How To Avoid Getting Sued In The Leasing Process

How To Avoid Getting Sued In The Leasing Process

In our previous blog titled, “How Quickly Can You Rent Out My Unit in the Bay Area“, we talked a little bit about our process and how long it takes. We even touched upon the difference between using a professional property management company vs. DIY rental owners. Let’s explore the relationship between property owners and tenant candidates. We’ll discuss ways to avoid getting sued in the leasing process.

Leasing out a property may seem like an easy task. You take a few photos, post them online, draft a description of what you require in a tenant, post it and see who applies. In the perfect world, you can have the perfect tenant! He/she has the perfect credit score, pays on time every time, and is very respectful of your property. But, nothing is perfect. Most property owners and landlords do not know what to look for in a tenant. They will likely run into a few hiccups — at times, they may even get sued.

To avoid getting sued during for discrimination in the leasing process, the key is to establish an objective tenant criteria upfront and follow it. So, what is considered an objective criteria, you might ask? That includes requirements for: income, credit score range, eviction record history (if it is allowed), smoking limitations, and whether or not pets are allowed. Setting these standards will help the property owner with find a qualified tenant.

Why don’t property owners just come up with the objective tenant criteria up front?

There’s an abundance of landlord resources out there, but some landlords still do not follow the best practices. Now, let’s examine why landlords my not establish an objective tenant criteria up front.

Here are a couple of reasons why.

1) Most landlords lack the experience and expertise. They don’t really know the market well enough to nail the best tenant criteria that’s just right. This means that it can’t be so strict that no one qualifies and yet not too loose to let in substandard applicants. The easiest way to solve this problem for them is, “let’s test the market with one set of criteria first.” The notion of “testing the market” is generally good in many areas of business except in tenant screening. You will run a serious risk of discrimination lawsuit.

Let’s say you received a bunch of qualifying applications, then you decide the bar was not high enough. Later, you turn down yet another applicant. Then, you decide to revise your criteria and eventually find your perfect tenant. Well, sorry to say, but you may be in trouble. You may not realize it, but you are running the risk of being sued if you advertise a certain criteria for a rental unit and then tweak a few standards. You may receive a pro-tenant attorney’s letter suing you due to discrimination laws. Even if you didn’t deny the 1st applicant because of race, color, religion, gender, etc, chances are, the attorney can find some way to come up with a credible discrimination case.

2) Many owners think that they are such a small fishes, they don’t think they will get sued. Owners may think they can change tenant criteria on the fly without getting caught by discrimination allegations. The truth is, these owners are making the mistakes that big fishes don’t make. Therefore, most of the defendants named on these lawsuits are small property owners.

Whether you are a first time or seasoned landlord, there are things to look out for when it comes to discrimination lawsuits. Next month, we will take a closer look at what property management companies charge in the Bay Area. Stay tuned for more info!

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