a tenant exit interview is to obtain feedback from the tenant on how to improve the rental property operations to attract and retain good tenants.

While information gained from the exit interview may be too late to retain that particular tenant, the information can be used to prevent a future tenant from experiencing the same or similar problem.

In developing questions for a tenant exit interview, a landlord is expanding on the standard question “why are you leaving?” The following questions are suggestions of questions that might provide valuable feedback on the rental property, property management, administrative staff, and rental services and amenities. A landlord will need to develop his own questions relevant to his business needs and the particular property.

What is your primary reason for moving?

While this is the obvious question to ask, generally a tenant who doesn’t choose to renew his lease has specific reasons for his decision. There can be many factors that influence a moving decision, but a landlord is concerned with the main motivation to move; as examples, rents, repairs, neighbors, noise, etc. Is the reason something the landlord should have been aware of? If the landlord was aware of an issue, did the landlord fail to address the issue? If the issue is with the property operations, and the landlord was unaware of the issue or its effect on property management, the tenant’s answer is to the benefit of all. It’s better for a landlord to find out sooner than later when there are problems. If the landlord can take control of the issue, the next tenant may be a tenant who wants to renew.

Are you moving to another rental community in the area?

This is a general question asked only to determine if the move is a local move or out of the area or state. A local move may be an indication that the landlord needs to conduct a current market review of his competition.

Are there other reasons that influenced the decision to move?

Are there other areas of concern that haven’t been mentioned of which the landlord should be made aware?

How did you find your new place?

If the tenant is moving to a different rental complex in the local area, this answer may provide the landlord with information regarding placement of future advertising.

What did you like about living here?

The tenant’s answer could be a feature of the chosen new unit; e.g., much more closet space, or as simple as the location is closer to work. The information might be useful for future advertising purposes.

Is there something that you didn’t like about living here?

The answer could be a surprise. It could be something that a landlord could easily remedy for future tenants by replacement or upgrades such as kitchen appliances or plumbing fixtures. It could be something else entirely and the landlord has no control over the issue. Different tenants will have different likes and dislikes.

By asking questions about likes and dislikes, the landlord can assess the strengths and weaknesses of the physical property, the property management, and the relationship between tenants and the administrative support staff.

Do you consider the rent is a fair rent for this unit/area?

This gives the landlord an idea of whether or not this tenant believes the rent is reasonable in comparison to similar properties. A landlord may also hear that a tenant’s friends are getting a better deal somewhere else. If the landlord did his research and compared rent for similar properties to determine an average rent in his area, he will be able to evaluate whether the rent rate is an issue of concern. If additional turnovers occur and rent is cited as an issue for the move-out, a landlord may need to revisit his rental pricing versus current market rents.

How would you describe your experience while renting here?

The tenant’s answer provides the landlord with information how his property and management is viewed by the tenant and how the tenant might communicate his satisfaction of the rental to his friends. Positive word of mouth referrals particularly from a good tenant are important to the landlord for future good tenants.

What would you change in the unit to make it more livable?

This gives a landlord ideas and suggestions for potential areas for upgrades or improvements.

What could have been offered that would have convinced you to renew the lease?

The tenant may share his rental criteria or provide information on his new rental that he thinks will be a better choice. If the new rental contract has not yet been accepted and the tenant is receptive to negotiating with the landlord for the current unit, the landlord should be prepared with his best renewal offer to present to the tenant.

Would you rent from us again?

The answer can be a confirmation of a satisfactory landlord-tenant relationship or a possible incentive to review business operations.

Picking an applicant who appears to be the best applicant can be a subjective judgment call based upon a landlord’s personal preference for one applicant over other qualified applicants.  Such a practice violates fair housing anti-discrimination protections.  The best practice has always been for a landlord to offer tenancy to the first qualified applicant.

Something to note is that recent legislation in two cities requires changes to landlords ‘practices for tenant screening and selection.  As examples:

The City of Seattle has passed a First in Time (FIT) ordinance that requires Seattle landlords to accept the first qualified applicant for tenancy. Landlords must screen and make offers to the first qualified applicant based on the order of completed applications received. The ordinance was created to standardize the screening process by preventing landlords from using individual judgment in the application process. The ordinance is viewed as a way to reduce potential bias against protected classes.

