Common Tenant Screening Mistakes

There are some common mistakes that landlords make when conducting tenant screenings that create problems for their business. Some mistakes can be serious violations of applicable laws, such as fair housing requirements and landlord-tenant laws. Other mistakes result from outdated policies and practices when due diligence was not done to keep current with latest federal, state, and local requirements Failure to screen to legal compliances creates potential for business liability if the selected tenant turns out to be a safety and security risk during tenancy or affects the business due to rental income disruption.

Being in a hurry

One of the biggest mistakes a landlord can make is to rush the tenant screening process. Being in a hurry to fill a vacancy is rarely a good business practice. Many landlords, anxious to fill vacancies, create problems for themselves by rushing through the screening process, putting the business at risk for a troublesome, perhaps costly tenancy. A landlord helps to reduce business risks such as loss of rental income, legal liabilities, costs of eviction, property damage, and safety and security issues by conducting full, compliant tenant screenings.

Failure to screen

Some landlords choose not to screen rental applicants. This decision may be rationalized as a cost-savings business practice, or an urgent need to fill a vacancy. Choosing to disregard stated business policy by foregoing tenant screening can have a significant negative impact on the business. An unscreened tenant can create unplanned expenses due to property damage, reduced revenue due to loss of rental income, or costly early termination of the lease through eviction. An unscreened tenant is a stranger to the landlord presenting a potential threat to the business and potentially a threat to the safety and security of other tenants.

Relying on gut feelings

Some landlords rely on their gut feelings when meeting with prospective renters . Relying on instinct to evaluate an applicant’s qualifications for tenancy has potential for claims of fair housing discrimination as well as financial loss for the business. A gut feeling brings emotional, subjective bias into the screening process. Applicants should be evaluated to written objective, measurable business standards.

Non-compliance with Federal, state, and local laws

Fair Housing

The federal Fair Housing Act prohibits discrimination based on protected classes of race, color, national origin, religion, sex, disability, and familial status in the sale or rental of a dwelling and in other housing-related transactions .Violation of the Fair Housing Act can be costly. Penalties may include fines, punitive damages, and attorney fees.

Fair housing laws of states, cities, and counties may provide more stringent protections against housing discrimination than does the federal Fair Housing Act. It is important to know the fair housing laws that apply to the location of the rental property to meet legal compliance. The landlord must comply to the standards that give the greatest fair housing protections.

FCRA compliances

When landlords use consumer reports to aid in tenant decisions such as applicant screenings, the federal Fair Credit Reporting Act (FCRA) obligates the landlord to certain regulated practices to ensure FCRA compliance for the protection, privacy, and accuracy of consumer personal information. This may include a separate notice and disclosure requirement for applicant authorization and consent per FCRA requirements.

Other regulatory requirements

Tenant screening is subject to numerous federal, state, and municipal laws. Due diligence is required to ensure compliance with current regulations, restrictions and prohibitions for the applicable jurisdiction.

Failure to establish rental criteria

If there is no written rental criteria for screening to qualification, a landlord puts himself at risk for discrimination claims. There should be documented clear, nondiscriminatory policy in language readily understood that details the screening policy and the process for evaluation of the applicant’s qualifications. Policy documentation also helps in the prescreening process to allow prospective renters to self-select their interest and ability to qualify to standards. Some states have landlord disclosure requirements to inform prospective tenants of rental qualification policy and practices before application submission.

Inconsistent application of rental criteria

The best screening practice is to screen every applicant. If a landlord does not screen every applicant, there is discrimination. Inconsistent or selective use of screening could put the landlord in danger of being a victim of rent fraud or giving the perception of profiling applicants. Every applicant must be screened to the same business standard according to the same established screening procedure.

Not utilizing prescreening

Prescreening interviews provide opportunity for the landlord to preliminarily determine prospect qualification to standards. If a landlord does not prescreen inquiries from interested rental prospects, time is wasted if the prospect cannot preliminarily qualify to minimum standards. The earlier in the process that a landlord can screen for qualification, the more efficient and effective the screening practice is to the filling vacancy process.

Not using a written application

A rental application is the most efficient means to collect preliminary information about a prospective tenant to begin the process of qualification to rental standards. A landlord should not miss this opportunity to collect important relevant information about the applicant.

