Category

Tenant Screening

Category

Although tenant screening is critically important in any rental business, it seems that the law and a culture of forgiveness stand to obstruct housing providers that look to connect the dots and mitigate risk.

Efforts to reform tenant screening practices have percolated to the federal level, with legislation endeavoring to reform the Fair Credit Reporting Act to make so-called “tenant-rating” agencies more accountable and afford additional protections to tenants.

Landlords are on solid grounds in denying tenancy to an applicant that has a prior eviction history. But U.S. Senator Cory Booker (D-NJ) says the reports that landlords rely on having limited details and don’t always provide context behind the eviction case.

Booker notes that unlike credit reporting agencies, whose practices are highly regulated, tenant rating agencies have little oversight and are prone to inaccurate or unfair conclusions. The proposed bill would:

• Prohibit a consumer reporting agency from making a consumer report containing information from a landlord-tenant court or other housing court record unless the case to which the record pertains resulted in a judgment of possession in favor of the landlord;

• Prohibit a consumer reporting agency from making a consumer report containing information from a landlord-tenant court or other housing court record unless the case to which the record pertains occurred less than three years before the report is created;

• Require the creator of a consumer report that contains tenant-landlord information to make reasonable attempts to assure the accuracy of the record;

• Require any person who takes an adverse action with respect to a consumer report to provide the consumer with a free copy of the report;

• Require the Consumer Financial Protection Bureau (CFPB) to create a centralized clearinghouse through which consumer may annually obtain a copy of their report from each tenant rating agency free of charge and correct any inaccuracies, and;

• Require the CFPB to conduct a study and submit to Congress a report on tenant rating agencies and their compliance under FCRA.

The rental housing industry is wedged between a rock and a hard place. On one hand, a tenant’s checkered past can be concealed. But overzealous screening exposes landlords to a perilous housing discrimination lawsuit.

Just one spoke in the wheel

This plan is part and parcel of what we see as a larger cultural shift that is tipping the scale in favor of tenant amnesty, over a landlord’s interest in protecting their rental investment by making informed decisions as to who occupies their units. The “eyes and ears” of rental property owners are slowly being handicapped by initiatives that conceal rental risks.

In an earlier article, we highlighted the National Consumer Assistance Plan, a cooperative initiative between the three credit bureaus to purge certain alarming notations on the prospective tenant’s credit report, including civil judgments lodged against them. In effect, the plan leaves the rental property industry blinded.

Ditto for Assembly Bill 2819, which cloaks a rental applicant’s prior unlawful detainer history under certain circumstances, a topic we chimed in on in this video.

In a digital age, sometimes common sense prevails

It seems that now more than ever, landlords and property managers cannot use technology and reports as a crutch – some old-fashioned personal sleuthing is in order. For example, calling previous landlords and asking a pointed question to get to the heart of the matter: “would you rent to them again?” This simple question will be telling and usually will ferret out any concerns.

If the tenant drives up to view the rental listing in a vehicle with hamburger wrappers strewn in the backseat of their car, perhaps it’s a sign that they will treat the apartment in the same fashion. Don’t mention the clutter because in today’s climate, it may invite litigation from fast food connoisseurs.

Housing Discrimination Always Looms Nearby

In all seriousness, while hygiene and other first impressions can go a long way in making an informed decision, we admonish landlords and property managers to keep their observations to themselves. The Unruh Civil Rights Act, and the California Fair Employment and Housing Act prohibit landlords from discriminating between would-be tenants on the grounds of their sex, race, color, religion, sexual orientation, marital status, ancestry, national origin, source of income, disability or medical condition.

However, in the case of Marina Point v. Wolfson, the California Supreme Court decided that the Unruh protections are not necessarily restricted to these characteristics. The envelope is constantly being pushed with newly protected classes being carved out, and so arbitrary discrimination of any kind may get rental housing providers in trouble.

When it comes to communication with a prospective tenant, then, less is more.

Our parting advice – be smart. Be aware. Be diligent. But when your “gut feel” isn’t enough and you have questions, contact our office. Bornstein Law will ensure that your tenant selection does not cry afoul of the law and that you make the most educated decisions when it comes to your rental business.

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Tenant Screening Becomes More Difficult As Concealing Checkered Pasts Become Easier

Clearly, tenant screening is one of the most important aspects of your rental business, but today’s climate makes this essential task more difficult as it becomes increasingly easier for prospective tenants to conceal any blemishes in their past.

