Need to Know!

July 29, 2013 9:37 pm

Screen Prospective Tenants – Reduce Problems & Improve the Bottom Line

Carefully screening prospective tenants does more to reduce problems and improve the bottom line than just about anything else a landlord can do.  Yet there are those who, due to financial pressures or lack of experience either fail to screen tenants or do so poorly. Poorly screened tenants are more likely to damage the property, be the subject of noise complaints, make late payments and otherwise fail to comply with the terms of the lease.  They increase turnover due to their impact on others and, ultimately, reduce rents, decrease net operating income and hammer owner equity. That is not to say that screening prospective tenants is easy.  Landlords must navigate a rapidly evolving and increasingly complex legal and regulatory environment, state and federal fair housing and consumer reporting law.  There are vast differences in the quality (completeness and accuracy) of data provided by tenant background check services. Step one in... View Article

July 17, 2013 9:02 pm

Authentication – Background Check Best Practice #7

Food & shelter are among the basic biological or physiological needs identified by Abraham Maslow in his “Hierarchy of Needs” motivational model.  It is not surprising then, that there are those who resort to fraud or identity theft to secure a job or place to live.  They may present with the name, Social Security Number (SSN), credit, employment and residence history of a friend… or that of a perfect stranger.   Either way, you are at considerable risk if you accept them – risk of credit loss or worse.  Applicant Authentication – Best Practice #7 Data returned in background checks or otherwise developed as part of the screening process, is of no value unless we are certain that the applicant is who they say they are.  The first step in the tenant or employee screening process, therefore, must be to confirm the identity of the applicant.  Human resource and property management... View Article

July 10, 2013 6:23 pm

Tenant Screening 101 – First Come-First Serve

When we think about tenant background checks, we tend to think in terms of screening a single application for a single rental unit.  Simple, right?  We take an application and collect a screening fee.  We conduct a tenant background check and either approve, approve conditionally or deny tenancy. But from time to time we are fortunate enough to have multiple applicants for the same rental unit.  What then?  Do we screen them all at once and “pick the best” – or do we screen them on a first come-first serve basis? Best Practice – Screen Applicants on a First come-First serve Basis Landlord tenant law often prohibits “…a landlord <from requiring> a fee or deposit from a prospective tenant for the privilege of being placed on a waiting list to be considered as a tenant for a dwelling unit”.  But the statutes may be silent or specifically allow collection of... View Article

June 19, 2013 8:10 pm

Private Landlords – A Target on Your Back?!

Adverse selection is a “term used in economics, insurance, risk management, and statistics.  In a rental housing context it translates into a propensity of people with a history (and therefore greater likelihood) of lease violations to find landlords who fail to adequately vet prospective residents. Professional property managers understand the importance of conducting thorough background checks and know that if they fail to do so, they are likely to pay a price in terms of resident profile, NOI and owner equity.  Plus, they have access to quality tenant screening products. Private landlords, however, may lack knowledge of leasing best practices and often lack access to quality tenant screening products.  High risk tenants know (or quickly learn) that their odds of being approved for tenancy are better among private landlords.  So guess what?  If you fail (intentionally or unintentionally) to thoroughly screen prospective residents – the market will reward you with... View Article

June 11, 2013 3:16 pm

Seattle Restricts Use of Criminal History for Employment Purposes – Creates New Protected Class!

Advocates may quarrel with that characterization, but the fact remains that this change to the Municipal Code (Chapter 14.17 – Use of Criminal History in Employment Decisions) offers specific protections to those with a criminal history – regardless of whether they are otherwise protected based on race, national origin, etc.  If it looks like a duck and quacks like a duck…. Specifically, the ordinance says: Employers shall not carry out a tangible adverse employment action solely based on an employee’s or applicant’s criminal conviction record or pending criminal charge, unless the employer has a legitimate business reason for taking such action. A legitimate business reason shall exist where, based on information known to the employer at the time the employment decision is made, the employer believes in good faith that the nature of the criminal conduct underlying the conviction or the pending criminal charge either: 1. Will have a negative... View Article

