“My reason is that he has more cash to put down upfront, which I deem more important than credit.”
That’s a perfectly valid reason to “discriminate” and not against fair housing. That said 1) you are nuts. A $500 difference in down payment seems far less important than the difference between perfect credit and horrible credit. 2) The thinness of the logic and the fact that you fear that you may be discriminating (and may be projecting that fear to the L/B) makes it sound like you are at risk of appearing to discriminate.
You don’t want to be sued. Even if you win it’s so horribly expensive that it’s almost as bad as losing…
When renting out a property on lease option, am I held to the same legal standards w/ respect to fair housing laws as if I were renting out in a traditional manner? Or is it more like a sale, in which case I can pretty much pick and choose who I want to accept an offer from?
My goal here is not to discriminate. I just want to make sure I have all my ducks in a row before renting a property out (i.e. have my written minimum standards in place before accepting applications). I’m curious as to whether the ‘option’ component of renting out on lease option allows me to circumvent this and be more “subjective” in my selection of an applicant.
Legal vs. Illegal Discrimination - Posted by John Merchant
Posted by John Merchant on April 20, 2004 at 10:40:55:
All the overlay of laws, court decisions, agency rules & bad publicity has given the word “discrimination” a bad connotation…but every landlord or seller had better be very discriminating in who he/she rents or sells to.
Just like a wise parent tells the offspring that they need to be discriminating in their friends and activities, the wise seller/renter also needs to discriminate in who he/she deals with on the RE.
While one cannot legally discriminate based on race, age, religion, etc., etc., the wise landlord or seller had better discriminate for reasons of bad credit, criminal history, skipping out on past landlords, etc…and absolutely nothing illegal about this.
I’ve even seen a court decision where a LL was held to have legally discriminated against a lawyer when the LL refused to rent to same just because the would-be renter WAS a lawyer…and I’m not sure I wouldn’t have done the same thing, or at least written in so many exculpatory clauses that no smart lawyer would have agreed to my terms.
First of all, the Fair Housing rules apply to both renting and selling. Second, the lease/option is not a sale, it is a lease.
HOWEVER, you should not rely on this assessment for other disclosure issues according to state law. So, for example, if state law requires you to disclose X,Y & Z when selling, and A,B & C when renting, give ALL SIX disclosures. It’s always better to err on the side of disclosure and compliance.
Are you saying the rules are looser for selling than renting? Seems to me that if you reject an offer to buy because the potential buyer is female or black or Irish or Jewish or whatever, you would have a problem.
Sec. 802. [42 U.S.C. 3602] Definitions
(h) “Handicap” means, with respect to a person–
(1) Bla
(2) Bla bla
(3) being regarded as having such an impairment, but such term does not include current, illegal use of or addiction to a controlled substance (as defined in section 102 of the Controlled Substances Act (21 U.S.C. 802)).
I’m not a lawyer, I can just cut and paste.
Jeffery (LCLA)
PS, just in case you were wondering: [42 U.S.C. 3602 note] Neither the term “individual with handicaps” nor the term “handicap” shall apply to an individual solely because that individual is a transvestite.
Here is my concern: I advertise my property as “Rent to own, $5k down, $1k per month” or whatever. I receive 20 applications, but none that can pay what I’m asking. I really want to get the place filled, so I lower my standards. Say 1 of the original 20 is white, has horrible credit, but has $4k to put down. Then say there’s another who’s black, has perfect credit, but only $3.5k to put down. Each can pay the rent, but neither could afford my original asking price for the option consideration. Am I ok in choosing the white person in this example? My reason is that he has more cash to put down upfront, which I deem more important than credit.
What if the black person in this example offered to pay 25% more rent per month?..or 50%?..or even double for argument’s sake?
Again my intention is not to discrimate here. Just want to feel confident I am making decisions that are legally sound.
If you get multiple applications then you just choose the one you want to rent or sell to, period! It’s your property and you can rent or sell to whoever you want. I sold or rented to X because I liked X the best out of all the apps I took. The end!
Now what you can’t legally do is say, I rented or sold to X because X is white, black, pink, blue or purple. Or because X was 25 where Z was 55. You can’t discriminate because of race, age or religon.
Bottom line is you should rent or sell to whoever is the most qualified and who you feel is the most likely to pay on time and take care of the property.
I would take X with only $2500 down and has good credit, good income and who is most likely to pay before I would take Z with $5k or $10k down and has bad credit, high debt to income and appears to be a bigger risk. That $5k or $10k down can get eaten up in a heartbeat if they stop paying and you had to evict or foreclose on and especially if they were to trash the property in the meantime before you could get them out!
It’s not the amount they are willing to put down or offer to pay per month. It’s the one who is the most qualified in my opinion that I think has the lowest risk of me losing money and sleep.