The City of Portland has passed a new ordinance, “Fair Access in Renting (FAIR)” that among other changes in rental screening and qualification practices requires landlords to give 72 hours’ notice before accepting applications for a rental unit. Landlords are required to screen prospective tenants on a first-come-first served basis. The law also prioritizes people with disabilities to rent accessible units, places a cap on required income-to-rent ratios for tenants, and limits the use of credit and criminal history in tenant screenings.

Landlords are always advised to conduct regular due diligence for new and pending local ordinances and state landlord-tenant statutes that will require changes in tenant screening and selection requirements.

A reasonable occupancy standard is commonly based on guidance from the Department of Housing and Urban Development (HUD) that as a general rule, an occupancy policy of two persons in a bedroom is reasonable under the Fair Housing Act. This is based on several factors such as the size of bedrooms, the size of the rental unit, configuration of the unit, physical limitations of the housing, relevant factors such as the age of children, state and local housing and occupancy codes, and other situational factors. Since the number of bedrooms is not the only factor that must be considered in developing occupancy standards, the HUD guidance is sometimes referred to as the “two-per-bedroom-plus” rule.

The federal Fair Housing Act prohibits discrimination in housing because of race, color, national origin, religion, sex, familial status, and disability. Landlords cannot use occupancy restrictions to discriminate based on familial status. A landlord’s occupancy policy that directly or indirectly excludes or restricts children would be a violation of fair housing laws. An occupancy policy which limits the children per unit is less likely to be reasonable than an occupancy policy which limits the number of people per unit.

The HUD guidance does not categorically set an occupancy limit for a rental unit. A landlord cannot know for certain that a reasonable two-plus occupancy limit for a unit will meet federal standards for legal occupancy.

A landlord may have legitimate business reasons to restrict the number of occupants allowed in a particular rental unit. Legitimate business reasons to limit the number of occupants in a particular rental unit could include limitations of building systems such as plumbing, electrical, or sewer or septic systems that could not accommodate increased use. The age and condition of the rental unit as well as the size and configuration of the unit may also be a limiting factor for occupancy.

States and municipalities can set their own occupancy standards that may be different than federal standards. State and local standards are usually equal to or greater than federal standards. Additionally, states or municipalities may designate other protected classes which are covered by anti-discrimination laws.

In some states occupancy standards may allow fewer people to occupy a rental unit. This could result in a landlord being compliant with state standards but non-compliant with the federal standard if the HUD guidance is applied.

A landlord, when developing occupancy standards for his units, must research federal, state, and local occupancy standards to determine how many people must be allowed in a particular rental unit under federal standards, under state statutes, and under local standards. There will be two sets of numbers that must be taken into consideration for occupancy standards, (1) the minimum number of occupants allowed in a particular unit, and (2) the maximum number of occupants as set by state and local health and safety codes based on the size of the rental unit and the number of bedrooms and bathrooms in the rental unit.

To help reduce potential problems a landlord should use standards that are at least as generous as the federal standards, but follow state and local standards if those standards are more generous than federal guidelines/standards.

The beginning of a new year is traditionally the time to evaluate current rental policies and practices for business and legal compliances.

This year the analysis and evaluation process may be a business necessity.

New landlord tenant legislation is scheduled to become effective this year in several states and many cities. Some of the new requirements may already be in effect, as new laws also often become effective on January 1^st.

As due diligence responsibility, a landlord must research legal requirements affecting the property’s location to make sure business policies and practices are in full compliance.

As of this writing, rent controls, tenant screening practices including use of credit reports, credit scores, criminal background checks, and eviction history, eviction proceedings, and security deposits are some of the legislative changes that have already been implemented or will become effective later this year. Many of these changes will have some effect on a landlord’s business policies and property management in those states and cities. Continuing the trend from last year, there are now more initiatives by cities, states, and tenant activist groups to provide for increased tenant protections as part of more inclusive rental housing decisions.

In evaluating current practices, a landlord should have a firm understanding of basic landlord tenant statutory requirements and the business necessity that is required for property operations. Even though experienced, a landlord cannot afford to take for granted that his property management is fully compliant without confirmation through legal research of applicable state, local, and federal laws.

Landlord-tenant laws serve as legal protections for landlords and tenants. Without defined standards and requirements, landlords or tenants could suffer business loss, or damage to persons and property. In some states, landlord-tenant regulations are more landlord-friendly, affording more protections to landlords as property owners. In other states, landlord-tenant regulations are more tenant-friendly, by providing tenant protections and remedies for housing deficiencies or unreasonable or illegal practices by a landlord.

