Tenant Screening Discrimination – Doug Quattrochi

Best Practices in Tenant Screening

Speaker:

Douglas Quattrochi – Doug

Moderator:

Richard Merlino – Rich

[Start 0:00:00]

Doug: We want to make sure that every meeting, you walk away with different aspects of landlording, different and new knowledge, and today, we want to cue up next month’s meeting. Next month we’re going to do tenant screening workshop, and today, I want to give you some tenant screening tips.

I want to end right on time because Councilor Moe Bergman is here to talk about an initiative of the city, and it will break up into networking. You could talk to the councilor, the judge, or Tyler.

            All right, so let’s talk tenant screening. Why do we want tenant screening? Here’s our goal. “A happy person with lots of money, who can fix minor issues and alert you to big issues while they’re small, who will live in your building forever, loved by everyone there until you ask them to leave, and then will go immediately having paid you everything you asked.”

            That’s the kind of tenant we want, right? How do we get there? This is a very short process, market department, screen the tenant, don’t get sued, sign the rental agreement, and ongoing screening, which I will leave you with this new idea potentially.

Let’s start with don’t get sued, though. We have a list of protected classes, Federal law and Massachusetts law. You cannot turn someone away because of there being in one of these classes. You already know this. You can’t turn someone away because they’re a different skin color, because they’re male or female, because they’re from a different country you don’t like. Or if you’re in Massachusetts, because they’re married or not, or because they receive public assistance, right? We all know the answer to the question, do you take Section 8, is, “Yes, of course, I do.”

Rich: Yankee fan.

Doug: Yankee fan is not on there. If you don’t want to rent to a Yankee fan, you say, “No Yankees fans.” That is allowed. But let’s talk about this last one here, gender identity. This is kind of the newest thing in Massachusetts. The Suffolk University, Suffolk Law did a study. They tested a whole bunch of us landlords around. They said more than half of us have screwed this one up. We inadvertently offered transgender people worse deals than we offered what are called cis-gendered people. Cis-gendered people are they are male and they feel male. They are female and they female. Transgender people are some combination or some transition, right? Let’s just talk about gender identity here, and I will give you some more business tips.

            This is not transgender. That’s Conchita Wurst, winner of Eurovision a couple of years back. How many people have seen this person? Only a few. You guys, this is drag. This is theater. You might have someone apply that looks like this, this is drag and it’s different.

These are actual real transgender people. Laila Villanueva and Logan Beck Ireland, they made CCN a couple of years ago. They’re both in the armed forces. Can you tell which one is transgender? Both of them. Correct answer. Thank you for reading the newsletter. Yes, they’re both transgender. Laila started life out male and is now female, and Logan started out the other way.

Transgenders are really confusing sometimes because although these people look like you would expect cisgender, they look completely male or female, there are lots of people in the Commonwealth of Massachusetts who are non-binary is the term. If you can’t tell what they are, don’t try. It doesn’t matter. It’s going to land you in discrimination lawsuit.

They’re holding out pictures. They started life as girls and they look like in some cases pretty masculine, right?

When in doubt, you should use pronoun that indicates you’re hip to transgender. Use their or they’re if not sure if it’s a him or her. Some people might tell you they prefer “zim” or “zir.” I do not know if you have heard that, but if they say that, you say, “Okay, I will do that. I will try to refer you with that.” But if you’re in doubt, their or they’re, gender neutral.

Beware of this, if somebody applies at your apartment, They’re a small percentage of the population, but they’re out there and the odds are good that some of us, probably based on the stats I ran, right, 10 of us have transgender tenants we might not even realize it based on the number of units represented in this room. Just be aware of this and don’t screw it up.

To Learn More, this is feature length article in the May 2017 newsletter, and we’ve got all kinds of cool things in there, as well as the stats and the history. Next month, we’ll run practices. We have an interactive screening workshop. You don’t have to participate, but we’re going to break up into little tables, and if you want to play the role of landlord or tenant and you want to try to dodge these discrimination mines, we’ll have a lot of fun. So please try to come next month.

Okay, that’s the warning. Please be fair.

