Many investment property owners who handle their own tenant screening process and rental decisions are unaware that there are state and federal laws that apply to tenant credit and background checks, and how landlords can use that information to make rental decisions. If you’re not consistently practicing a compliant tenant screening process, you could find yourself facing stiff discrimination fines or vulnerable to civil suit from rejected prospective tenants.
What Does The Fair Credit Reporting Act (FRCA) Have To Do With My Rental?
You’re not a credit reporting agency, so this may seem weird, but when you order a consumer report on a prospective tenant, you’re certifying to the agency providing the report that you are going to use that information for a legally “permissible purpose,” in this case, tenant screening. So far, so good.
But if you find something in that report that causes you to reject the tenant’s application or require a co-signer, or require additional rent (these are called adverse actions in legal terminology), the FCRA requires you to notify the party in writing of the adverse action and reason. You must provide the contact information for the company who gave you the report, and let the recipient know that they have a right to dispute the report.
Fair Housing Act And Criminal Background Checks For Tenants
Running a criminal background check on a prospective tenant seems like a no-brainer. Who wants to rent to criminals? In practice, though, landlords are limited in how they use information from a criminal background check to take adverse action against a tenant.
- A tenant can’t be rejected because of an arrest, if no conviction followed.
- You must be able to demonstrate that a rejection based on criminal record “accurately distinguishes between criminal conduct that indicates a demonstrable risk to resident safety and/or property and criminal conduct that does not.”
- People with convictions for distribution or manufacture of drugs can be denied based on those convictions. People with convictions for drug possession cannot.
- Your treatment of criminal issues must be consistent across all applicants. You can’t reject an application from one person with a drug distribution conviction, and then later accept one from another person with the same conviction.
- Selective use of criminal history to reject applications based on race, national origin, or other protected characteristics is considered discriminatory.
Stay On The Right Side Of The Law With Tenant Screening
The laws that cover tenant screening are complicated and they’re always changing. It’s easy to see how a landlord could end up breaking the law without even knowing it. The Orlando property management experts at Belmont Management Group help their clients stay compliant with all of the applicable laws, so they can rest assured that their investment property business is in good standing and running smoothly. Call or contact us online to learn more about how working with the professional property management team at Belmont Management can make your rental properties turn the best possible profit for you.
Please keep in mind that this is mostly a summary of the important points, but by no means does it constitute or cover all of the requirements of a compliant tenant screening program.