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How to Screen Tenants: 6 Essential Steps to Protect Your Investment

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6 Minutes Read

What’s the first thing you notice when you meet someone for the first time? It could be their hair, face shape, or even their speech. However, you probably won’t know what their middle school was called or what they once dreamed of becoming when they were young. After all, a few interactions aren’t enough for people to fully open up.

 

Similarly, you can’t judge a tenant’s reliability at first glance when renting out a property. Tenant screening is a crucial step in ensuring a successful rental experience. A well-screened tenant means timely rent payments, minimal property damage, and fewer rental issues. However, landlords must carefully navigate tenant screening laws to avoid legal complications, discrimination claims, or privacy violations.

This blog will help you understand how to screen tenants effectively while staying compliant with federal, state, and local regulations.

 

Understanding Tenant Screening Laws

Tenant screening laws protect renters from discrimination and ensure landlords follow ethical screening practices. These laws govern:

  • Fair Housing Compliance – Ensuring all applicants are treated fairly.
  • Background & Credit Checks – Regulating the collection and use of applicant data.
  • Privacy & Security – Protecting sensitive tenant information.
  • Notification & Adverse Action Rules – Requiring landlords to disclose reasons for denial.

Knowing these laws will help landlords avoid lawsuits, penalties, and reputational damage.

 

Fair Housing Laws: Ensuring Non-Discriminatory Tenant Screening

The Fair Housing Act (FHA) prohibits landlords from discriminating against applicants based on the following criteria.

Protected Classes Under FHA

  • Race
  • Color
  • National origin
  • Religion
  • Sex
  • Familial status (having children, pregnancy, etc.)
  • Disability

State and Local Fair Housing Laws

Some state and city laws add extra protections, such as:

  • Sexual orientation
  • Gender Identity and Gender Expression
  • Marital status
  • Source of income (housing vouchers, disability benefits, etc.)
  • Age
  • Military or veteran status
  • Immigration Status

Tip: Always check your local fair housing laws to avoid unintentional discrimination.

Exemptions to Fair Housing Laws

In some cases, landlords may legally deny tenants without violating FHA:

  • Owner-occupied housing: A landlord who lives in a rental property with four units or less may legally select tenants based on personal preferences.
  • Religious organizations: Housing affiliated with religious institutions may prioritize tenants of the same faith.
  • Senior housing: Communities designated for seniors (55+ years old) can legally exclude applicants who don’t meet age requirement.

Red Flag: Even if exempt, landlords must avoid discrimination based on race, national origin, or disability.

 

After learning about essential laws and regulations concerning rental housing, let us help you with tenant screening. In the next section, we’ll explore how you, as a property owner or manager, can take proactive steps to identify and secure the best tenants for your property—ensuring reliability, financial stability, and a positive rental experience.

 

Important Steps for Tenant Screening

Important Steps for Tenant Screening

A structured tenant screening process helps landlords comply with laws while selecting reliable tenants.

Step 1: Set Clear Screening Criteria

Define Minimum Requirements (examples shown below):

  • Income – At least 2.5x the monthly rent.
  • Credit Score – 620+ is recommended.
  • Employment Stability – Minimum 6 months at current job.
  • Rental History – No evictions or late rent payments in the past 3 years.

Fair Housing Alert: Never base decisions on personal biases (e.g., “I prefer single tenants” or “Families with kids might be noisy”).

 

Step 2: Request a Rental Application

Ensure the application collects the following:

  • Personal details - Name, contact info, SSN
  • Employment information - Job title, name of employer, salary
  • Rental history - Past landlords, addresses, contact info
  • Financial obligations - Monthly debt payments such as credit card, student loan
  • References - Professional & personal

Legal Compliance: Never ask about religion, marital status, or national origin in applications.

 

Step 3: Conduct Background & Credit Checks

What You Can Legally Check!

  • Credit score & debt history
  • Eviction records
  • Criminal background
  • Employment verification

Fair Credit Reporting Act (FCRA) Compliance

  • Get written consent before running credit reports.
  • If denying a tenant due to negative credit results, send an Adverse Action Notice with denial reasons.

Use Online Screening Services

 

Step 4: Verify Employment & Rental History

Call Employers & Past Landlords

  • Employment Verification: Confirm salary, dates of employment, and job title.
  • Landlord References: Ask if the tenant paid rent on time, caused damages, or violated lease terms.

Red Flag: If a previous landlord hesitates to answer or gives vague responses, this may indicate past issues.

Step 5: Conduct an In-Person or Virtual Interview

A quick meeting helps assess the following:

  • The tenant’s honesty & personality
  • Whether their income, references, and background match the application
  • Any red flags (e.g., inconsistent answers about job history )

Pro Tip: Meet in person or via video call to avoid Fair Housing violations (e.g., judging based on race or appearance).

