I am a New Landlord.
Question
I am a relatively new landlord, only now turning my old home into a rental after having a new home built nearby. What can I ask and am I not allowed ask during tenant screening. Also, is there anything prevents me from making copies of tenant documentation? Finally, can I give the applicant a copy of the credit or other screening reports that I order?
Answer
You can ask for almost any documentation that might be of use in screening as long as it has a reasonable relationship to your determination that the applicant can be expected to pay the rent and take care of your property. In fact, you should make copies of anything that could be of use in (1) tracking down a skipped tenant, (2) collecting a judgment, or (3) defending yourself against a fair housing complaint. However, you must be very careful to request the same information from all applicants in order to avoid any claim that you discriminated against a particular applicant(s) or protected class of applicants.
Obviously, there will be cases where certain information/documentation is not applicable because of reasons not related to protected classes. For example, you would not expect to obtain W-2 forms from a self-employed applicant and you would not usually ask to see tax returns of an applicant who provides W-2s or other evidence of sufficient income to meet the financial obligations incurred under the lease agreement. The best procedure is to provide written information with your application forms about this and other relevant issues related to screening. For the example, you might state in the information that relevant tax return forms must be provided to verify self-employment income and that W-2s and/or other documentation must be provided to verify employment income. This would take care of all three cases – that is: self-employed only, employed only, and those who are both.
You must also remember that federal law, and in some states state law requires that landlord adequately protect personal information collected from applicants and properly dispose of such information when no longer required. The details of protecting and disposal of personal information is not directly within scope of your questions, but is readily available from the Federal Trade Commission’s (FTC) website.
Regarding providing a copy of credit reports or other screening reports, the credit reporting agencies recommend you not do so. However, some states require the applicant be provided a copy upon request. You need to check the law of your particular state.
Another issue related to rental housing applications concerns the need to provide to unsuccessful applicants an adverse action notice when an adverse action is taken that is based solely or partly on information in a consumer report as defined by the FTC. The notice must include:
- The name, address and telephone of the CRA that supplied the consumer report including a toll-free telephone number for CRAs that maintain files nationwide,
- A statement that the CRA that supplied the report did not make the decision to take the adverse action and cannot give the specific reasons for it, and
- A notice of the individual’s right to dispute the accuracy or completeness of any information the CRA furnished, and the consumer’s right to a free report from the CRA upon request within 60 days.
Be aware that certain states have more restrictive consumer credit laws and additional requirements. For example, CA requires the landlord to give a receipt for any fee collected that is greater than a specified amount ($30 or $35 as I remember) and provide the applicant a copy of the credit report when requested.
Be sure you understand which types of screening requires an adverse action notice and which do not, as the penalties can be quite high for failing to provide the notice if required. Landlords who fail to provide required disclosure notices potentially face legal consequences. The FCRA allows individuals to sue landlords for damages in federal court. A person who successfully sues is entitled to recover court costs and reasonable legal fees. The law also allows individuals to seek punitive damages for deliberate violations of the FCRA. In addition the Federal Trade Commission (FTC), other federal agencies and the states may sue landlords for non-compliance and get civil penalties. However, a landlord who inadvertently fails to provide a required notice in an isolated case has legal protections, so long as he can demonstrate “that at the time of the violation he maintained reasonable procedures to assure compliance” with the FCRA.