Source of Funds & Rentals: Breaking Down What This Means for YOU
August 17, 2020
July 1st is always an eventful day for us on the Virginia REALTORS® Legal Team, as most of the new bills that were passed by the General Assembly in the spring go into law on that day. This year there were several bills affecting the real estate industry, but a couple of those bills have led to most of the questions we’ve received on the Legal Hotline. One of those hot-button bills was legislation to add source of funds as a protected class under Virginia’s Fair Housing Law. General Counsel Laura Farley has already covered how that bill affects residential sales, so today I’ll take a look at how the law affects landlords and property managers.
The bill defines “source of funds” as “any source that lawfully provides funds to or on behalf of a renter or buyer of housing, including any assistance, benefit, or subsidy program, whether such program is administered by a governmental or nongovernmental entity.” In the property management world, the program that you probably think of first is Section 8. However, the definition is much broader and can cover any type of assistance or subsidy.
We’ve gotten several questions along the lines of, “Do I have to accept all applicants who are using Section 8 vouchers?” The answer is not necessarily. For one thing, the bill provides a carve-out that exempts landlords who own four or fewer rental properties in Virginia. Ownership in this case means either owning outright or having at least a 10% interest in any entity that owns the property (such as an LLC). If the landlord owns just one rental property, then he or she does not have to worry about a source of funds Fair Housing violation simply because he or she doesn’t want to accept Section 8 vouchers.
Similarly, the law exempts situations where the source is not approved within 15 days of the submission of the request for tenancy approval. These exemptions try to balance the rights of people who use these subsidies to obtain affordable housing with the logistical and administrative burdens that come with accepting such subsidies.
The Legal Hotline has also received several questions about whether the property manager’s status as a licensed real estate agent requires the landlord to accept these subsidies. That is not the case—the law only looks at how many properties the landlord owns and makes no mention of the property manager.
It’s also important to note that the law does not require landlords to automatically accept any prospective tenant who uses one of these subsidies or benefit programs. The landlord (and you as a property manager) can still go through the normal process that you would for any other tenant, including background checks, credit checks, and reference checks. If the tenant would not pass those checks regardless of how they will be paying their rent, you may still legally deny his or her application (assuming your other checks also comply with Fair Housing, of course). The law simply prohibits discrimination against tenants based on how they will be paying rent.
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