A landlord should not risk claims of discrimination by prejudging whether the rental prospect will qualify to standards. All applications from all interested prospects of legal age should be accepted and reviewed according to business policy for submission All applications should be verified for complete and accurate reporting of information.

Not conducting applicant interviews

A landlord misses an opportunity to request additional information from the applicant or to clarify information on the application if the landlord does not conduct an applicant interview.

A landlord must be knowledgeable of fair housing laws to understand what questions are permissible and what questions are not permissible during an interview.

The interview is a time to confirm the applicant’s responses to the questions regarding the completed application form. By confirming the applicant responses, a landlord prepares for the verification process at the source document or source entity. While a landlord may want to get to know the applicant, it should be remembered that the landlord-tenant relationship is a business relationship, contractual to specific duties and obligations. Questions asked must be relevant to business purpose and not stray into personal or non-essential topics. A professional working relationship between landlord and tenant will be a best practice for both landlord and tenant. A landlord should be clear in the expectations for tenant duties and behavior and follow legal compliances for disclosures and notification to tenants.

Not conducting a full, complete tenant screening process

A full, consistent, uniform tenant screening process helps the landlord obtain a big picture view of the applicant and his qualifications. Failure to conduct one or more screenings can create liability for the landlord and potentially impact his business. Full screening includes screening for:

  • Consumer Credit Report – A credit report provides the landlord with an applicant’s credit history as reported to a credit reporting bureau as of a certain date. The credit history shows the applicant’s credit usage and credit management. By analyzing the data, the landlord evaluates whether the applicant could be a potential financial risk if selected as a tenant.
  • Background Checks – Landlords must comply with federal, state, and local laws that regulate or prohibit the use of criminal history background for tenant screenings. A landlord’s blanket policy that excludes any person who has been convicted of any offense is discriminatory and violates provisions of the Fair Housing Act. A landlord must determine applicable compliances for the jurisdiction governing his rental property regarding the use of background checks for tenant screenings.
  • Public Records Search – A public records search for an applicant’s bankruptcy, liens, judgments, and eviction records may be conducted to determine potential financial risk to the landlord’s business.

The landlord must also conduct verification of income, employment, and references to complete the screening process.

  • Income verification – A tenant’s ability to pay full and timely rent ranks as of the top concerns for landlords. Failure to conduct adequate verification of income can mean potential problems with late or missed rent throughout the tenancy. A common mistake in screening for income is source of income discrimination. Some states, cities, and counties have passed fair housing laws to include source of income protections. In these jurisdictions landlords must incorporate source of income (SOI) protection into fair housing policies and rental practices. A landlord cannot reject a rental applicant on the basis of the applicant’s source of income as long as the income is from a lawful source. Fair housing protections for source of income do not prohibit a landlord from setting his rental criteria to include income qualification sufficient to meet rental obligations.
  • Employment verification – For many applicants, employment verification of current employment status and wages/earnings is income verification. A landlord should verify the accuracy of the employment information supplied on the rental application by directly contacting the employer with an information request.

No verification of rental references

Contacting landlord references to verify previous rental history information should be a screening practice conducted for all applicants. Rental history is as important as credit history in the tenant screening process. The applicant’s past pattern of rental behaviors with landlords and fellow tenants may give clues as to how he will conduct himself as a tenant in his future choices for rental housing.

Failure to keep complete and accurate documentation of rental matters

Failure to keep accurate documentation of important landlord-tenant interactions puts a landlord at risk. Documentation is key to defending against charges of discrimination or to show cause in a landlord’s court action for tenant eviction. Any communication with a prospect, applicant, or tenant should be documented and retained for at least the period required by statute. Without written documentation of policies, practices, forms, interviews, or other rental records, it will be a landlord’s word against a claimant’s allegations.

Failure to conduct due diligence

A landlord should prioritize conducting due diligence for new and proposed legislation that impacts the rental business As a business owner a landlord must know the regulatory climate rules and regulations that affect his business.

There is a greater responsibility for landlords under their obligation of duty of care to tenants to protect them from known risks to persons and property. That duty too falls under the landlord’s due diligence to actively manage his properties according to legal requirements for habitability and tenants’ rights by statute.

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