Can AI Tenant Screening Get You Sued?

By Shelby Campbell

With over two and a half decades of unwavering commitment to the mortgage industry, I am your seasoned Mortgage Loan Officer dedicated to helping individuals and families achieve their homeownership dreams.

AI is transforming the way landlords and property managers screen tenants. Many platforms now claim to offer faster decisions, better insights, and more objectivity. However, as these tools become more prevalent, a critical question is emerging: Can using AI to screen tenants lead to legal trouble?

If you’re wondering where AI tenant screening helps and where it creates risk, I’ll walk you through what works, what to watch out for, and how to stay compliant while using these tools.

1. AI relies on historical data, which can include bias. Most platforms use past rental records to build their algorithms. If those records include unfair patterns, the system might repeat them. This can cause legal problems even if it wasn’t intentional. For example, if the results make it harder for certain people to get approved based on race, age, or family status, it could be challenged as discrimination.

2. Some AI systems use complex logic that is not transparent to users. If you reject an applicant and cannot provide a clear reason, you may be violating the Fair Credit Reporting Act. Landlords must issue an adverse action notice with a specific explanation. Even if the software is responsible for the decision, you will still be held accountable.

3. AI can’t understand personal context. AI systems only analyze data. They do not consider individual circumstances. For example, an applicant might have a lower credit score due to medical debt or earn income in a nontraditional way. A person can weigh those details fairly. Use AI for support, but leave final decisions to a human.

4. Inconsistent results can lead to legal risk. AI tools may flag one applicant for review while approving another with a similar background. If this happens without a clear reason, the process can appear unfair. This is especially risky if the outcomes affect people based on race, gender, disability, or other traits. Avoid using unclear filters like social media data or behavior scores that are hard to explain. Always follow consistent and well-documented standards.

5. Follow best practices to stay compliant. Choose AI tools that meet Fair Credit Reporting Act standards and apply the same criteria to every applicant. I also recommend keeping a written policy and reviewing your screening results regularly. Lastly, ensure someone on your team understands how the system works and how it reaches decisions.

AI can support faster and more consistent tenant screening, but it must be used with caution. But the good thing is, when combined with human judgment, legal awareness, and clear processes, AI can be a valuable part of your strategy. If you need help reviewing your current screening practices or selecting a compliant tool, reach out. Call or email me. I’m here to help protect your business and your properties.