Should Property Owners Approve Tenants? 3 Risks Revealed

When managing rental properties, one thing often debated is whether or not to allow an owner to review a rental application or background check before accepting an applicant. And, should property owners approve tenants?

The answer is a resounding NO.

Being in a service-based industry the concept of telling a client “no” is a difficult one. However, it is our duty as property managers to protect our clients even when that means protecting them from themselves.

Risks of sharing the rental application with your owner

Here are the risks you create if you share tenant screening applications with owners:

1. Data security risks

An application often contains a trove of sensitive and private information, including birthdays, social security numbers, ID numbers, children’s names, and more. Sharing of this information via electronic means without proper high-end data encryption is not only risky and it can even be illegal.

2. FCRA violations

The Federal Credit Reporting Act is a series of Federal Laws that dictate how and when things like credit reports can be run and to whom the information can be shared. The FCRA prohibits the sharing of consumer credit reports to persons or entities that do not have the proper vetting. Violations of this act hold strict penalties and fines.

3. Fair Housing Violations

Application information reveals details about a renter like Gender, National Origin, Race, and Familial Status that are protected under federal law.

What if the owner makes a biased statement based on the name of the applicant? This conversation (one in which you immediately should cancel your listing or property management agreement with the owner) will be much harder than just a simple “no” would have been in advance.

Even if the owner doesn’t make this egregious mistake and you find a legitimate and legal reason to decline the applicant later, the applicant always has the ability to file a HUD complaint.  In the event of a Fair Housing complaint, your defense may be challenging if the decision to decline came after your disclosure of information to the owner.

What if an owner insists that you show them renter applications?

You need to ask yourself the basic question: What information are they looking for on an application?

Without a doubt, the owner is looking to calm their fears about the unknowns of a new renter living in their investment.

There are much better and safer ways to calm their fears than handing over a sensitive application.

Review your rental criteria with owners in advance

Show and discuss your written rental criteria with your owner in advance.  Make this part of your “onboarding process”.  Though unlikely, if you reach an impasse with your owner, it’s better to do it now than after you have spent countless hours and hundreds of dollars on marketing.  

Ultimately the owner’s concerns should be based on the quality of the applicant. Making sure they understand how and why your minimum rental criteria significantly reduces the risk of placing an unqualified tenant is the best way to calm owner fears.

Share your legal expertise

Get well-versed in local and federal laws regarding applicant protections. More and more jurisdictions are updating laws that create more protected classes. Things like a source of income, felony charges, sexual orientation and others are protected in cities across the country.

Many owners are simply unaware of the laws and risks associated with breaking them.

Using Rentzap to find quality tenants

Rentzap streamlines the process of finding quality tenants with a fully managed screening process. By applying a uniform set of rental criteria, Rentzap ensures that you find the best tenant for your property. Each prospective tenant undergoes a thorough underwriting process, giving you confidence in your tenant selection.

Wrapping up – sharing rental applications

Property management companies should be aware of the significant risks associated with sharing rental applications and background checks with property owners. While it may seem like a harmless act of transparency, it can lead to severe consequences and potential fair housing violations.

As property managers, you have a responsibility to protect your clients, even if it means making difficult decisions that may initially be met with resistance. Educate property owners about the rental criteria used to screen applicants. Demonstrate your expertise in local and federal housing laws. This helps alleviate their concerns and ensures the privacy and rights of prospective tenants.

Ultimately, the short-term discomfort of saying “no” to an owner’s request to review applications is nothing compared to the long-term legal and financial repercussions that could result from sharing sensitive information. By standing firm in your commitment to ethical and lawful practices, you protect your clients and your businesses.

FAQ property owners approving tenants

What is a property manager’s first responsibility to the owner?

A property manager’s first responsibility to the owner is to effectively manage rental properties in a way that achieves the owner’s goals, primarily maximizing the financial return on their investment.

What is a manager of the property?

A property manager is responsible for overseeing and managing a rental property. They act on behalf of the owner. Their tasks include handling tenant relations, property maintenance, and financial operations. They ensure the rental unit is well-maintained and profitable.

How do you handle multiple tenant applications?

To handle multiple tenant applications, review each application systematically. Use a consistent set of criteria for all applicants, such as credit score, rental history, and income verification. Prioritize applications received first, provided they meet your established criteria. This approach ensures fairness and compliance with housing laws.