Single-Family Rental Investors: Avoid These Nine Fair Housing Mistakes

SFR investors may end up inadvertently saying or doing things in violation of the law. Watch for these nine common mistakes.

It comes as a surprise to some single-family real estate (SFR) investors, especially those purchasing their first rentals, that the Fair Housing Act applies fully to them. Often, they think of the legislation as governing the actions of multifamily property landlords. For this reason, or simply because they don’t fully understand the provisions and nuances of the act, SFR investors may end up inadvertently saying or doing things in violation of the law.

What Does The Fair Housing Act Prohibit?

The Fair Housing Act (Title VIII of the Civil Rights Act of 1968 plus amendments) has evolved with regulations and court decisions, but in general, the act makes it illegal to: refuse to rent or sell a dwelling to someone because of their race, color, disability, religion, sex, familial status or national origin (the seven protected classes under the Fair Housing Act) or to discriminate based on these classes in the lease terms or sale contract; advertise properties in such a way that implies discrimination against or preference for people based on a protected class; coerce, threaten, intimidate or interfere with a person’s housing rights for discriminatory reasons; or retaliate against a person or organization that supports a person exercising their housing rights.

Failing to understand the broad implications of these provisions can result in housing discrimination and the time- and resource-consuming legal processes involved if a renter or prospective renter files a claim. Government and nonprofits provide free investigative and legal representation to tenants for fair housing claims, so even if false, defense of a fair housing claim can be very costly. What’s more, a claim, if proven true, can be financially devastating to your business.

Common Fair Housing Mistakes You Should Avoid

There are many ways to run afoul of the Fair Housing Act. Since 2005, the number of housing discrimination complaints nationwide averages more than 27,000 annually.

These nine fair housing mistakes, in no particular order, are among the most common:

1. Refusing to rent to an applicant for any reason other than failing to meet your clearly stated (and legal) criteria: You should carefully consider your rental requirements — such as credit and tenant history, perhaps with input from your attorney — document them and apply them consistently. Softening your criteria to help one “hard-luck” family could be discriminatory if you don’t do the same for all.

3. Inquiring about family status: You are not allowed to ask an applicant how many children they have, whether they are pregnant, if they are married, etc. This is a common mistake because inquiring about family in other contexts is simply part of making conversation and getting to know someone. However, in rental application situations, this can be perceived as discriminatory. You can, however, set reasonable occupancy standards and limit the number of people allowed to live in your units. Check with your attorney to determine what is reasonable.

4. Failing to understand if there are additional protected people in your area: In addition to the seven federally protected classes, some cities and states have added other groups. For example, political affiliation or sexual orientation might be covered by anti-discrimination laws in your area.

5. Refusal to provide a reasonable accommodation for a disabled resident: Declining a request to take action to modify an entrance, living space or other area to assist someone with a disability, even at the tenant’s expense, can get you into legal trouble. It’s a good idea to talk with your attorney before responding to these kinds of requests.

6. Denying an application because the person has a service animal and you have a no-pets policy: It is important to understand that under the law, service animals are not pets. Consequently, you cannot refuse a potential tenant for having one, or charge them a pet deposit or higher rent.

7. Using buzzwords in your advertising: Statements such as “a short walk to downtown,” “perfect for young families” or “near the church” might accurately describe your property, but these may all be found to be discriminatory advertising under the Fair Housing Act.

8. Making rules that pertain specifically children: For example, it is acceptable to have a rule that people may not ride bikes on the sidewalk. But, you may not have a rule stating that children may not ride bikes on the sidewalk.

9. Failing to provide anyone who interacts with residents on your behalf with information and education on the Fair Housing Act: Claiming that a discriminatory act was committed by someone on your staff rather than you personally does not excuse you from the potential consequences. Be sure that everyone understands the provisions of the law, and that if they find themselves in a gray area, they talk with you or your attorney before taking action.

Steering Clear Of Single Family Rental Discrimination Issues

The keys to preventing discrimination complaints are to fully understand the Fair Housing Act, seek the advice of an attorney as needed, treat everybody equally and adhere to your legally valid rental policies. That way, you are sure to be fair to all applicants and can avoid the many costs associated with responding to and settling claims.

Source: Forbes