As the second-most populous state in the country, Texas is booming in domestic migration and rapid urbanization. It’s no wonder the Dallas-Fort Worth area tops apartment construction activity nationwide, with Houston climbing to the sixth spot.
This growth requires diligent adherence to a documented tenant screening process for landlords. It’s important to keep things transparent and fair to build trust with your tenants.
Aiming to minimize legal risks is only natural. So, we’ve compiled this essential guide to help you navigate the nuances of Texas tenant screening laws. Let’s dive in!
Understanding the Texas Tenant Screening Process
Ensuring that landlords choose reliable tenants is of high importance. Besides, an unfit tenant may cause sleepless nights of negotiations, late rental payments, and costs incurred to repair property damage or evict.
Fortunately, there are laws that seek to establish an open and equitable leasing process:
- Fair Housing Act (FHA)
- Fair Credit Reporting Act (FCRA)
These rules can help you make informed decisions to protect your residential properties from legal pitfalls. With fairness and compliance, you can cultivate positive landlord-tenant relationships.
Fair Housing Act
Under the Fair Housing Act (FHA), landlords are prohibited from discriminating against tenants in housing transactions based on race, nationality, religion, sex, disability, and family status.
- Avoid any discriminatory practices
- Follow the landlord's tenant selection criteria to evaluate all applicants
- Provide appropriate accommodations for persons with disabilities
- Allow service animals even if the property has a no-pet policy
These guidelines encourage inclusivity. If you want to keep mutual respect between you and your tenant, you must remain open and honest about your rental agreements.
Fair Credit Reporting Act
The Fair Credit Reporting Act (FCRA) protects the information gathered by a consumer reporting agency including credit bureaus, health records, and tenant screening services. The key requirements for landlords are the following:
- Written consent from applicants for background checks
- Issuance of adverse action notice in case of disputed inaccuracies
Information collected from a consumer report cannot be given to anyone without a purpose outlined in the Act.
The Importance of Tenant Screening in Texas
As a landlord, tenant screening will help you identify responsible and reliable renters. Tenants who are willing to sign longer leases or extend them can lower turnover and vacancy rates for you. Other benefits involve:
- Minimal property damage and delayed payments
- Protect your property investments and property value
- Increased rental property security
- Prevent eviction
Assess the tenant who will most likely fulfill lease obligations and rental agreements to effectively maintain your rental property.
The Tenant Screening Process
Texas necessitates several critical steps in tenant screening. Here’s what landlords should know:
1. Written Rental Application
Landlords should require rental applications from potential tenants for review. The document gathers essential information from employment verification and rental history to personal reference.
2. Application Fees
With the specific guidelines concerning rental application fees, landlords must:
- Explicitly communicate the rental application fee
- Explain whether a fee is refundable if an application is not processed.
3. Screening Laws
A landlord must disclose the tenant selection criteria for tenant screening to the applicants to ensure they understand how they will be evaluated and assessed.
4. Written Consent for Screening
Before performing a background check, a landlord must secure written consent from the applicant. Failure to comply may result in legal consequences and violation of FRCA.
Tenant Background Checks in Texas
A detailed tenant background check confirms the prospective tenant’s rental and financial ability. Let’s discuss the primary factors needed:
1. Criminal History
Criminal background checks track potential safety risks for landlords and other tenants, which can reveal past offenses related to theft, drug activity, or violence. This typically covers felonies and serious misdemeanors. Texas law allows landlords to consider criminal history as long as they comply with fair housing laws.
Other residents and the surrounding community can sleep at peace knowing that they have a safe living environment.
2. Eviction History
Eviction history offers insight into the previous leasing behavior of the applicant that indicates their past rental payments and lease obligations. This can also involve failure to follow rules or disputes with landlords.
Landlords often look at past evictions that have occurred within 7 to 10 years. The whole process assesses the risk of potential evictions for better rental leasing decisions.
3. Financial Health
Financial stability is a crucial factor in determining whether a tenant can maintain rental payments consistently. Reviewing outstanding debts or bankruptcies can signal an applicant’s level of credibility and financial accountability.
Landlords frequently check the tenant’s monthly salary, employment status, credit score, and debt-to-income ratio. A tenant with at least 2.5 to 3 times the rent price can guarantee affordability. This reduces the risk of any type of financial strain that could lead to eviction.
4. Rental History and References
How do you know if the tenant has violated previous rental agreements? Conduct a rental history check and review references to determine any damage caused to former rental properties or missed rental payments.
Aside from rental history, landlords also assess good communication with previous property owners, adherence to community rules, and proper property care. You’ll be assured that the tenant is responsible enough for a successful lease agreement.
5. Income Verification
Confirming the tenant’s income ensures they are financially stable to maintain rent payments without hardship.
To ensure job stability, a landlord must review pay stubs, bank statements, and tax returns. Self-employed applicants may be required to provide proof of business tax returns and contracts.
Verifying income is key to minimizing the possibility of missed rental payments.
6. Credit Check
Managing finances is important for landlords because it allows them to gain valuable insight into prospective tenants' recent debts or foreclosures. A credit score of 650 or above is generally ideal for landlords to proceed with a tenant application.
Any financial difficulties may increase the risk of late payments, so conducting a credit check ensures that your tenant is more likely to pay rent on time.
Texas Landlord Tenant Laws
The Texas Property Code sets specific guidelines for tenant screening to assist landlords with a fair and transparent procedure. These requirements include:
1. Written Tenant Selection Criteria
Establishing tenant selection criteria with written procedures ensures that all applicants are evaluated based on consistent, clear standards that prevent discrimination.
2. Legal Compliance
Complying with both federal and state laws can govern your tenant screening process more efficiently. This prevents potential lawsuits from both parties while maintaining a fair process for all applicants.
3. Application Fees Disclosure
You can avoid any misunderstandings by being transparent with rental fees associated with your property. If a Texas landlord charges an application fee, they must disclose the amount to the tenant.
Avoiding Common Screening Mistakes
Even reputable landlords commit errors along the process of screening, but there’s a way to prevent that. Let’s look at the common mistakes you need to avoid:
- Failure to Provide Written Criteria
- Ignoring FHA or FCRA guidelines
- Inconsistent Applicant Evaluation
- Lack of Adverse Action Notices
To prevent these issues, Texas landlords should utilize standardized criteria and automated techniques to ensure compliance.
Finding the Best Tenant for Your Property
Identifying prospective tenants that fit the property requirements will reduce the likelihood of future issues. By following and understanding Texas landlord-tenant laws, you’ll be able to promote a harmonious living environment for everyone involved.
That is why partnering with Red Team Real Estate for expert guidance can help you with managing tenant screenings. Since 2012, we’ve been dedicated to providing client-centric service for property management.
Contact us today and make the right choice for your property!
Additional Resources
Is Texas a Landlord Friendly State? Essential Insights for Investors