Legislative Changes

Legislation at state and local levels can have significant impact on traditional rental housing policies for evaluating business risk through tenant screenings, selection standards, and rental policies. The following are examples of recent landlord-tenant legislation by cities and states. Information is provided for discussion purposes only and should be reviewed in context of the importance of landlord due diligence for business and legal compliances.

City Ordinances

Minneapolis, Minnesota

The City Council of Minneapolis, Minnesota has updated the city’s Renter Protection Ordinance. The updated ordinance regulates how landlords conduct tenant screenings of potential tenants. One of the provisions of the ordinance prohibits landlords from rejecting a potential tenant for having an insufficient credit score or insufficient credit history.

Historically a credit score has been regarded as an objective, measurable, and defensible method of evaluating financial risk to the landlord’s business. The applicant’s use of credit, credit payment history, and debt exposure were set out as indicators of future credit performance. The applicant’s creditworthiness was in practice judged by his credit history and/or credit score. Now, a Minneapolis landlord should examine his rental standards, and as necessary, revise standards to comply with the updated regulations. In some cases, a landlord will need to change his tenant screening policy and practices to remove qualification requirements for credit score and satisfactory credit history. The landlord must assess the potential financial risk of an applicant using various screenings that are in compliance with the ordinance.

Other provisions in the Renter Protection Ordinance forbid landlords from charging security deposits that exceed a single month’s rent; rejecting a potential tenant for any misdemeanor convictions older than 3 years and most felony convictions older than 7 years; and rejecting tenants for evictions older than 3 years. There are provisions for a landlord to reject applicants with convictions for certain crimes such as murder, kidnapping, criminal sexual conduct, etc., but only if those convictions were within the last 10 years. Landlords who use an individualized assessment process are allowed to reject applicants because of criminal record, credit score or eviction history. However, before rejecting an applicant, the landlord must first give the potential tenant the opportunity to provide supplemental information about the nature and severity of the potentially disqualifying behavior. If the landlord still wants to reject the applicant after considering the supplemental information, the landlord must provide written reason for denying the application and a copy of the document must be filed with the city.

Portland, Oregon

The Portland City Council has issued a mandate that renters in the Portland city limits who are served a no-cause eviction or any of the following triggering events must be paid Relocation Assistance by their landlord. Those events include:

• a no-cause eviction, or
• a qualified landlord reason for termination, or
• a rent increase of 10 percent or higher over a 12-month period, or
• a material change in the lease terms, or
• a renter receives no option to renew their lease.

Tenants must receive a written notice for any of these events at least 90 days prior to the effective date, including a description of their rights and obligations and the amount of the Relocation Assistance they are eligible to receive.

Seattle, Washington

The Seattle City Council has passed 5 new tenant protection laws, including new protections for domestic violence survivors from being held liable for damages to a rental unit that were caused by their abuser.

Additionally, to strengthen renter protections:

• landlords are prohibited from restricting legal occupancy limits established by local, state or federal laws (aka the “roommate bill”) allowing tenants to share the costs of rent and other benefits of shared occupancy;
• information on the rights and resources of tenants is required to be included on notices to terminate a tenancy, increase rent or for landlord entry to a unit;
• authorized enforcement of compliance to state law requires landlords to provide receipts for rental payments and prohibit the requirement for electronic payments only; and
• landlords are required to register the rental unit with the appropriate governing agency before filing and issuing an unlawful detainer to terminate a tenancy.

Kansas City, Missouri

The Kansas City Council has passed a tenants bill of rights package. The tenant rights package includes two pieces of legislation. The first part cites local, state and federal law and provides a list of rights already afforded to tenants, including rights to habitability, freedom from discrimination and retaliation, and the right to organize and collectively bargain. The second part of the ordinance requires that landlords give 24 hours’ notice before entering properties and provide tenants with a means to get a utility estimate for the property. Landlords are also required to provide a copy of the bill of rights. The ordinance also bars discrimination against prospective tenants solely because of a prior arrest, conviction or eviction.

State Legislation

Illinois

The state of Illinois has passed a new law preventing landlords from evicting, retaliating, or threatening to take action against undocumented immigrant tenants who report code violations or make requests for maintenance. Illinois was the second state after California to pass such a law.

New York

The state of New York passed the Housing Stability and Tenant Protection Act of 2019, called the strongest law protecting tenants in the state’s history that established stronger tenant protections statewide. Landlords cannot evict or otherwise penalize tenants for making good faith complaints to the landlord about violations of the warranty of habitability. Security deposits are limited to one month‘s rent and landlords must give tenants the opportunity for a walk-through before they move-in and before the tenant moves out. The security deposit must be returned within 14 days with an itemized list of deductions. The eviction process was changed to provide new rights in eviction court.