 

Step 6: Make a Decision & Send an Adverse Action Notice if Needed

If approving an applicant:

  • Send an application approval letter
  • Request a Security Deposit
  • Set Move-in Date to sign a lease agreement and other relevant documents

If denying an applicant, it’s recommended to “Send an Adverse Action Notice” (per FCRA laws) with:

  • The reason for denial (e.g., unsatisfactory credit score, eviction history)
  • The applicant’s right to dispute the decision
  • Contact details of the credit reporting agency

(Click here to download the template for Adverse Action Notice)

 Legal Risk: Failing to send an adverse action notice may result in lawsuits & penalties.

 

Step 7: Check for Fraudulent Applications

Common Fraud Indicators

  • Falsified pay stubs or bank statements
  • Inconsistent rental history
  • Inconsistent employment history

Tools to Detect Fraud

  • Income verification software (e.g., Snappt)
  • Direct employer verification

 

Step 8: Evaluate Co-Signers If Needed

If a tenant lacks sufficient income or credit, consider requiring a co-signer who:

  • Meets income & credit requirements
  • Signs the lease and takes responsibility if the tenant defaults

Legal Reminder: Co-signers must go through the same screening process.

 

Step 9: Make a Decision & Send an Adverse Action Notice If Needed

If Approving an Applicant

  • Send an application approval letter
  • Request a Security Deposit
  • Set Move-in Date to sign a lease agreement and relevant documents

If Denying an Applicant

  • Send an Adverse Action Notice (per FCRA laws) with:
  • The reason for denial (e.g., low credit score, eviction history)
  • The applicant’s right to dispute the decision
  • Contact details of the credit reporting agency

Legal Risk: Failure to send an adverse action notice may result in lawsuits & penalties.

 

Step 10: Keep Records & Stay Compliant

Maintain records of:

  • Applications & consent forms
  • Background & credit checks
  • Corresponding with applicants
  • Reasons for acceptance/denial

Why It’s Important:

  • Protects against discrimination claims
  • Helps in case of legal disputes

Final Thought: Always follow federal, state, and local laws to avoid legal issues and ensure a fair screening process.

Apart from conducting a thorough screening process, staying informed about state and local laws is equally important. Understanding these regulations helps ensure compliance, preventing unintentional violations or discrimination during tenant selection.

By staying current with legal requirements, you can create a fair, transparent, and legally sound rental process while protecting your rights and those of your tenants.

 

State & Local Laws to Be Aware Of!

1️⃣Ban-the-Box Laws
Some states restrict how landlords can evaluate a tenant’s criminal history. If your property is in one of these areas, you CANNOT:

  • Ask about convictions on the initial application
  • Deny an applicant solely based on a past arrest

Pro tip: Check Your State’s Law- Some cities require landlords to justify denials based on criminal records.

2️⃣Tenant Screening Fees: Some states cap application fees or require landlords to refund unused portions.

3️⃣Eviction Record Laws: Some states limit how far back landlords can look into eviction history (e.g., only the past 3-7 years).

4️⃣Privacy Protection: Landlords must secure tenant data and cannot share personal information without permission.

 

What Happens If You Violate Tenant Screening Laws?

What Happens If You Violate Tenant Screening Laws

Failure to comply with tenant screening laws can lead to:

Civil Lawsuits – Tenants can sue for discrimination.

Fines & Government Investigations – Federal, State, and local agencies may investigate & impose penalties.

License Revocation – Some states can revoke a landlord’s real estate license.

Loss of Rental Income – Loss of rental income & legal fees impact cash flow.

Reputational Damage – Public lawsuits can harm your business.

Bottom Line: Always document the screening process and follow federal, state, and local laws to avoid penalties.

Landlords must adhere to fair housing laws to maintain compliance and avoid potential legal pitfalls. They must ensure that all applicants are evaluated using the same criteria without bias or discrimination. FCRA regulations require obtaining written consent before conducting background or credit checks, safeguarding tenant rights in the screening process.

Moreover, keeping detailed records of applications, communications, and screening decisions ensures compliance and serves as legal protection in case of disputes. By implementing these best practices, landlords can secure reliable tenants while mitigating legal risks, creating a fair and effective rental process.

To make maintenance even more manageable, consider using property management software like ManageCasa. It helps streamline maintenance tracking, schedule inspections, and manage your budget—all in one place. Let us show you how our software simplifies property management and enhances efficiency.

 

Upgrade Your Property Management Experience with ManageCasa

Upgrade Your Property Management Experience with ManageCasa

Your property management operations—whether HOA, COA, rental properties, or a mix—deserve modern tools, unified oversight, and reliable support. We’ve been providing HOA/COA management solutions for nearly a decade, allowing you to focus on building a strong, engaged community.

Why ManageCasa?

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Schedule a FREE DEMO today!

 

 

 

 

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