Let’s talk about the numbers. That’s really what it’s all about here, we’re in business. We have a picture of our tenant screening scoring system. This is a member’s only form on the website, but it basically says–you can’t read it— sufficient income (?) gross income divided by rent is greater than 3.6. Counting just a single earner, 20 points, so that’s a strong single earner. Counting all earners, 15 points, less and less 10, 0 for each category. Credit, criminal, housing history, income, expenses, and whether they have cosigners. It’s possible to give a number to an application, and I encourage you to do that because somebody says, “Well, they discriminate against me because I’m nonbinary, transgender.” No. It’s because you’ve only got 60 points and you needed 80 to qualify. Get out of jail free, right? Question or comment?

[0:05:23]

Brian: They may not be able to read in the back, but under bankruptcy, it says, “divorce or medical bankruptcy?

Doug: Yes.

Brian: And they lose 5 points for that?

Doug: Well that’s what it says on our default scoresheet, yes.

Brian: Is divorce a marital status that we can’t discriminate against?

Doug: Possibly. I would like to hear what an attorney has to say. The intent of this form is that regular bankruptcy is more damaging and if it’s divorce or medical because that’s common, it will cost in terms of your application. The intent is to be nice, but the discrimination law doesn’t care if you’re nice, right?

If somebody wouldn’t mind, ask your attorney next chance you get. Is giving fewer demerits to a divorce or medical bankruptcy possibly bad? Let me know. Anyways, the idea is to assign points to people, so that you have an objective measure.

Let me give you some real brass tacks tips as well. Phone screening is hugely useful. Now I know you don’t all do it, but I recommend you adopt something like this. This is a copy of what’s on our website in the members’ only form. When somebody calls and says, “Hey, I’m interested in this apartment you have on Main Street.”

You ask, “When you’re looking to move in and why are you moving? Do you have first month’s rent and security because I need those to move in?”

If they say, ‘No, I don’t have it.” You say, “Call me back when you do.” You can talk more. I know some folks do talk a lot more and get all the details, but that’s enough there. That’s a business reason. If they don’t have first and security, you can say, “Oh, let me know. I’m not going to rent to you now; maybe in the future.”

You ask over the phone, “How is your credit score?” Ask an open-ended question. Don’t say, “You have a score of 750 because they’ll what the right answer is.” They’ll say, “Yes, I do.” Say, “How is your credit score?” “Well, to be honest, not so good.” You get more information that way.

What kind of recommendation would you current landlord would give you? We’ll talk about that.

How many people will be living with you? Useful to know. You get the total.

What’s your source of income? Remember, we learned years ago not to ask for paychecks. Show me your paystubs, but you can ask what do you for work? Yes, I think you can.

Male Audience 1: [crosstalk 0:07:27] subsidized portion.

Doug: Which is great, Section 8. Fine. You’ll pass the income screen.

Male Audience 2: Be careful when asking [unintelligible 0:07:31].

Doug: It’s a good point. All right, remember your intent doesn’t help in the discrimination lawsuit. You can ask what’s your household gross, right? We’re in agreement on that? All right, that’s safe. Maybe don’t do that first one but ask what’s your household gross.

How many smokers are in your household? Smokers are not a protected class. How many pets do you have? Just information, not saying or doing illegal with that. They might volunteer they have an emotional support animal or service animal in that section, but you’re asking about pets.

I always put this in there. Everyone will say, “That’s stupid. Nobody has had a waterbed for 4 years.” Well, do you plan to keep the waterbed or an aquarium, or anything that could leak? Useful.

If you don’t like their answers, you can say, “It’s not likely your application will pass. You might want to look somewhere else.” Or you can say something more blunt, “I’m sorry, we just don’t rent to smokers. You’d be happier living somewhere where you can smoke indoors in the winter. I know you promise to smoke outside, but it’s going to be though. You’d be happy elsewhere.”

If you like their answers, you give them their next steps, a tour or application. Tell them what to do.

Rich: Can I be obnoxious and jump into?

Doug: Yes, please.

