Q: Our homeowners association requires a lease application for rentals, and we do a criminal background check and a credit check. Recently, a realtor seeking approval of a lease told us that denying a tenant based on credit score is illegal. Is this true?
A: There are a lot of conflicting opinions on this issue, so your question is timely. Community associations cannot deny a renter for illegal discriminatory reasons such as race, religion or national origin. However, a tenant’s financial history can be proper for a lease application provided the governing documents give the association the clear ability to reject a tenant based on a history of financial irresponsibility. The key is clarity in the governing documents and consistency with decisions. The association can review credit scores, but the better approach in our opinion is to look at whether the applicant has multiple blemishes indicating a history of serious financial irresponsibility. These applicants are more likely to be problematic tenants. If an applicant has a single short sale and one past due credit account but is otherwise a law abiding applicant, the Board should consider whether denial of that applicant is really in the best interests of the community. After all, many people who need to rent in this economy may have a short sale or bankruptcy in their past and cannot currently qualify to buy a home. However, if the applicant has a bankruptcy and multiple accounts in collections (which a credit report will show), we think it is proper and legal to deny on that basis provided there is clear authority to do so in the association documents.