Washington

The state of Washington’s Landlord Tenant and Eviction laws had major changes in 2019 that included a landlord’s mandatory use of the 14 day Notice to Pay or Vacate (previously landlords used a 3 day notice requirement). If a tenant is a day late in rent, a landlord must give the tenant 14 days to pay rent before the landlord can file an eviction lawsuit. Tenants cannot be evicted for not paying charges that aren’t actually “rent”. A landlord must apply the tenant’s rent payment first toward rent before applying the payment to other kinds of non-rent such as late fees. A landlord is required to provide at least 60 days’ notice in advance for a rent increase (previously only a 30 day notice was required).

California

The state of California passed the Tenant Protection Act of 2019 which has a number of changes for residential properties regarding rent control and eviction protections. The law took effect on January 1, 2020, with some of its changes implemented over several months during a transition phase. The Tenant Protection Act of 2019 extends a rent cap and eviction control to the entire state where rent control does not already exist. Full discussion of the Tenant Protection Act is beyond the scope of this article. California landlords are advised to conduct due diligence on the Act, seek legal consultation as required and implement their rental policies accordingly.

The tenant screenings a landlord conducts are important risk assessment tools for business profitability and asset protection. Screening requirements are regulated by legal compliances and business necessity. Tenant screenings relevant to business standards provide key data to evaluate an applicant for potential business risk. With recently passed legislature by some states and local governments, there are now additional restrictions and prohibitions regarding the use of tenant screenings in rental housing decisions.

While the timing and scope of tenant screening practices are changing in different  localities, the need for tenant screening remains strong in order to protect the landlord’s business and the safety of his tenants in residence.  A landlord will need to correctly understand how such restrictions or prohibitions affect his business and make adjustments in his practices accordingly. To maintain legal compliances, a landlord must incorporate full due diligence as an ongoing risk management practice for his property locations.

One example of new regulations in tenant screening policies and practices is the City Council of Minneapolis, Minnesota approval of an update to the city’s Renter Protection Ordinance. The updated ordinance regulates how landlords conduct tenant screenings of potential tenants. One of the provisions of the ordinance prohibits landlords from rejecting a potential tenant for having an insufficient credit score or insufficient credit history.

Historically a landlord has looked to the consumer credit report as the key document for measurement of an applicant’s qualifications to rental standards. A credit score has been regarded as an objective, measurable, and defensible method of evaluating financial risk to the landlord’s business. The applicant’s use of credit, credit payment history, and debt exposure were set out as indicators of future credit performance. The applicant’s creditworthiness was in practice judged by his credit history and/or credit score. Now, in Minneapolis a landlord should re-examine his rental standards, and as necessary, revise standards to comply with the updated regulations. In some cases, a landlord will need to change his tenant screening policy and practices to remove qualification requirements for credit score and satisfactory credit history. The landlord must assess the potential financial risk of an applicant using various screenings that are in compliance with the ordinance.

A credit score or credit report are not the only screenings available to the landlord for decision making. The landlord retains his ability to operate his business to select a tenant who meets rental qualifications as long as the landlord’s rental standards are legal, non-discriminatory, and applied to all rental prospects, applicants, and tenants. The landlord will control the means and methods of screening potential tenants by choosing legal appropriate screening measures to evaluate applicant qualifications to business standards.

A landlord protects his business by analyzing business risks and implementing practices that reduce risk. The risk of missed rent or late rents is a concern to most landlords.  To reduce problems associated with rent defaults, a landlord can screen an applicant for the ability and willingness as a tenant to meet rent obligations. Financial ability and satisfactory credit management is at the center of applicant qualification and approval for tenancy. An important determination in setting business policies is how best to evaluate this requirement. In the past a landlord may have based a housing decision on the applicant’s credit history and/or score. Now a landlord must evaluate screening practices that can collect the type of information to qualify an applicant to rental standards for income and employment that allow an applicant to meet rent, as well as reference sources to confirm payment history of the applicant in his willingness to make rent payment a priority. Consumer credit reports are still a valuable resource and provide critical data for financial analysis and evaluation. The information in the credit report should be considered in context of the source and reporting period of contributing creditors, not as an absolute indication of credit worthiness.

