Fair housing and screening

Bottom line first. Before you sign anyone, two sets of rules apply: you may not treat applicants differently because of who they are, and you may only screen and charge them in certain ways. Break these rules and the cost can be $2,500 or more per applicant, plus the other side's attorney fees. This lesson is general education, not legal advice.

Fair housing: who is protected

Colorado's anti-discrimination law lists the traits a landlord may not use to turn someone away or to treat them worse. The list is: disability, race, creed, color, sex, sexual orientation, gender identity, gender expression, marital status, familial status, veteran or military status, religion, national origin, and ancestry (C.R.S. 24-34-502(1)(a)(I)). Familial status means, in plain words, whether a household includes children. A group like this is called a protected class.

The federal Fair Housing Act is a separate law that covers race, color, religion, sex, national origin, familial status and disability. Colorado's list is longer, so for a Colorado landlord the state list is the one to learn.

The state law bans more than a flat refusal. It also bans:

• offering different terms, conditions or services to someone because of a protected trait;
• asking questions, orally or in writing, about a protected trait of someone who wants to rent;
• advertising a preference or limit based on a protected trait, such as a listing that says it wants a certain kind of tenant (24-34-502(1)(d));
• falsely saying a home is not available when it is, to keep a person out (24-34-502(1)(j));
• punishing a person for complaining about discrimination or helping someone who did (24-34-502(1)(e)).

There is a safety valve. The law does not force you to rent to someone whose tenancy would be a direct threat to the health or safety of others or would cause substantial physical damage to the property of others. Reasonable local, state or federal limits on how many people may live in a home also still apply (24-34-502(7)(a)). Keep in mind that the law names exceptions for things like certain owner-occupied buildings and housing for older persons, and some exceptions cover only part of the rules. Do not assume you qualify. Ask before you rely on one.

Source of income

Source of income means where the rent money comes from: a job, benefits, or a housing program. Colorado bars a landlord from refusing to rent, or from setting worse terms, because of a person's source of income, including a housing subsidy. It also bars ads that limit applicants by source of income (24-34-502(1)(l) to (p)). A housing subsidy is a program that pays part of the rent for a tenant (38-12-902(1.7)).

Exceptions exist for small landlords. The source-of-income rules do not apply to a landlord with three or fewer units for rent (24-34-502(1.5)(a)). Separately, a landlord who owns five or fewer single-family rental homes, with no more than five rental units in total, does not have to accept federal housing choice vouchers (24-34-502(1.7)). You may check credit, as long as you check every applicant's credit (24-34-502(1.5)(b)). Count your units carefully before you decide an exception applies to you.

Application fees

A rental application fee is any money you charge or take from a prospective tenant for applying, including any nonrefundable fee before the tenancy starts. A refundable security deposit and rent paid ahead are not application fees (38-12-902(5)). The rules:

• You may charge a fee only if every dollar goes to your cost of processing the application. The cost can be your actual expense, or your average expense per applicant (38-12-903(1)).
• Everyone who applies for the same unit pays the same amount (38-12-903(2)(a)).
• You must give a receipt, and a disclosure or itemization of what the fee covers. An electronic receipt is fine unless the applicant asks for paper (38-12-903(3)).
• If you do not use the whole fee, you must send back the rest, making a good-faith effort within 20 calendar days after processing the application (38-12-903(4)).

Portable tenant screening reports

A portable tenant screening report is a report an applicant orders for themselves from a consumer reporting agency (a company that compiles credit and background data). It carries identity, income, address, rental and credit history, and criminal history information, and it shows the date it is current through (38-12-902(2.5)). The applicant can hand it to many landlords.

The main rule: you must accept one, and you cannot charge an application fee or any fee to use it (38-12-903(2)(b); 38-12-904(1.5)(a) and (c)). You may require that the report was done within the previous 30 days, that it reaches you free of cost, and that the tenant states nothing material has changed (38-12-904(1.5)(b)). Before you begin screening, you must tell applicants they have the right to give you one, in at least 12-point bold type in ads, on your website, or on the application, or by telling them orally and getting written confirmation (38-12-904(1.5)(d) and (e)).

A landlord is exempt if the landlord takes only one application fee at a time per unit and refunds the whole fee within 20 calendar days after the applicant declines to lease (38-12-904(1.5)(f)).

What you may consider

• Rental and credit history: nothing older than seven years before the application (38-12-904(1)(a)).
• Criminal history: never an arrest record, and no conviction older than five years, except specific listed offenses such as certain methamphetamine, sex-offender-registration and violent-crime offenses (38-12-904(1)(b)).
• Income: you may check that annual income is at least 200 percent of the annual rent, and you may not require more than that (38-12-904(1)(d)). For a tenant with a housing subsidy, the 200 percent test uses only the part of the rent the tenant pays (38-12-904(1)(c)).

If you deny an application, you must give a written notice with the reasons, making a good-faith effort within 20 calendar days after you decide. If you used a consumer report, include a copy and tell the applicant they can dispute it with the reporting agency (38-12-904(2)).

Penalties

A landlord who violates the screening rules owes the applicant $2,500 plus court costs and reasonable attorney fees (38-12-905(1)). The applicant must give written notice at least seven calendar days before filing. If you fix the violation within seven calendar days of that notice, you pay only a $50 penalty (38-12-905(2) and (3)). For breaking the income-check rules, which also count as discrimination based on income, the $50 is owed up front and the $2,500 is added if you do not cure it (38-12-905(5)). Cities such as Denver and Boulder can add their own rules, so check your city and a lawyer.

Example with real numbers

Marcus rents a house for $1,800 a month. He has two applicants, Priya and Sam.

1. Annual rent: $1,800 times 12 = $21,600.
2. The most income he may require: 200 percent of $21,600 = $43,200 a year, which is $3,600 a month (38-12-904(1)(d)). Demanding $4,000 a month would break the rule.
3. Marcus charges a $50 application fee to both of them. Priya hands him a portable screening report, so he must give her fee back or never charge it (38-12-903(2)(b)).
4. Sam's screening costs Marcus $38. He keeps $38 and owes Sam the remaining $50 minus $38 = $12 within 20 calendar days after processing.
5. If Marcus denies Sam, he sends a written notice with the reasons within 20 calendar days of deciding.