At Bornstein Law, we understand that the past doesn’t equal the future, and we are all about second chances. Yet we are also about transparency and equipping rental property owners with the information they need to make informed decisions regarding their selection of tenants.

Let’s talk about a couple impediments to getting a clear glimpse into a tenant’s history, starting with the three major credit bureaus’ joint National Consumer Assistance Plan, which will eliminate the appearance of certain “red flags” on the prospective tenant’s credit report.

Rolled out over a 3-year period, NCAP established, among other things, new standards for personal identifying information, or PMI, for a record to appear on a credit report. These identifying factors include a consumer’s name, addresses, Social Security Number and Date of Birth. Experian estimated that about 96% of civil judgment data and as much as 50% of tax lien data would not be discernable from the tenant’s credit report.

TransUnion chimed in and though it stopped short of giving hard and fast numbers, claimed that there would be a “significant change” to civil judgment data, and at least 60% of public record tax lien data would evaporate from its database. The translation for landlords: The presence of a monetary eviction may not be readily ascertainable from the applicant’s credit report.

As a sidebar, we’ll say that depending on the credit scoring model used, some tenant applicants that are saddled with medical debt could potentially have their score boosted and enter the pool of eligible rental candidates, but we don’t want to get bogged down into the finite details of NCAP, merely forewarn landlords that credit reporting may not be a total portrayal of the incoming tenant’s history.

State law has an open mind, as well.

In the following video, Daniel Bornstein alludes to AB 2819, which will impact a landlord’s ability to obtain an applicant’s prior unlawful detainer (UD) history. The bill essentially seals an applicant’s prior unlawful detainer history under certain circumstances.

Another footnote is that one consequence of the law, in our view, is that it disincentives unlawful detainer defendants to speedily settle the case, as frivolous motions and other stalling tactics can ensure the judgment does not enter the public record.

We can’t help but draw a loose parallel to AB 1008, dubbed the “Fair Chance Hiring Bill” or “Ban The Box”. This Bill places severe restrictions on employers to pry into a job applicant’s criminal history, concerning for the rental housing industry because property management employees usually have close access to a tenant’s personal belongings and their children.

Rightly or wrongly, it seems that there is a forgiving culture that says we are all human, and that certain mistakes should be overlooked. Our job is not to evaluate people, but to offer informed and pragmatic advice in developing a framework for you to make your own calls.

In parting thoughts, do your due diligence when vetting tenants and employees, for that matter, but do so smartly, in compliance with the law. Don’t be over-exuberant or cross the nebulous line into discrimination.

We’ve only scratched the surface here and will continue our thread on a myriad of tenant screening issues in the near future — follow us on Facebook to stay in the know.

In an earlier post, we stressed the importance of property owners and managers to take care in screening prospective tenants in a complete, deliberate process. The front-end work is especially important in light of a bill which went into effect January 2017, effectively cloaking a tenant’s eviction action history. In other words, unsuspecting landlords can now unknowingly turn the keys over to a tenant that has had a troublesome history of unlawful detainer actions that are sealed from the public view.

Thanks to the efforts of the California Apartment Association and other voices for property owners, there are safeguards for landlords, but rather than getting bogged down in this law or the merits of the bill, we wanted to shift gears.

While we highly advise a thorough vetting process of a prospective tenant’s rental history, financials and employment, an applicant’s criminal history is a topic that is a little more unwieldy, from a legal perspective. First, some backdrop.

There are thousands of California prisoners released on a monthly basis, all of whom need housing. Everyone can change, including ex-offenders, but as a landlord, taking a leap of faith and hoping a prospective tenant will change can be a risky proposition.

For this reason, landlords understandably use criminal record screening to manage their risk. There is a nebulous line, however, between protecting your investment and having a blanket policy of denying housing to all ex-offenders, and so the law attempts to strike a balance between the converging interests of property owners and the societal interest of transitioning stigmatized ex-offenders into normal life.

Enter the racial makeup of arrest and imprisonment – a disproportionate number of minorities are in the criminal justice system – and this has all of the elements of a potential discrimination claim against a landlord that categorically denies housing to anyone with a record.

“No American should ever be discriminated against because of their race or ethnicity, even if that discrimination results from a policy that appears neutral on its face. Black and Latino Americans are unfairly arrested at significantly higher rates than white Americans.”

