Legal Corner: Tenant Screening Advice
By Stephen C. Duringer, Esq., The Duringer Law Group, PLC
Question. Given all the drama of the last few months, I really understand the importance of tenant screening. Could you please provide information on the best resident screening practices that you and your clients use?
Jeff W., Beverly Hills
Answer. Proper tenant screening begins with a rental application you can get online from the Apartment Association of Greater Los Angeles, which needs to be completed, and signed by every adult applicant. Verify that the application is complete and legible, photocopy the prospect’s government issued photo identification, e.g., driver’s license, identification card, or passport, and keep the photocopy with your file. Verify that the signature on the application matches the identification, and the picture matches the person standing in front of you.
Ensure that you comply with your state and federal fair housing rules. A landlord cannot refuse to rent to a tenant or engage in any other type of discrimination based on group characteristics specified by law that are not closely related to the landlord’s business needs. Race and religion are examples of group characteristics specified by law. Arbitrary discrimination based on any personal characteristic is also prohibited. Under most state and federal laws, it is unlawful for a landlord, managing agent, real estate broker, or salesperson to discriminate against a person or harass a person because of the person’s race, color, religion, sex (including pregnancy, childbirth or medical condition related to them, as well as gender and perception of gender), sexual orientation, marital status, national origin, ancestry, familial status, source of income, or disability. Many states also prohibit discrimination based on a person’s medical condition or mental or physical disability; or personal characteristics, such as a person’s physical appearance or sexual orientation that are not related to the responsibilities of a tenant; or a perception of a person’s race, color, religion, sex, sexual orientation, marital status, national origin, ancestry, familial status, source of income, disability or medical condition, or a perception that a person is associated with another person who may have any of these characteristics.
Housing providers cannot use a financial or income standard for persons who want to live together and combine their incomes that is different from the landlord’s standard for married persons who combine their incomes. In the case of a government rent subsidy, a landlord who is assessing a potential tenant’s eligibility for a rental unit must use a financial or income standard that is based on the portion of rent that the tenant would pay. A landlord cannot apply rules, regulations or policies to unmarried couples who are registered domestic partners that do not apply to married couples. Nor can a landlord inquire as to the immigration status of the tenant or prospective tenant or require that a tenant or prospective tenant make any statement concerning his or her immigration or citizenship status.
You should establish rental criteria and apply it consistently to all applicants. To find the best and most qualified tenant for your property, certain tenant screening or rental criteria must be established. The successful applicant should: (i) have acceptable and verifiable credit history, (ii) have acceptable and verifiable tenancy history, (iii) have sufficient and verifiable income to meet their present and future financial obligations, and (iv) not pose a risk of harm to the rental property or to persons. Acceptable and verifiable credit history means that the applicant has faithfully honored his or her credit responsibilities in the past. By signing and submitting the Apartment Association of Greater Los Angeles provided application, consent is provided for you to run and receive a copy of the applicant’s credit history from the credit bureaus. The Apartment Association of Greater Los Angeles offers several, easy to use and affordable tenant screening services that can handle this for you.
Credit history is reported based upon a person’s social security or taxpayer identification number. To accurately evaluate a person’s credit history, all successful applicants should have either a social security or tax identification number. Lack of a number will not preclude them from applying; however, it is impossible to verify that person’s credit experience. As you review the applicant’s credit report, look for collection accounts, late payments, bankruptcies, fraud alerts, and other derogatory information that sheds insight into the applicant’s past practices. Verify that the former addresses listed on the credit report match the ones provided on the application. Note that the credit bureaus have implemented new rules and procedures over the past several years that limit the reporting of judgments, foreclosures, liens, and other derogatory items unless specific identifying information, i.e. social security number, is included on the court issued document. Since the courts prohibit the inclusion of such identifying information, the credit bureaus no longer report most judgments, liens, and certain derogatory information. Credit reports are an important and necessary tool to use in proper tenant screening; but understand that credit reports and the information contained therein are limited, and do not tell the whole story. Beware!
Acceptable and verifiable tenancy history means that the applicant has been a good tenant in the past. You certainly do not want to rent to the professional dead beat who has been evicted once or several times in the past. Most landlords will automatically disqualify an applicant who has been evicted in the past. Sometimes, the Apartment Association of Greater Los Angeles’ tenant screening services can provide an eviction search report that will assist you in determining if your applicant was evicted previously. Be cautious though, as not all evictions appear on the eviction reports. These reports are tools to use, and although they are useful, they certainly are not perfect. In addition to past evictions, you want to see if your prospective applicant has been involved in any other litigation; has he or she been sued? Or has he or she sued a former landlord? These records are available, to a limited extent, through public records searches in each county by accessing your local jurisdiction civil court’s website, or by a third-party provider.
Sufficient and verifiable income to meet their present and future financial obligations means that the applicant can afford the rent that you will be charging as well as be able to handle their car payment, child support, credit card bills, student loans and any other obligation they might have. Consider all legal sources of income. Employment, unemployment, Section 8 or other rental vouchers, Social Security, child support, alimony, and public assistance, are sources of legal income and must be considered. Consider asking to see the original bank statements of the prospect so that you can verify the actual deposits made over the past several months. If your applicant claims to make $4,000 per month, you should see regular monthly deposits of $4,000 per month on the bank statements. Rather than set a minimum multiple of the monthly rent as a minimum qualifier, e.g., three-times the monthly rent, consider a minimum net income requirement after consideration and deduction for all fixed expenses. Note that special rules apply to screening Section 8 voucher recipients, so contact your legal counsel to ensure compliance with these procedures as the rules are in flux.
