This article will help you:
- Interpret background reports on potential tenants
- Make fair assessments of potential tenants
- Decline tenants in a way that complies with federal and local laws
As a landlord, you are subject to federal, state, and local laws concerning tenant screening. While the steps required may seem complicated, they should reduce discrimination and ensure that individuals receive both fair consideration and transparency in the process.
We’ll walk you through your duties under federal law, as well as how to consider certain types of information and make decisions based on the report.
Note: In addition to the federal laws we’ll describe below, certain states and municipalities have their own versions of consumer reporting and fair housing laws. We recommend consulting your city, county, and state-specific laws that affect how you use background checks.
Because new laws pass frequently in this area, consult your local tenant clinic for more advice. For example, San Francisco Tenants Union provides a drop-in counseling clinic. There are also several resources such as FindLaw and JoeTenant that allow you to find tenant laws by state.
We’ll go into more depth in this article, but your key responsibilities are:
- Have a permissible purpose to run background checks (like applications or renewals)
- Wait until the end of the application/renewal process to run background checks
- Individually consider offenses you find in a report; don’t automatically deny based on any offense
- Inform the applicant/tenant when you will take negative actions based on the result of a background report (and provide certain information, listed later in this article)
- Give applicants/tenants a chance to explain offenses that you found, and consider those explanations and circumstances as part of your evaluation process
What are your duties under the Fair Credit Reporting Act (FCRA)?
The Fair Credit Reporting Act (FCRA) concerns the use of consumer reports for many purposes -- for instance, hiring, contracting, or evaluating creditworthiness. It also applies to tenant screening. Your responsibilities, as outlined by the FTC, are:
- Have a permissible purpose for requesting a criminal background report (in your case, that generally means checking applicants or tenants who applied to rent or renew a lease) and use the information in the report only for that housing purposes.
- Provide notice to the applicant or tenant when you take adverse action (in other words, any unfavorable action, like denying a lease or renewal) based on the information in a background report.
What are your duties under the Fair Housing Act (FHA)?
While the FCRA governs consumer reporting and background checks in general, you are also subject to the Fair Housing Act, which is enforced by the Department of Housing and Urban Development (HUD).
The Fair Housing Act prohibits discrimination in housing-related decisions on the basis of race, color, religion, sex, disability, familial status, or national origin. In 2016, HUD issued guidance on how to consider criminal records in in housing decisions.
Because certain populations are disproportionately represented in the criminal justice system, criminal-history-based restrictions on housing decisions may violate the FHA if the burden falls more on applicants in one class without justification.
As a result, HUD advises housing providers (including landlords) to consider each applicant or tenant individually and not make blanket policies about rejecting applicants, as that could be seen as discriminatory.
Some general tips from HUD include:
- Do not consider arrest records as a reason for denying housing -- arrest records do not constitute proof of unlawful conduct.
- Consider the nature and severity of the crime -- don’t blanket reject candidates who have any offense.
- Consider the age of the offense (how recently it occurred) -- less recent crimes may be less relevant.
- Consider the relevance of the offense -- not all offenses affect the applicant’s qualifications as a tenant.
- Offenses that are taken into consideration should be closely tied to ensuring the safety of other tenants or your property -- for example, convictions for drug manufacturing and distribution.
- Ensure that any policy regarding the consideration of criminal records is applied consistently across all groups.
Other tips in line with the FHA:
- Don’t run a criminal background check until the end of the process, after applicants or tenants have passed other screening processes (like credit checks, rental history, and other qualifying criteria).
- Give applicants or tenants an opportunity to provide context on the information that you found. A criminal record doesn’t always tell the whole story, and applicants may be able to provide additional context that helps you make a fairer decision.
How do you interpret a background check report for housing purposes?
Checkr’s reports contain information on the applicant and the screenings that were run. But what you’ll likely spend the most time considering are the outcomes of the individual screenings. For each screening, Checkr provides a status: clear or consider.
- Reports marked as clear do not contain any potentially adverse information about the person.
- Reports marked consider have potentially adverse information that should be reviewed: for example, a criminal offense.
When you receive a copy of the report, review it closely, considering the guidance provided by HUD (nature and severity, age of the offense, relevance to tenancy). If you don’t find information that would cause you to take any negative action, then you can proceed with the lease or renewal. If you do find information that may cause you to decline the applicant or change the terms, then you’ll need to complete what’s called an “adverse action” process.
Here’s what clear or consider reports look like on a tenant screening report:
What’s an adverse action and what process is required?
Let’s say you find information on the background report that would cause you to change your mind about a tenant. Here, “adverse action” is one of your key areas of responsibility. An adverse action refers to any unfavorable action you take based on the information in a report. This includes:
- Denying an application or lease
- Requiring a co-signer on a lease
- Requiring a deposit that would not be required for another applicant
- Requiring a larger deposit than might be required for another applicant
- Raising the rent to a higher amount than for another applicant
If you do any of these things (or take another unfavorable action not listed here), you’re required to provide notice to the applicant or tenant, including:
- The name, address, and phone number of the consumer reporting company (like Checkr) that supplied the report. If you’re doing tenant screening through a third-party service or online renter platform, they will link to our contact information.
- A statement that the company that supplied the report did not make the decision to take the unfavorable action and can’t give specific reasons for it.
- A notice of the person’s right to dispute the accuracy or completeness of any information the consumer reporting agency furnished, and to get a free report from the company if the person asks for it within 60 days. They are also welcome to contact our Applicant Support team for a copy of their report.
This notice can be delivered orally, in writing, or electronically. For a sample form, contact firstname.lastname@example.org.