Rich: One thing to be careful, not in that example, but just in general, we’re saying, “You’d be happier living…” is there something called steering where we want to try to stay away from, so that’s just something to be cognizant.

Doug: Well, of course. You’d be happier living with other…, you know.

Rich: Right. In that example, it’s fine. “You’d be happier living in a smoke-filled room.”

Audience: [laughter]

Rich: Not a protected class, but that’s just something to be concerned about.

Doug: Of course, yes. Definitely. Good interruption, thank you.

Credit—we’ll make these slides available. We have a recommendation on the site for small landlords, but search for which tenant screening service is best and you can see, “credit.” Can I just get a show of hands. How many people rent to tenants with bad credit you don’t even check because you just figured everybody has bad credit.

Rich: That’s two different questions.

Doug: How many people will rent o bad credit? Okay, put your hands down. Thank you. How many people don’t even check credit? Few people. Okay, a lot of us look at credit, so there you go. Recommendations on the site.

            Criminal. I highly recommend you do it. It’s easier than ever to get this data. You register once on the CORI website. It’s $25 per person. We’ve got a step-by-step thing on the website. Landlords can get more information themselves than third-party resellers because of the way the law works, so do it yourself.

Eviction. This is free at MassCourts.org like the e-filing system. It was a huge improvement to get these records online. Do not assume just because someone appears at MassCourts.org that they are a bad person. Get both sides of the story and figure out what happened, but it’s definitely useful information and it’s free. You should do that first or early.

[0:10:17]

Housing. You want to look at average like the residents, look at that. the animated gif is working.

“You’re lying. What makes you lie?” You can get the current landlord’s recommendation, but current landlords might have an incentive to sing their tenants praises so you take them and stop the tenant being that other landlord’s problem.

The best thing to do is to ask for the previous landlord’s recommendation if you can find them.

Here is another list of questions you can ask them. Let’s see if I get in trouble for discrimination here. What address did they rent from you? What are the dates of residency? Approximately, what was their rent? Did the tenant ever give you or other tenants heartburn? If yes, please explain. That’s probably –only if I eat them.

Audience: [laughter]

Doug: Do not eat your tenants. These are very concrete. Did you ever notify the tenant that they’re late on rent? Did you ever give the tenant an eviction notice? Sometimes, different things, right?

            Did you withhold from a security deposit? Did they move out suddenly or without notice? Did they leave owing you money? Would you rent to them again? This is also gray areas. Some people might not answer to that. If you got a corporate landlord, they might not answer any of that except dates and numbers.

            Private landlords, small landlords, I’ve always called the previous landlord, “Thank you all. “You’ve opened nice enough to answer my call and answer my questions, and I will do the same for you.” Call around if they rented from a small landlord.

            If you really like to investigate people, meet them at their car. Look at it. Is it well maintained? Is it full of stuff in case of a hoarding problem? What does that car cost per month? Is that consistent with what they’ve stated on their application? Can they afford that thing?

Bring the application into their apartment. Is the place damaged? Did they do it? Did they have undisclosed pets or undisclosed minors living with them that should have been listed? Not that you can—

Male Audience 2: That’s a gray area.

Doug: It’s a gray area, right?

Male Audience 3: Take a copy of their license and verify the addresses.

Doug: Yes, absolutely good idea, and talk to neighbors, too, see if this person is noisy or do they follow the rules or what.

Rich: Undisclosed minors. Is that what you’re concerned about, Brian?

Brian: Well, accessing somebody else’s apartment [crosstalk 0:12:21] you are.

Doug: Behind you.

Brian: Well, it’s—

Rich: I’d be suspicious if somebody like forgot one of their kids like how does that make that kid feel?

Audience: [laughter]

Brian: Well you got to have a darn good reason to show up in someone’s doorstep and say, “Let me see your apartment,” because if that’s what you really want.

Rich: Sure.

Brian: But you need to have some valid reason for being there.

Rich: That’s true. If you want, I’ll tell you later how I do it.

Audience: [laughter]

Rich: And they’re always happy to see me.

Brian: Ding! It’s later.

Rich: Yes, it’s not later, yes.

Brian: Okay.

