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— Property Management Quarterly — January 2016
J
ust about every property
manager has dealt with the
Jekyl-and-Hyde tenant. To fill
a vacant property, you do a
quick search and find some-
one you think will be a great tenant.
And, at first, the tenant is the good
Dr. Jekyl; he follows the rules, keeps
up on the maintenance and pays his
rent on time. However, after a few
months, Mr. Hyde appears; he falls
behind on maintenance and rent,
and the property appears to be dam-
aged. You ultimately are forced to
evict him, which costs a significant
amount of time and money.
While there is no crystal ball or
magical totem that allows you to
see into the future and sort the pro-
spective good tenants from the bad,
there are steps you can take during
the screening process to help pre-
vent renting a property to Mr. Hyde.
However, while it’s important to
gather as much relevant information
as possible before choosing between
prospective tenants, it’s equally
important to take precautions in the
screening process to avoid violat-
ing state and federal laws regarding
credit checks and discrimination.
Serious missteps can result in pay-
ing thousands of dollars in tenant
damages, court costs and attorneys’
fees.
Ask for verification consent.
Make
sure your rental application includes
a section where the prospective ten-
ant authorizes you to conduct rental
and employment verification, as well
as background and credit checks. A
good rental application will ask for
a substantial amount of personal
information.
Request rental ref-
erences.
Make sure
your rental applica-
tion form includes
a section regard-
ing the applicant’s
rental history, and
then verify that
information. The
section should
include (at a mini-
mum):
• The names and
contact informa-
tion of former
landlords,
• Rental dates,
• Monthly rent and number of late
payments, and
• Any complaints or legal action
taken by the landlord to collect over-
due payments.
Run a background report.
When
screening a tenant, checking into
an applicant’s background can save
you from unnecessary future drama.
There are numerous companies
that will run background checks for
property managers, but even a quick
check of public records and court
databases for recent criminal convic-
tions and evictions can be helpful.
Verify employment and income.
No property manager wants to
deal with a tenant who inflated
his employment and income on
the application but, in reality, can’t
afford the rent. At a minimum, you
should require pay stubs and call the
employer to verify the application
information. Alternatively, it might
be beneficial to get an income verifi-
cation letter from the employer.
Run a credit check.
Running a credit
check will provide
insight into the
applicant’s history
of paying his obli-
gations. In addi-
tion to getting the
prospective ten-
ant’s overall credit
score and history, a
credit report’s pub-
lic records section
shows court judg-
ments for past-due
rent.
Pay attention to
FCRA.
If you take
adverse action against a prospective
tenant based on his credit report,
such as denying the application
or requesting a co-signer, the Fair
Credit Reporting Act requires that
the applicant be informed that the
action was based on the negative
report. Also, you must give the appli-
cant the name, address and phone
number of the agency that furnished
the report.
Furthermore, the FCRA extends
this protection beyond simple credit
reports to all consumer reports,
which can include rental history.
Don’t discriminate.
This may seem
like simple common sense. There
are numerous and well-known fed-
eral and state laws (like the Fair
Housing Act) that protect individu-
als of a protected class, based on
race, religion and national origin, for
instance, from the negative impacts
of housing discrimination. How-
ever, in practice, it can be hard to
determine what are discriminatory
actions and policies.
For example, if a prospective ten-
ant – who also is a member of a
protected class – is asked to undergo
numerous background checks, sub-
mit multiple references and obtain
a co-signer, and this rigorous scru-
tiny can be shown to be based on
her protected-class status and was
above and beyond the typical appli-
cation process, your screening pro-
cess could be found to violate the
Fair Housing Act.
Establish defensible criteria.
To
establish a comprehensive screening
process and protect yourself against
discrimination liability, establish
delineated criteria for approving and
rejecting rental applications.
For example, your company policy
could require that to qualify, pro-
spective tenants have:
• A credit score of at least 720 from
one of the three major credit report-
ing agencies,
• Verified monthly income of at
least three times the rental pay-
ments, and
• No evictions within the last three
years.
You don’t have to share your
approval criteria with potential ten-
ants, although doing so may help
weed out the Mr. Hyde early, but
having and following established cri-
teria can go a long way in the event
you are accused of housing discrimi-
nation.
Tenant screening is a vital step in
avoiding the Mr. Hyde tenants that
cause you grief, stress and financial
strain down the road. However, it
is important to ensure that you are
taking the necessary precautions
to avert violating potential tenants’
rights during the process.
s
Legal
Donald “Corky”
Eby
Attorney, Robinson
and Henry PC,
Castle Rock
Kayla Weeres
Law clerk,
Robinson and
Henry PC,
Castle Rock
