Today's article is on both the obvious and not so obvious landlord liabilities.
If you’re going to invest in rental properties, you need to be aware of potential landlord liabilities. Some hazards are more obvious than others. We will start with the obvious and work our way to the lesser-known pitfalls that can occur during the tenant screening process.
Obvious Hazard: Injury or Suffering Due To Neglect
The property must maintain a certain level of “habitability” where the landlord is responsible for unlivable, unsafe, or unclean conditions.
Some common violations would be a tenant falling through a faulty porch staircase, pest infestations or mold issues. If the tenant suffers due to the negligence of the landlord, they could be entitled to compensation for their pain and suffering.
Most people understand this so let’s move to a topic that isn’t as well known.
Less Obvious Hazard: Discriminating Against A Protected Class
A lesser-known hazard comes up during the tenant screening process. This would be discriminating against individuals protected under the Fair Housing Act.
Here is also a PDF of the Fair Housing Act.
There are seven federally “protected classes” under the Fair Housing Act:
- Familial Status
- National Origin
Here’s a harmless-sounding line that could be added to a rental listing, “A great bachelor pad with close available parking in a church lot.” In that one line, you could make the argument that religion, sex, and familial status were all being discriminated against.
It’s important you’re mindful of these protected classes when advertising and filling vacancies for your rentals.
Never ask an applicant if they’re pregnant or how many kids they have. Your rental application should only reference individuals 18 years and older.
Now let’s move to a hazard that most landlords are unaware of.
Least Obvious Hazard: Fair Credit Reporting Act
If you’re an informed landlord you’re going to run a background check on your tenant applicant. This will give you a better look into their history to see if they have things like evictions, crimes, or liens on record.
The Fair Credit Reporting Act works to promote the accuracy, fairness, and privacy of information in the files of consumer reporting agencies (CRA). I work at RentPrep and it is an example of a consumer reporting agency.
Understand that the landlord has responsibilities under the FCRA as well.
For example, when you deny a tenant applicant you need to give an adverse action notice to the denied applicant. It’s recommended to just give a generic form that says they’ve been denied and to contact the CRA if they would like to see a copy of their report.
The applicant has the right to see a copy of the report and dispute information. The CRA should check the data for accuracy, and if there is incorrect data they need to submit the data to be expunged from public record.
As a landlord or property manager it’s important you read the rules of the FCRA and make sure you’re properly handling your background reports.
The Three Most Common Issues We See are the Following:
- Failing to get written authorization to run a background report
- Improperly denying an applicant
- Improper sharing of the background report
Make sure you’re getting signed consent on the rental application to run a background check. Use adverse action to deny an applicant and make sure you’re not sharing the findings of their report with anyone.
At RentPrep we hire, train and employ FCRA Certified Screeners to ensure compliance. This way you can call the office to ask questions and make sure you’re following the law with your tenant screening process.
Thanks to Eric Worral of RentPrep for this very informative guest post. Be sure to stop by RentPrep and check out their services.
Check out this post on 8 tips for selling a tenant-occupied home.
Eric Worral is an employee at RentPrep.com which is a tenant screening service for landlords and property managers. He's been a landlord since 2008 and writes tips on ways to better screen tenants and manage rental properties
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