‘Clean Criminal Background’ in Ads? Expect to Be Sued
While the Department of Housing and Urban Development (HUD) has federal oversight over Fair Housing Act violations, property managers and investment homeowners often have more trouble with another group – private law firms. And those private law firms are currently targeting property managers and investment homeowners that ban any potential renter with a criminal record.
The Fair Housing Act doesn’t specifically deny a landlord the right to reject an applicant based on a prior conviction; however, HUD issued a statement saying a blanket policy to deny felons can have an impact on minority populations under “disparate impact.”
Landlords who have a “no criminal background” policy – especially those who include that information in their advertising – are being sued, and when the lawyers issuing the lawsuit cite the HUD update on criminal background checks, these landlords can find themselves in a difficult – and legally expensive – position.
“Private law firms essentially test whether a property management company adheres to a memo issued by HUD (Department of Housing and Urban Development), and if in their opinion it does not, they file a lawsuit,” said Florida Realtors CEO Margy Grant last year after a single law firm filed over 48 lawsuits against property owners who had blanket no-criminal-background-check policies.
In short, a no-criminal-background policy isn’t worth the risk. Any money saved using a thorough vetting system could be lost instantly if an aggressive lawyer files a lawsuit.
“Unfortunately, it doesn’t matter if a rental policy purposely discriminates or not,” says Grant. “With HUD’s recommendations in hand, a law firm can file a lawsuit. And even if a property management company has done nothing wrong, it’s always expensive for a brokerage to defend itself in court.”
What is disparate impact?
Disparate impact is an act that may not discriminate against a single individual under the Fair Housing Act but is deemed harmful to a minority group overall. According to HUD, some minority communities have a higher percentage of members convicted of a felony, and that makes blanket policies against all felons discriminatory under the Fair Housing Act.
Things to consider when developing an in-house rental policy
Overall impact - Does the policy have a disparate impact – an action that may not discriminate against a specific applicant yet still impact a group protected under the Fair Housing Act? Is there a distinct impact on a group of people because of their race or national origin, for example? HUD recognizes that this is fact specific; however, it points to several Department of Justice statistics showing that blanket denials based on criminal history have a significant impact on African Americans and Hispanics.
Justified policy - A housing provider must show that its screening policy is justified, which HUD defines as “necessary to achieve a substantial, legitimate, nondiscriminatory interest.” The policy can’t be speculative or hypothetical, meaning evidence must exist that supports the screening policy. While protection of other residents’ safety and their property may be considered, the housing provider must prove, through “reliable evidence,” that the policy serves that purpose.
Alternatives - Is a less discriminatory alternative available? Examples will depend on the details of the applicant’s background. However, HUD mentioned the length of time that has passed since an applicant’s conviction, a good tenant rental history before or after the conviction, and the circumstances surrounding the criminal conduct.
The National Association of Realtors® (NAR) offers additional screening information on its website.
Rental operating recommendations to avoid lawsuits
Create a written policy with standards on how to evaluate all individuals; evaluate each individual on a case-by-case basis.
Document research done and decisions made on individuals, and periodically review the information to ensure the policy is a) being followed and b) not having an unintended discriminatory effect.
Delay evaluating an individual’s criminal record until last – only after all financial and other qualifications have been met. This helps avoid any unintentional discriminatory effect and minimizes costs and efforts.
Don’t make decisions based on prior arrests that did not result in a conviction.
Remove application questions that ask about arrests without convictions. While a landlord may ask about prior convictions, it should be clear that each applicant is evaluated on a case-by-case basis.
A blanket restriction against any particular conviction or all individuals with a criminal record will likely be viewed as having a discriminatory effect, therefore evaluate each individual applicant on a case-by-case basis. Take into account mitigating and surrounding factors.
Do not apply criminal record policies or practices in an inconsistent manner. This may subject a housing provider to a claim of intentional discrimination.