June 3, 2013 7:14 pm

Credit History & Employment Background Checks – Best Practice #6

Earlier this year the Equal Employment Opportunity Commission (EEOC) updated their Enforcement Guidance (Guidelines) regarding use of criminal records for employment screening purposes.  In a nutshell, the Guidelines state that use of criminal records in making employment decisions in some  instances violates the prohibition against employment discrimination under Title VII of the Civil Rights Act of 1964.  We explored the Guidelines in some detail in “Pre-employment Screening – New EEOC Guidelines“. The updated Guidelines are based largely on the “disparate impact” legal theory – which says that a so-called facially neutral business practice which has a disproportionate impact on protected groups can form the basis of a discrimination claim – regardless of the intent or consistency with which the practice is applied.  The EEOC has thus far focused on use of criminal records for employment background check purposes.  State legislatures, on the other hand, have begun focusing on (limiting) use... View Article

May 1, 2013 4:09 pm

Just Say NO! – to Rental History Database Products – Best Practice #3

Just say NO… to rental history database searches! The Federal Trade Commission recently warned the operators of six websites that share information about consumers’ rental histories with landlords that they may be subject to the requirements of the Fair Credit Reporting Act (FCRA).  The letter clearly states that “…If <these firms> assemble or evaluate information on individuals’ rental histories and provide this information to landlords so that they can screen tenants, <they> are a consumer reporting agency (“CRA”) that is required to comply with the FCRA.” Bottom line… if it looks like a duck, walks like a duck and quacks like a duck, it’s a duck – frantic quacks and wing flapping aside!!  It is quite likely then, that these folks will be found to be Consumer Reporting Agencies and that rental history database searches used for tenant screening purposes are Consumer Reports as defined by the Fair Credit Reporting Act.  What... View Article

April 2, 2013 9:50 pm

Rental References – More Important Than Ever!

Tenant screening as we know it today is a relatively new practice fueled by strides in the quality and availability of consumer credit and public records information.  Comprehensive tenant background checks quickly followed – adding rental references, employment verification, and recommendations. About 10 years ago the market began to embrace the so-called “quick” model – computer generated background checks based on the premise that scored credit combined with an instant public records search is sufficiently predictive to obviate the need for the more thorough (and accurate) but time-consuming comprehensive tenant screening product.  Some abandoned the use of rental references altogether. But the landscape is changing yet again, driven largely by the emergence of the “disparate impact legal theory.” Under this theory (for which there is substantial and growing precedent), “facially neutral” business practices have been shown (statistically) to disproportionately impact protected groups on the basis of discrimination claims.  One example... View Article

September 20, 2012 11:08 pm

How to Develop Landlord Rental Criteria

Experienced rental property owners and managers understand the importance of rental criteria – developing and consistently applying that criteria as part of the tenant screening process.  They know that doing so protects their investment by: Reducing the risk of credit loss (bad debt) Reducing the likelihood of damage to the property Protecting and retaining good residents. At the same time, the prospect of developing criteria from scratch might seem a bit overwhelming.  Well, it doesn’t have to be! The process goes like this: Select areas of consideration – those things you wish to consider as part of your tenant screening process. a.  Credit history b.  Rental history c.  Employment d.  Income e.  Public records (criminal & eviction history) Decide what will result in “denial of tenancy”. Establish thresholds for unconditional “approval” – applies when the applicant meets or exceeds thresholds in all areas. Decide which forms of conditional approval you... View Article

September 10, 2012 5:30 pm

Portable Tenant Screening Reports – Housing Advocates & the FCRA

There is a great deal of discussion in the rental housing industry regarding the pros and cons of “portable” tenant screening reports – a single tenant credit check, for example, made available to multiple prospective landlords.  Tenant advocates like the idea and have long sought a portability mandate – legislation to require landlords to accept such reports.  The appeal (to advocates) is that low income and other hard to place applicants often pay multiple tenant screening fees before finding a landlord who will accept them – a hardship they can ill-afford. A portability mandate, in theory at least, solves this problem by making it possible for applicants to pay for a single tenant screening report and use it with multiple landlords.  But there are problems with this approach. First of all, landlords, as a group, are strongly opposed to a portability mandate – even those willing to accept such reports! ... View Article