Doug: I put this up here. I’m going to roll through this. I put this up because I know people in this room actually do go to people’s houses and their cars and talk to their neighbors. I just want you to consider it of course you got to have legit reasons for doing that.

            All right, you can look at expenses. Their income is usually three times their monthly rent is what you look for, but that’s approximation. Sometimes people insist they can afford it, and they can document their child support, car payments, utilities, and everything. They might be able to afford it even if they don’t pass that income ratio. Just keep that in mind. Some people are actually pretty tight with their finances.

You can negotiate the rent up or down. Be very, very careful here. If they have more pets than you planned on, you can’t charge separate pet rent but you might be able to say, “Look, I’m going to offer this apartment to you. I listed it for no pets at a certain price. I’m going to offer it to you with your pets at a higher price.” You don’t put it into lease as separate rent. Just negotiate higher. It’s not pet rent. Just negotiate higher.

More people—

Rich: And Judge Horan said that was okay when she was here.

Doug: Yes, and [unintelligible 0:13:56] jurisdiction and she could change her mind in your particular case.

Male Audience 4: [unintelligible 0:14:01]

Doug: Yes. More people, you should never charge for extra kids or anything, but if you listed, anticipating four people will live in the unit and they show up with eight and that’s per the sanitary code and that fits, you can say, “Look. I’m happy to have all of you. I just think there would be some more water usage or utility usage, more wear and tear. I think it would be fair to charge a little more rent. What do you say?” A lot of people might agree to that.

            Think about it. Think about what your expense is going to be in there. Make sure that you have a number that works for you and them.

At the end, adopt all their points. Be objective. If they pass, tell them they can provide move-in monies. That’s the final test. If they do personal checks, if you permit that, those checks will have to clear and that can be a couple of weeks sometimes.

If they’re marginal, don’t tell them no specially if you don’t like them, specially if they might fit in into protected class. Tell them how to get more points. Tell them how to be successful on your application. Do they need a co-signer? Do they need more documentation? If you engage in dialogue, that helps you avoid that discrimination claim. It proves that you’re business-minded.

[0:15:01]

If they’re not close, you can tell them, “Hey, you’re not really close to passing,” but still tell them how to get more points. That’s the fair thing to do. They might surprise you.

Okay, in the process here, we talked about these steps. I want to leave you with this last idea of ongoing screening. “Each renewal is a chance to part ways or solidify your relationship. Has their family status changed? Has their job changed? Have they got better credit because they’ve been living there for so long and their rent is reported or something like that?

You could say something like, “Congrats on your upcoming anniversary! If you have more income ore better credit now, you can submit a fresh application to see if you qualify for rent reduction. I like you as a tenant. I’ll give you lower rent because now you’re making more money, you’re more stable.”

Sometimes, people get much better jobs and they’re looking poised to move into Boston or somewhere else and you don’t want them to do that, so you try to keep them.

You’d also say something like, “Hey, I’m sorry to hear about XYZ leaving. Based on the last information we received from you, you may now have trouble affording the apartment because they were a major part of your household income. Let us know if you’d like to be released from your lease or if you have updated income information, or you’d like to take a roommate.” Right?

Male Audience 4: Doug, you’ve got to change on the second bullet point. When you talk to somebody about rent reduction, you say, “Instead of a 10 percent increase, it’s only going to be 5.”

Doug: Sure, you can do that, too. But then if they move out and go to Boston, they’ll say, “I didn’t warn you.” If somebody gets a really better job.

Male Audience 4: The average is [crosstalk 0:16:18].

Doug: I’m just giving you stuff to think about. Just giving you stuff to think about. All right, that’s the idea here. It’s a lot of times we get the tenant in the apartment and we just let them coast forever until there’s a problem that you might be able to anticipate that a little. Whether you’re aggressive on the rent raises or you’re aggressive in keeping tenants for the long term, you have choices.

            Okay, that’s my screening piece. I will definitely see you all [unintelligible 0:00:00] is necessary. I will see you all next month for the tenant screening workshop.

[End 0:16:49]

This is part of the Worcester Rental Real Estate Networking and Training series.

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