Manager: This guy came in this week and applied for an apartment. He is really obnoxious and I get “bad vibes” from him. Do I have to lease to him?
Me: Why does he give you “bad vibes”?
Manager: He has called every two hours to see if his application has been approved. Then, he puts me on hold every time he gets another call on his call waiting. He yelled at me when I told him that we would not be able to process his application without a copy of his driver’s license. He has asked to see the same two apartments every day for the last week. He told my assistant manager that our staff was incompetent because we could not tell him how many cubic inches the refrigerator freezers have. He wants to see the resumes of the maintenance staff. He made one of my leasing agents cry. This guy is obnoxious and rude.
Me: Did he complete his application?
Manager: Yes. Good credit, no criminal history, sufficient income. I verified the information on the application. He is qualified to be a tenant here.
Me: Do you have a written policy that outlines your admission criteria?
Manager: Yes, and he meets all of the criteria, but I can’t imagine dealing with this guy for the next year. Do I have to lease to him?
Manager: I don’t? Isn’t that discrimination? Don’t I have to treat everyone the same?
Me: Not necessarily. As long as your reason for not leasing to this person has nothing to do with this person’s race, color, religion, national origin, sex, familial status or handicap, (the “protected classes” under the Fair Housing Acts), you don’t have to lease to them.
Manager: If he is in the “protected class” don’t I have to lease to him anyway?
Me: No. You do not have to rent to him just because he is in the “protected class”. Your decision to deny the application is not based on this applicant’s race, color, religion, national origin, sex, familial status or handicap. You may deny the application for another reason. For example, the applicant could be in the “protected class”, but if he refuses to fill out the application completely, you could refuse to lease to him based on that reason. It’s all right as long as you would have rejected someone in the non-protected class for the same reason. However, you might want to document in your file the reason you rejected someone because you may have to defend the decision in the future.
Manager: You mean we can have a “No Jerks” policy?
Me: Yes. Just as you may have a policy that rejects applicants who have a criminal record, who do not have sufficient income, who have bad hygiene or who have bad credit history. The legal test is whether your decision is because of the applicant’s race, color, religion, national origin, sex, familial status or handicap. If your decision is for some other reason, you are not violating the law.
Manager: What do I tell him about why I’m denying his application? Don’t I have to give him a reason why we will not lease to him?
Me: No. As long as the reason is not based on his credit report you do not have to give a reason. I do recommend that you confirm all disapproved applications with a polite letter confirming their disapproval but it is not required. In this situation, you do not have to state the reason for the disapproval in the letter if you send one.
Managers are often surprised to hear that they do not have to lease to people who otherwise qualify to be tenants. The misconception is that they have to treat everyone the same. While is it a good idea to be consistent in your treatment of all tenants and prospective tenants, you do not have to treat everyone the same.
However, if you deny an applicant just because you don’t like them, you run a greater risk of a discrimination claim if they are in the protected class. For example, say you deny the application of a Hispanic female who is in a wheelchair and has three minor children because she is obnoxious and rude to you and your staff. A jury could more easily infer that your denial was based on some other reason (i.e. her disability, her race, her familial status) than the fact that you did not like her behavior.
Be consistent in enforcing the policies, otherwise, it may be hard to prove that you did not discriminate against someone in the “protected class” illegally. The problem with a “No Jerk’s” policy is that it may be viewed by a jury as a pretext for discrimination. In other words, a jury might think that your rejection of someone based on their offensive behavior is just an excuse that you are using to discriminate against them for some unlawful reason such as their race, color, religion, national origin, sex, familial status or handicap.
You should have a written policy that outlines your admission criteria for tenants. You may want to modify the written policy to include a category for “Management Discretion”. Your file should have some documentation that the basis for your denial was in accordance with your policy. If someone otherwise meets your admission criteria but you are not comfortable leasing to them, you may use the Management Discretion category as the basis for rejecting the application. In addition, include notes of the specific conduct that you found to be offensive as well as the basis for your decision.
If you reject an applicant based on the applicant’s obnoxious behavior, be sure that their behavior is not due to a mental disability. The applicant may be in the “protected class” and you may be inadvertently denying their application based on a mental disability, which is reason for their unacceptable behavior.
The same question arises in lease renewals. Sometimes you lease to people who make life difficult for themselves and everyone around them and you wish you had never leased to them. While their behavior may not warrant an eviction, you may decide to refuse to renew their lease. As long as decision to deny the lease renewal is not because of this tenant’s race, color, religion, national origin, sex, familial status or handicap, you do not have to re-new their lease. Like lease applications, you do not have to tell the tenant why you did not renew their lease.
Another factor comes into play in lease renewals. You may not refuse to renew a lease in retaliation for a tenant exercising his rights. Here, you must make the distinction between a tenant who is rude and obnoxious in making legitimate demands and asserting their legal rights and the tenant that is just rude and obnoxious without merit. If a tenant has been obnoxious and pushy but in the context of asserting their legal rights such as requesting repairs, you should probably renew their lease. Otherwise, a jury could easily infer a motive of retaliation. You would have a difficult time proving that the reason for not renewing the lease was based solely on the tenant’s conduct and was unrelated to their exercising their legal rights.
Life is too short to have to put up with certain people as tenants. As long as your reason for not leasing to a person has nothing to do with their race, color, religion, national origin, sex, familial status or handicap, you don’t have to.
Charles Brown is an attorney who invests in real estate in the Austin, Texas area. He is Board Certified in Residential and Commercial Real Estate Law by the Texas Board of Legal Specialization. He can be reached at 512-476-8942.
Copyright 2010 All Rights Reserved
This article is provided courtesy of the REIClub, a club for people with an interest in Real Estate Investing. Whether you want to expand your investments, hold steady and monitor your current portfolio or youre just curious about Real Estate, you are invited to subscribe to the REIClub monthly newsletter “ for free, and become an Insider. You even get a few very nice bonuses. It takes less than a minute to subscribe, so do it now!
American Apartment Owners Association offers discounts on products and services for landlords related to your rental housing investment, including rental forms, tenant debt collection, tenant background checks, insurance and financing. Find out more at www.joinaaoa.org.