How to screen your prospective tenants properly 2013

Landlord’s Legal CenterFranco Simone, Esq.

1660 Hotel Circle North, Suite 610San Diego, CA 92108

(619) 235-6180 Telephone(619) 235-6392 Facsimile

www.landlordslegalcenter.com

Screening Applicants Purpose:

The primary goal of the screening process is to find a desirable tenant, typically a stable occupant who is a good credit risk and will not damage the premises or disturb other tenants.

IN OTHER WORDS— TO AVOID BAD TENANTS WHICH CAN COST YOU $$$$$$$$$$$$

Damage to your unit Eviction fees and attorney’s fees

Landlord May Use These FactorsCredit StandingEmployment historyAmount (not source) of incomeRental HistoryPast bad conduct relevant to

reasonable belief applicant may be direct threat to health or safety of current tenants/neighbors

What Steps Should I Take To Screen ApplicantsRental Application

Verifying Information on Rental Application

Credit Report

GOAL OF RENTAL APPLICATIONIs to obtain information about an Applicant to determine if

that person will be a stable, responsible individual who will have the ability to pay the rent. (See Form #1-Rental Application)

The application should contain the applicant's express written authorization for the landlord

1) to contact all persons or firms named as references, former landlords, or employers;

2) to verify the contents of the application, including obtaining a credit report on the applicant;

3) A written application must be signed by the applicant before a landlord can obtain a credit check.

Written Rental ApplicationsWhat NOT to Ask:

It is illegal for the Landlord to ask Tenant questions about race, color, religion, sex, sexual orientation, marital status, national origin, ancestry, familial status, source of income, disability, age, medical condition, victim of domestic violence or whether you have persons under the age of 18 living in your household.

LL can’t ask about immigration or citizenship status.

ExceptionsLL can’t discriminate because of source of income BUT

can ask Tenant’s source of income and the level of income

Tenant asks for an “accommodation”-Proof of Disability

For housing limited to persons of one sex who will share living areas in a single dwelling unit

LL can limit the number of persons per unit-however…..

Section 8

RED FLAGS ON APPLICATIONSIncomplete applicationTenant wants to move in quicklyCheck ID with name on application-Get copy of IDMake sure name matches Social Security number

IF employer sounds fishy try calling through separate telephone number you obtain on your own

Get an application from any one over 18 years of age

Verify Application Information!!! Contact all persons or firms named

as references, former landlords, or employers

andVerify the contents of the

application, including obtaining a credit report on the applicant.

BAD EXCUSES NOT TO VERIFY INFO“They seemed like nice people.”

“I didn’t have time.”

“They were referred to me by a friend/Pastor/family member.”

“I really enjoy the eviction process.”

Verifying InformationIncome-Pay stubs, 1099s, award letters, call

employer

Personal ID-Drivers Lis., Passport, green card

Past residences-Send a letter/Call past Landlords

Pull a Credit Report to compare with the information on the Application

Credit ReportLL can charge up to $49.50 in an Application

fee to apply to actual out of pocket costs to cover credit report and checking personal references. (2012)

Three credit bureaus: Equifax, Trans Union and Experian

Who Provides the Credit Report?

Even though you may do so, do NOT accept the tenant’s copy of his/her credit report.

Credit Scores-An OverviewThe highest possible credit score under the FICO

system is 850.

Any score between 850 and 720 is considered to be excellent.

Scores between 719 and 600 still qualify for credit.

Scores between 599-300 high-risk

Reading a Credit Report

Part 2

Part 3

Part 4

Part 5

Part 6

Part 7

Part 8

Fair Credit Reporting Act (FCRA)What a Landlord Needs To Know:

If you are a LL or management company who uses “consumer reports” to evaluate rental applications your need to follow FCRA

FCRA designed to protect the privacy of consumer reports information and guarantee that the information is correct.

What If I Don’t Follow FCRA?

Applicant can sue in Federal court for damages, attorney’s fees and court costs.

If deliberate…..punitive damages

Federal Trade Commission or the states may sue LL for non-compliance and get civil penalties.

What is a Consumer Report?

Credit Reports

Tenant-Screening Service-rental history

Reference-Checking Service

What Actions Are Covered?Depends on who is verifying the

references?

If by an Agency hired by LL------ COVERED

If by LL’s employees------ NOT COVERED

What is an Adverse Action?Any action taken by the LL or

management company that is unfavorable to the interests of a rental applicant is covered by the FCRA

For example:

Denying applications, requiring a co-signor or requiring an additional deposit.

What Does This All Mean?

If you use a consumer report issued by an agency you hired and that report causes you to take an adverse action against a rental applicant the YOU MUST give the applicant notice that this occurred.

When is a Notice Required?Take the Case of……

1. Further investigation2. Consumer report part of the decision

3. Increase in deposit4. Using Agency to check employment

What Information Must Be Included In a Notice?Name, address and telephone number of the

Agency which issued the report.

Statement that the Agency supplied the report did not make the decision for the adverse action.

A statement that the applicant has a right to obtain, within 60 days, a free copy of the credit report from the agency and the right to dispute the accuracy of the information. See Form 2

Some Legal Protection

If LL inadvertently fails to provide a required Notice in an isolated case, then LL has some protection from damages if LL can demonstrate “that at the time of the…violation he maintained reasonable procedures to assure compliance” with the FCRA.

Final ThoughtsBe consistent in the Application Process:Use same rental application

Always pull a credit report

Always verify the same information

Exceptions-Disable Applicants-”reasonable accommodations”

Screen criteria should relate to legitimate LL objectives

No Subjective Criteria-long hair, smells bad

More Final Thoughts

QUESTIONS