Federal Fair Housing Laws and how it affects residential property management companies

Generally the property management company’s policies in regards to tenant qualification are documented in the Tenant Criteria/Qualification Sheet.  This document will state the minimum criteria a renter must possess to rent through the particular management company.  These criteria’s are generally developed by the management company with no input or feedback from the rental owner.   There are multiple underlying reasons why property management companies use a Tenant Criteria Sheet; one of the main reasons being it will protect them if a Federal Fair Housing compliant was filed.  For example, if a single mother with 4 children gets denied for residency, shortly afterwards the single mother with 4 children finds out that a married couple with no children moved in same unit.  The single mother may feel that she was discriminated against because she has children.  Now, if the management company did discriminate against the single mother because she had children then that is a very serious violation of the Federal Fair Housing Laws and Arizona Revised Statues.  The first violation can results in an $11,500 fine and many other penalties if found guilty.  A second violation can result in a fine over a $100,000 and the possibility of imprisonment.  Familial status is one of the seven protect classes according to the federal fair housing laws.

When a property management company gets audited due to a fair housing compliant, the property management company has to prove to the auditor that the single mother was not discriminated due to her familial status, but was discriminated (yes, discrimination is perfectly legal) because of some other reason besides the 7 protected classes.  The management company is legally allowed to discriminate based on any reason except for the 7 protected classes; The Fair Housing Act identifies seven classes protected by the law: race, color, national origin, religion, sex, familial status, and disability.   

Most management companies (at least in Phoenix area) adhere to the tenant criteria sheet to mitigate the risk of a federal fair housing violation.   Adhering to the tenant criteria sheet proves to an auditor that all renters that apply for residency are discriminated equally.  Referring to the example above, let’s say the single mother got denied for residency because of a low credit score, and this single mother feels she was discriminated against and files a compliant.  During the audited the auditor will examine all the records to determine whether all rental applicants that had low credit score were also denied residency.  If the auditor determines that the management company was consistent with acceptance/denial processes then the case will be dismissed.