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The Best Way for Property Managers to Reject Applicants

Part of your job as a property manager is screening potential new tenants. The screening process you use and the way you reject applicants can get you in trouble if you aren’t careful.

It’s important to understand the Fair Housing Act and other federal and state laws related to renting and discrimination. Under the Act, you cannot discriminate against a tenant based on race, color, religion, sex, national origin, familial status, ancestry, sexual orientation, and disability. What if you are rejecting an applicant? Is there a right way to do it to avoid a discrimination claim?  

Recently we talked to a CRES client who is a property manager screening new tenants for a 4-bedroom house. There is currently one applicant with numerous children. He wonders, what is the best way for a property manager to handle the situation?

Property Manager Process for Screening Applicants

There are a number of things to consider when screening applicants. Do you have a fair and consistent screening process? Some things to consider in your screening process include:  income, percentage of rent to income, and the credit report.

Most applications are denied based on the credit report. This could mean an unfavorable credit report or simply one not as good as that of another applicant.

In this case, the income is good, but the property manager has not yet received a credit report. The delay in the report could itself be telling, or there may be grounds in the report that support rejection of the application. Having other applicants with better credit ratings would give the landlord a reason for rejecting the application.

The CRES Risk Management legal advice team also advised that while the property manager was screening applicants, the choice belongs to the landlord who must make the final decision. The property manager should try to get other applicants and their credit reports to submit to the landlord for a decision.

Applicants with “Too Many Kids”

The question remains: Can the property manager (or the landlord) deny the application because the family is large? This is an emphatic No. Familial status is a protected class and rejecting an applicant because of children could result in a lawsuit. In California, you cannot discriminate on age (in this case children), unless the home is in a declared adult community.

At the same time, property managers and landlords must be aware of occupancy restrictions for their city or county. Because the family is quite large, and the house not excessively so, there may be legal restrictions on occupancy that would be reason for rejection of the application. The landlord should explore zoning restrictions on how many people can live in the house given its size and location.

How Property Managers Can Protect from a Discrimination Claim

Our client is right to be concerned with this situation and to take steps to protect herself. Here’s a roundup of the CRES Risk Management legal advice team’s advice:

  1. Obtain several applications along with credit reports for all. Denial based on credit score is quite common.
  2. Make sure the landlord makes the final decision.
  3. Check into zoning laws for occupancy.
  4. Advise the landlord in writing to consult with an attorney about Department of Fair Employment & Housing (DFEH) requirements in California on leases.

Do you have questions about a tricky property management issue – or maybe another legal issue? CRES clients can call the CRES ClaimPrevent® Hotline 7 days a week. Clients receive a guaranteed response within 4 hours or next business day, with recommendations confirmed in writing.

What’s your biggest concern when it comes to screening applicants as a property manager?  

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