Discrimination against tenants and how to deal with these issues

I thought I was not allowed to discriminate against tenants. Is that true?

You are not allowed to make decisions based on someone's status as one of what is called the suspect classifications. They are such things as race, gender, family status, and disability. You can discriminate on the basis that someone is a poor business risk or not right for your ideal tenant mix as long as your reason is not an excuse for illegal discrimination.

What things do I want to think about in choosing among potential tenants?

The following is a checklist of items to consider. Not all of them will apply to all situations. They will, however, help your mind start working in the right direction.

Is this tenant's business compatible with my other tenants' customers and clients? (Would the clientele of an upscale women's clothing store be compatible with that of the tattoo parlor?)
Does this business compete with a tenant I already have or one that I hope to obtain in the near future? (Do you want to rent space to Kathy's Koffee Klatch if you think you might have a chance to get Starbucks instead?)
What are the parking needs for this tenant? (Will this tenant's customers fill the parking lot and cause problems for my other tenants?)
Will this tenant's activities generate large amounts of noise, trash, electricity consumption, or possible negative advertising (e.g., a recording studio or an abortion clinic)?
Will this tenant create an image I do not want? (What kind of reputation will a high concentration of alcoholic beverage vendors at one location give your property?)
Is this tenant likely to outgrow my space fairly quickly and leave? (Depending on your situation, you might want to wait for a more long-term tenant.)
Is this tenant likely to grow to the point that it wants to buy my building in the future? (Again, depending on your future plans, this may be a good thing.)
Is this tenant a good credit risk?
Is this tenant likely to cause excessive wear and tear to the property (e.g., a day care center)?
Is this tenant likely to increase my fire insurance premiums (e.g., a restaurant)?
Is this tenant likely to attract vermin (e.g., a restaurant or seed/feed store)?

Can I screen tenants for bad credit risks, criminal backgrounds, and other such things?

You can refuse to rent to someone because of bad credit or a criminal background so long as you have firm rules and do not apply them on a case-by-case basis. There are many commercial services that provide these kinds of background checks for you or that make them available online. Check with other landlords or property management firms in your town for guidance regarding which resources they find most useful.

If I discover I made a mistake in renting to someone, do I have to let him or her renew his or her lease?

Do not be afraid to refuse to renew a problem tenant. You have to weigh all the headaches of having that tenant against the financial pain of having empty space for a few months until you find a new one.

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