What tenant screening criteria can a landlord legally use?

Tenant Screening Criteria

If you own property and expect to rent it out to strangers, it’s critical to protect yourself and your assets through a clear tenant-screening process. Also important is the criteria you set for interviewing potential tenants.

Across the US, states have varying FCRA regulations and Fair Housing laws that protect the rights of tenants. Hence, your criteria and subsequent screening process must be consistent and thus discrimination-free to align with the law. Read on to know how you can set up a consistent yet watertight process for this.

What tenant screening criteria can a landlord legally use?

This depends on the state in which you are renting out your property. Typical background checks on potential tenants can include:

• Identity checks, to verify the name, date of birth and social security number and other fundamental details of your tenant. This can often be verified at no or low cost using a quick online search on the country’s database.
• Criminal check, to verify the lack or presence of any criminal history. Again, state-specific rules will determine how you handle the information uncovered during this check. For instance, a criminal check on a potential tenant may uncover a police arrest. However, if this did not lead to a conviction, many states may legally prevent the landlord from taking adverse action against the tenant. Either way, it is still a solid method to stay informed.
• Credit check, to determine whether a new or potential tenant is indeed capable of paying monthly rent without hassles. In fact, landlords are considered among the elite few, who have “permissible purpose” to request a credit check.
• However, keep in mind that as per recent statistics, over 40 million Americans have some sort of major or minor “error” in their credit reports. So, while credit checks can certainly be useful, they should NOT be used as the sole discriminatory factor to undermine a potential tenant’s value.
• References, personal or professional. Here, you may request references to past landlords in order to determine the potential for evictions and non-payments. You may also ask for professional references from his or her present job, to verify that they are indeed gainfully employed and can hence pay the rent month in and month out.
• Drug tests, in order to determine the stability of a potential tenant. Again, this needs to be completely non-discriminatory, and in line with the state’s FCRA and housing guidelines.

How Long Does It Take To Run A Verified Background Check?

What happens when a (potential) tenant fails the screening criteria?

Along with the criteria, it is also paramount to set a consistent policy – both for screening and subsequent action – so you are not inadvertently charged for discrimination.

If you find that a potential tenant has failed on some of your criteria, consider the seriousness of the breach. For instance, if his or her name came up in recent sex or criminal offense, and was convicted, the law is on your side on refusing their tenancy. However, you are still required to align with state-specific FCRA regulations by following the pre-adverse action process.

On the other hand, consider that a potential tenant does not meet your stringent credit-check criteria. Here, they may be room for some amount of (reasonable) negotiation based on demand and supply of rentals in your area.

For instance, you may request a higher deposit amount, if they have a poor credit score, in order to protect your assets. Also, this policy is best documented, and consistently followed for all potential, new, and existing tenants in order to avoid discrimination.

For this reason, it is best to renew (and possibly review) your tenant screening criteria every quarter (or at least twice a year), so you have room to modify it based on demand and supply.

What happens when a landlord wishes to cancel or refuse a tenancy?

If it is a new or potential tenant, then you are likely to have made this decision, based on failure to meet your tenancy screening criteria. Here, remember to stay in adherence to state-specific regulations to avoid discrimination.

For instance, some states may legally allow the use of marijuana and prescription medication. Hence, the detection of these substances during a drug test may not be sufficient for you to legally evict an existing tenant or refuse a new tenancy.

However, in the case that you have a strong case for eviction, or refusal of the tenancy (like a serious sex offense discovered during the screening process), you should align with FCRA guidelines.

The guidelines say that you should send the tenant a pre-adverse action notification to inform them of your decision. This will also give them the opportunity to clarify or even refute any information associated with them through the screening. For the final eviction, once again follow the adverse action process.

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