The issue of missed or late rents can raise another concern for landlords. The lease agreement sets out the legal contract terms and conditions for both landlord and tenant. The tenant by signing his lease has agreed to meet contractual obligations for full and timely rents. If the tenant defaults on this material term, what other lease terms and conditions may fall to default? Screening for ability to pay and willingness to pay should be backed up by the applicant’s management of his resources to meet credit responsibilities. There should be adequate history of the applicant’s commitment to meet his financial duties and obligations.

This is an area where the applicant’s credit report can supply information by listing open and closed accounts, the type of credit, the total amount of loans, balances due, and payment history. Additionally a credit report will list any accounts sent for collection or write off.

Financial ability to pay rent can come from various sources of income. Wage earnings are the most common source of income. Proof of current employment and wages or salary income for applicants can be verified by the applicant providing copies of the last several paycheck stubs, and the landlord’s direct confirmation of the applicant’s employment status by a written document from the current employer or as documented in a telephone conversation.

Self-employed individuals can provide copies of previously filed tax returns, or copies of the IRS Form 1099- Miscellaneous as documentation of their earnings. An applicant whose income comes from commissions or incentives will need to provide the landlord with copies of appropriate documents that support the sources of income. A landlord may need to review copies of tax returns, bank statements, 1099s, or other supporting documents for verification purposes.

Verification of non-earned income, such as interest, dividends, annuities, Social Security or disability benefits, IRA/401(k) pension distributions, other retirement plan distributions, court-ordered agreements for spousal support, child support or as awarded by lawsuits, and other investment cash flow and entitlement items, may be verified through copies of official statements available to the applicant.

In general, a landlord can request whatever financial information is required to confirm the applicant’s ability to pay under the landlord’s legal, business supported rental criteria, provided the same financial information is requested from all applicants.

Renters who meet their financial obligations will have a record of timely payment. The credit report provides summary data of payment history. Additionally landlords can contact rental references to confirm the renter paid as agreed while a tenant at former rental address. Credit references can be contacted for those creditors who have extended credit or otherwise established a financial relationship with the renter but who do not report payments or payment history to the major credit reporting bureaus.

When an applicant has an insufficient credit history or credit score, it can be as a result of a  voluntary lifestyle decision to not utilize credit or that credit has not yet been established over a sufficient period of time to generate a credit history, a landlord must determine how best to evaluate his qualifications to rental standards.

Many landlords have experience in evaluating applicants with thin credit files or otherwise appear to be credit invisible to credit reporting bureaus. Those landlords have found that an applicant considered credit invisible may actually have a strong history of debt repayment according to terms and conditions of non-reporting creditors. Being invisible does not mean an applicant is not credit worthy. An applicant whose credit report file comes back as thin is not automatically a person who has made poor credit decisions and missed payments. In some ways a thin file applicant is credit neutral. Some applicants – whether their credit file is visible, invisible, or thin – are credit worthy, while others are not.

An applicant interview is a screening tool that can also provide information about credit usage and money management. The interview allows the applicant to tell his story and explain how he manages his financial obligations, i.e., pays his bills. The landlord has the opportunity to ask the applicant questions that clarify information on the application form or as furnished by references from the employer, previous housing providers, and credit references.

Additionally a landlord should be knowledgeable of legal requirements in some jurisdictions and in certain circumstances for individualized assessment of the applicant’s background history, including criminal, eviction, and credit history.

The terms and conditions for tenancy are set by the landlord. The landlord has the right to offer conditional approval for tenancy such as requiring a co-signer or different lease terms. The above discussion can serve as an example to landlords of changing rules and regulation of landlord-tenant issues and the need to monitor such changes and adjust as necessary for compliances. Tenant screenings are comprised of various types of verifications and fact checking that contributes to the final decision to offer tenancy.

The restrictions and prohibitions made by the Minneapolis City Council change tenant screening practices in that jurisdiction. Landlords are always required to review practices, revise practices as necessary and comply with current legal requirements. The process of tenant selection decisioning remains the landlord’s business decision. Proponents of the ordinance view the new changes as tenant protections to make the screening process a more inclusive process. The new tenant screening regulations are effective in June 2020 for landlords who own 15 or more rental units. Landlords with fewer rental units have until December 2020 to comply with the new regulations.

Note: Landlords are cautioned that information, as presented in this article, is for discussion purposes only and should not be construed as legal writings, or as legal advice. The topic of discussion, however, is representative of some the changes in landlord-tenant issues that are effective this coming year; that are being proposed for future consideration; or that are pending in the next state and local legislative sessions.