An applicant must not pose a risk of harm to the rental property or to persons. That means that you certainly do not want to rent to an arsonist, drug dealer, sex offender or anyone who might harm your property, other residents, or might engage in illegal activity on the premises. Consider requesting a criminal background check as part of your screening process. Your applications should not ask about ‘arrest’ rather they may inquire about ‘convictions for serious crimes against persons or property.’ Most housing providers, in years past, would decline to rent to persons convicted of a serious crime against persons or property. The law recently changed prohibiting blanket denials based upon criminal convictions. Rather, housing providers must now identify individuals with criminal convictions and process their application in a special manner. This ‘secondary review’ should consider the “nature, severity, and recency of the criminal conduct.” Every case will now require individual attention and the review will be based upon the individual facts presented. Note that your consideration of past convictions should be limited to serious crimes against persons or property that were committed in the relatively recent past. This area of law is undergoing changes, so expect ‘clarification’ this legislative session. You should consult your attorney for specific guidance in this area.
Proper tenant screening requires you to ask each applicant to submit a credit screening fee upon submission of an application (the allowable amount changes annually – check with the Apartment Association of Greater Los Angeles for the current maximum). Although many housing providers do not require the payment, thinking that they might lose an applicant, by requiring the payment, it acts as a pre-qualifier effectively eliminating the worst of the worst.
Verify all the information provided on the prospect’s application. Make a photocopy of the applicant’s government issued picture identification and maintain all in a safe and secure location. Verify employment by independently securing the contact telephone number from the phone book, or internet. Do not be surprised if the ‘supervisor’ listed on the application, along with the phone number is simply the applicant’s girlfriend and her cell phone. When contacting previous landlords, expect to get the most helpful information from a ‘previous’ landlord, not necessarily the current one.
Run credit and eviction reports on every applicant. Verify the information that appears on each report with that provided on the application. Look for inconsistencies, different addresses, or gaps in employment or residence. Does the applicant have multiple social security numbers? Different names or spelling of names? If the applicant is self-employed, ask for confirmation of a legitimate business. Does he have a website? Business cards? Business license? Ask to see his original bank statements for the past six months to verify that he actually is depositing the amount of money that he claims to be making.
Consider informing all the prospective applicants that you have a policy of taking a picture of all successful candidates and retaining the pictures in your files. This simple policy and practice is extremely effective in weeding out the potential drug dealer, identity thief, and those intending to use the property for illegal purposes, these folks just don’t want their photo taken, and will quickly withdraw their application.
Consider making a surprise visit to the applicant’s current residence. An unannounced visit about dinner time is usually most informative of the applicant’s current living situation. If you see a car parked on the lawn, and the house or apartment in shambles, and a bunch of ne’er do wells hanging out on the porch, picture that activity continuing in your property. If the prospective resident’s current household includes dogs, cats, and distant relatives, they will most likely join your prospect when he moves into your nice, freshly painted, and well-kept apartment! Do not be shy about the surprise visit, the good prospect might be a bit startled, but will welcome the visit.
Walk the applicant out to their car after he drops off the application. The make or model is not as important as the condition and contents of the interior. If you see a filthy beater dripping oil, with a registration sticker from the 1990’s then be careful. Likewise, if you see clothes and bags filling the back seat, you just might have found where this character is currently living!
Trust your instincts. Use common sense when reviewing the information provided and screening the applicant. Do not rush! Do not let the applicant force you to decide until you have completed your screening process. Rent to the best and most qualified applicant, not necessarily the first to apply. Contrary to what the tenants’ rights folks would lead you to believe, you do not have to rent to the first applicant who happens to squeak by you want the best and most qualified. Sometimes you must accept three or four, or even ten or more applications before you know just who is the best and most qualified. Your own threshold of pain, and business sense, will tell you when enough is enough.
There are a few important issues to be aware of. Be careful when answering telephone calls from prospective tenants responding to your listing or advertisement. Do not attempt to pre-screen the applicant over the phone. Provide objective information about the unit, provide your general rental criteria as stated above, and encourage all to visit the property and submit a written application. You never know if the person on the other end of the phone is really a tenant prospect,, or rather a fair housing imposter posing as a prospect trying to trick you into a violation of fair housing law! Sounds crazy, but it can happen, fair housing employs hundreds of people that literally sit at desks perusing the published listings for potential fair housing violations. These folks will then telephone the unsuspecting landlord, misrepresent themselves as something they are not, to trick the unsuspecting landlord into saying the ‘wrong’ thing. Gotcha.
It is better to have a vacant unit than to rent to a dead beat that will cause you nothing but headaches until the day he is evicted. The truly bad tenant will continue to haunt you by filing frivolous lawsuits both during and after the Sheriff shows him the door. The damage and destruction that can be levied by the ne’er do well scam artist can be extensive. Proper tenant screening at the beginning will effectively weed out these dead beats who intend on doing you harm.
Be sure to establish reasonable rental criteria, thoroughly verify all information provided, apply tenancy criteria consistently to all, know and follow all fair housing rules, trust your instincts, and use your common sense! Accept the best applicant, not necessarily the first to apply!
This article is presented in a general nature to address typical landlord tenant legal issues. Specific inquiries regarding a specific situation should be addressed to your attorney. Stephen C. Duringer is the founder of The Duringer Law Group, PLC, one of the largest and most experienced landlord tenant law firms in the country. The firm may be reached at (714) 279-1100 or (800) 829-6994. Please visit www.DuringerLaw.com for more information.