Q: I am trying to sell my house and just found out that our homeowners' association will not approve a buyer who doesn't have a credit score of at least 750. Is this legal?
_John
A: It is legal under certain circumstances, but your association should be careful to know and follow the rules.
Your community documents should be checked to make sure that your association is allowed to screen potential buyers, and under what circumstances it may do so. If it does decide to look at credit scores, it will be bound by several laws, including the Fair Credit Reporting Act. If your association denies a buyer, it may be opening itself up to a costly lawsuit in which its decisions will be highly scrutinized.
If buyers are denied, your association will have to make the federally required disclosures to the rejected applicants, telling them where the information was obtained, how the decision was made and how any errors on their credit reports can be fixed. Once again, if proper disclosures are not made, your community may find itself in court.
All of the factors that the association is considering, including credit scores, background checks and history of foreclosures or evictions, must be applied evenly to all potential buyers. The criteria must be reasonable, non-discriminatory and not set at such a high bar that it makes it almost impossible for a buyer to be approved. Because this can be such dangerous ground, your association should check with its attorney before implementing or changing its procedures.
