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Is it illegal to turn down a potential tenant because they can not speak or read English to interpret/understand the contract and property rules?

A landlord cannot turn away an applicant simply because of a strong accent or because communication with a limited-English speaker presents an extra challenge. This violates laws protecting people on the basis of “national origin.” Landlords and managers must make every reasonable effort to communicate. However, landlords have the right to do business in English and are not required to translate applications, lease agreements, etc.
If there’s going to be a translator, make sure they’re of age and have them sign a statement that they explained the Agreement to the tenant and that tenant clearly understood and agrees to all the terms. Get a copy of the translator’s ID.  Here’s something to consider…also have a statement stating that the translator agrees to be responsible for any cost should the tenant take legal action against you and tells the court that they didn’t understand the Terms & Conditions of the Agreement. If the translator refuses, this should be a red flag. Don’t sign the contract. Keep in mind that there is no way for you to truly know what the translator is telling you or tenant. -----Disclaimer: Since I’ve been answering a lot of questions, I thought I would make the following statement. I’m not affiliated with EZlandlord Forms. I’m just here (not sure how long) to help those that have questions. Having 40+ yrs with Rental Property and done well, it’s my way of “Pay it Forward (check out the movie).” However, it is up to you to become familiar with your State/Local laws. I always like to know if the suggestions I offer are helpful. Feel free to comment anytime. Thanks in Advance. BTW...check out the Rental Property Organizer at Simp-List.com. Free Trial Download with data.
If you are concerned about them understanding the contract, I would ask them to have a translator present as you go over pertinent terms.  Though even if they don't understand the terms and sign the lease, I would think their signature acknowledges that they understood and agree to the terms (though I am not an attorney).  I deal with tenants often who speak English as a second language and for my own protection I ask for a translator (usually a family member or friend) to be present when they are signing the lease. www.lingschrealty.com
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