~ Former HUD Secretary Julián Castro

The issue of housing discrimination against ex-offenders made its way to the U.S. Supreme Court, which allows plaintiffs to challenge housing practices that have a discriminatory effect without having to show discriminatory intent. The ruling lowers the burden for plaintiffs to show instead that the practices both have a “disparate impact” on racial groups and are not justified. Since Blacks and Latinos disproportionately enter the criminal justice system, ex-offenders meet this test.

Against the heels of that Supreme Court Decision, HUD issued sweeping guidelines for landlords and property managers to follow. While acknowledging that people with criminal records aren’t a “protected class” under the Fair Housing Act and in some cases, turning down a tenant because of their record can be legally justified, blanket bans on ex-offenders amount to de facto discrimination.

What this means is that if your rental policy excludes ex-offenders across the board, it is most likely in violation of housing laws, exposing you to liability. If you use criminal records to screen tenants, the policy must be narrowly tailored.

Landlords need to better scrutinize whether the perspective was arrested and if they were also convicted. Even if this distinction is made and the rental applicant was in fact convicted, property owners must weigh the nature and severity of the crime and conviction when deciding whether or not to rent to that person.

In parting thoughts, Bornstein Law stresses the importance that background check and screening criteria consistently to each and every rental applicant. So, if you deny one prospective tenant away because of a blemish on a criminal background check, but welcome another ex-offender as a tenant, you are exposing yourself to liability under fair housing laws. Landlords also need the tenant’s explicit permission and signature prior to running the criminal check. If you state that you’re going to conduct a criminal record check, you must do so uniformly for every applicant. You can, however, narrow the field by screening only those applicants that survive other checks, such as a credit report.

We hope you found this series to be informative, and as always, Daniel Bornstein is happy to engage in any questions you may have. Email him today.

 

Clearly, tenant screening is one of the most important aspects of your rental business, but today’s climate makes this essential task more difficult as it becomes increasingly easier for prospective tenants to conceal any blemishes in their past.

At Bornstein Law, we understand that the past doesn’t equal the future, and we are all about second chances. Yet we are also about transparency and equipping rental property owners with the information they need to make informed decisions regarding their selection of tenants.

Let’s talk about a couple impediments to getting a clear glimpse into a tenant’s history, starting with the three major credit bureaus’ joint National Consumer Assistance Plan, which will eliminate the appearance of certain “red flags” on the prospective tenant’s credit report.

Rolled out over a 3-year period, NCAP established, among other things, new standards for personal identifying information, or PMI, for a record to appear on a credit report. These identifying factors include a consumer’s name, addresses, Social Security Number and Date of Birth. Experian estimated that about 96% of civil judgment data and as much as 50% of tax lien data would not be discernable from the tenant’s credit report.

TransUnion chimed in and though it stopped short of giving hard and fast numbers, claimed that there would be a “significant change” to civil judgment data, and at least 60% of public record tax lien data would evaporate from its database. The translation for landlords: The presence of a monetary eviction may not be readily ascertainable from the applicant’s credit report.

As a sidebar, we’ll say that depending on the credit scoring model used, some tenant applicants that are saddled with medical debt could potentially have their score boosted and enter the pool of eligible rental candidates, but we don’t want to get bogged down into the finite details of NCAP, merely forewarn landlords that credit reporting may not be a total portrayal of the incoming tenant’s history.

State law has an open mind, as well.

In the following video, Daniel Bornstein alludes to AB 2819, which will impact a landlord’s ability to obtain an applicant’s prior unlawful detainer (UD) history. The bill essentially seals an applicant’s prior unlawful detainer history under certain circumstances.

Another footnote is that one consequence of the law, in our view, is that it disincentives unlawful detainer defendants to speedily settle the case, as frivolous motions and other stalling tactics can ensure the judgment does not enter the public record.

We can’t help but draw a loose parallel to AB 1008, dubbed the “Fair Chance Hiring Bill” or “Ban The Box”. This Bill places severe restrictions on employers to pry into a job applicant’s criminal history, concerning for the rental housing industry because property management employees usually have close access to a tenant’s personal belongings and their children.

Rightly or wrongly, it seems that there is a forgiving culture that says we are all human, and that certain mistakes should be overlooked. Our job is not to evaluate people, but to offer informed and pragmatic advice in developing a framework for you to make your own calls.

In parting thoughts, do your due diligence when vetting tenants and employees, for that matter, but do so smartly, in compliance with the law. Don’t be over-exuberant or cross the nebulous line into discrimination.

We’ve only scratched the surface here and will continue our thread on a myriad of tenant screening issues in the near future — follow us on Facebook to stay in the know.