Tenant Screening Regulated by Federal Law?

For rent
  • A new lawsuit out of Massachusetts had a ruling last week that eventually could affect Texas landlords.
  • The court ruled that a tenant screening company that provided a single credit score number was subject to the Fair Housing Act.
  • As a result, a lawsuit against the screening company and landlord is allowed to move forward.

There was a pretty interesting lawsuit out of Massachusetts last week that caught my eye. You may be thinking – “What in the world does Massachusetts have to do with Texas or Michigan?” Well for one, Vineyard Vines makes some great clothing that looks good no matter what state (physical or mental) you are in. And for two, the decision from this lawsuit could affect multifamily tenants throughout the country.

Obviously because it is from a Massachusetts federal district court, it does not directly impact Texas landlords. But the issue could be a common one that influences courts or plaintiffs here. As a result, I think it’s a topic worth discussing. So lets do that.

Massachusetts Court Rules on Tenant Screening Algorithm

So the basics of the case are this – a Boston area property management company was using an outside company SafeRent Solutions LLC to conduct tenant screening. And then using that information to determine whether to rent an apartment to potential tenants.

SafeRent used an automated algorithm in its screening to determine if a tenant was qualified for the apartment community. This provided a SafeRent Score that was based on several factors, including credit history, bankruptcy records, past due accounts, payment performance, and eviction history. But allegedly it had no separate human input. It was simply a computer algorithm.

Nonetheless, both the landlord and SafeRent were sued as part of a class action lawsuit. In that lawsuit, the Plaintiff alleged that SafeRent’s algorithm is calculated in large part on factors that produce disproportionally lower SafeRent Scores for Black and Hispanic applicants. And the factors it considers do not necessarily show higher risk tenants. As a result, it violated the Fair Housing Act.

In response, SafeRent argued that an algorithmic screening program is not subject to FHA standards. It argued that it is simply an algorithm it provides to landlords to make their decision. SafeRent does not make tenant decisions itself.

Thus far, SafeRent’s arguments have not been persuasive to the Massachusetts court. The Court said that there was enough evidence in the Plaintiff’s petition to show that SafeRent provided a unifying score based solely on its algorithm that the landlord could not change. And SafeRent knew that the landlord solely relied on that score to make the rental decision.* As a result, SafeRent is subject to the FHA and the plaintiff’s lawsuit, therefore, is allowed to continue.

What Does this Ruling Mean for Texas Landlords

So what does this all mean? Should Texas landlords care? Well yes. And no. And it means a lot. Or maybe nothing. Does that clear it up?

First, this ruling is from a Massachusetts federal district court. Massachusetts courts have no precedential value on Texas courts. As a result, technically this decision does not mean anything for Texas landlords.

But its not unusual for courts to look to other districts for guidance and reasoning. If a similar case came up in Texas, therefore, a court could possibly look to this Massachusetts decision. It is, thus, potentially influential in a Texas court.

And, of course, the defendant can appeal the decision. And if that happens, then the Circuit Court and potentially the Supreme Court could give a ruling on the issue. The Circuit Court decision would not be direct precedent, but it would be even more influential than the District Court decision. And, of course, a Supreme Court ruling would be the law of the land.

The most likely reason that Texas landlords should take note, however, is this decision is very likely to give incentive to other plaintiffs around the country. And perhaps right here in Texas. And that could mean Texas landlords are sued for violations of the Fair Housing Act for engaging with some tenant screeners. At the least, its something that landlords should be aware of.


*This was a motion for summary judgment.

Share this Story

Related Blogs

Subscribe to our monthly newsletter