Landlords and property managers need to screen tenants before entering into rental agreements, but accurate tenant histories are hard to obtain. Use these guidelines to determine if a prospective tenant is the right fit for your property.
Landlords at a loss
A prospective tenant calls a landlord to inquire about renting a unit of the landlord’s property. The landlord needs to screen the prospective tenant, but is not sure just what to do to get the most reliable information. The landlord has checked references for other tenants and knows prior landlords often are not reliable sources for determining the creditworthiness of their past tenants.
This landlord, like many, is frustrated by the endless loop of inquiries about prospective tenants. Many landlords and property managers are hesitant to provide accurate tenant references. They are fearful of litigation if the tenant disagrees with the information they provide. They instead refer the inquiring landlord to secondary sources, like personal references, on whom the landlord certainly can’t rely, or who direct the landlord back to the original source.
Instead of hopping aboard the merry-go-round of referrals, use the information outlined below to compose a factual, reliable report on your prospective tenant.
The rental application
Before you worry about interviewing prior landlords or requesting information to check facts, you first need permission from the prospective tenant to obtain their information.
To get permission, have the tenant fill out a rental application form authorizing you to run their credit history and contact prior landlords and employers. [See RPI Form 553]
You may charge a one-time, nonrefundable credit reporting fee for actual out-of-pocket costs, not to exceed $30 plus adjustments made annually according to increases in the Consumer Price Index (CPI). Any unused portion of the fees collected for the report need to be returned to the prospective tenant along with an itemized receipt for credit reporting services. [Calif. Civil Code §1950.6]
The rental application asks for personal references, as well – you may decide whether or not to pursue these references. Many landlords and property managers do not perceive personal references as reliable sources of information, as the tenant may have coached a friend or relative to act as a reference in their favor.
Contacting prior landlords
Prior landlords and property managers are often tight-lipped about their former tenants. Fear of violating the Fair Housing Act dissuades landlords from offering information, however true, in order to avoid litigation and possible liability.
To get the information you need from a prior landlord, you’ll need to ask the right questions. Focus on the facts with questions including:
- Did the tenant cause any damage to the property?
- Was the tenant ever served a 3-day notice?
- Did the tenant comply with the terms of the lease?
- Did the tenant make payments on time?
- Did the tenant incur any late fees, and were they paid?
- Were there any bounced checks written by the tenant?
You may also ask the prior landlord about the tenant’s personal conduct, what the amount of the tenant’s monthly rent payments was and the dates of the tenant’s residency.
An investigative report may also be purchased from an investigative consumer reporting agency, which includes personal interviews with neighbors and associates of the prospective tenant. You need to have the tenant’s consent before requesting an investigative report. [CC §1786.12(d)]
However, even if you ask the right questions, landlords may lie. If the tenant’s current landlord wants to get rid of them, they may gloss over negative details to make the tenant seem pleasant. Pay attention to the landlord’s mannerisms when you ask your questions – do they hedge or fall silent? These may be signs the landlord is hiding significant details, whether to avoid litigation or relieve themselves of the tenant.
Always speak to the landlord in person if possible. Interviews held over the phone provide a convenient camouflage for tenants and their friends to sidestep negative references. Personal interviews give landlords pause before providing histories. Chances are, if you don’t speak to the landlord face to face, they may not want to cooperate at all.
Reading the facts
Once you are done interviewing references, it’s time to review the tenant’s credit history. Enlist a credit reporting agency (CRA) to obtain an accurate credit report for your tenant. Some tenants provide a copy of the report they obtained free online – which can be true, if not altered.
Landlords and property managers need to identify themselves to the CRA, state the purpose of the information requested and certify the information in the report will be used solely for the purpose expressed – to verify and assess the prospective tenant’s credit history. [CC §1785.14(a)]
A credit report contains relevant information, but only to a point. A credit report does not include:
- bankruptcies ten years old or older;
- eviction or unlawful detainer (UD) judgments seven years old or older;
- UD actions without final judgments;
- tax collection reports seven years old or older; and
- criminal activity or charges seven years old or older.
You may consider doing a quick internet search under the prospective tenant’s name for any criminal history. CRAs and tenant screening servicers will provide a thorough criminal history report for an additional fee. A general sweep online, however, may bring up criminal activity or charges that are no longer reflected on the credit report.
Consider providing a prospective tenant with the opportunity to come forth with their criminal history by simply asking whether they have any prior convictions on the rental application. [See RPI Form 250]
You may also contact courts in the tenant’s county for past eviction reports. These reports are available to the public for only seven years, so you are unlikely to find eviction incidents that are not included in the credit report.
To verify the tenant’s employment information provided on the rental application, ask the tenant for their most recent pay stubs. Pay stubs alone won’t prove a tenant’s employment, however; be sure to contact the employer to verify the tenant’s employment is current and stable.
Fair Housing Act violations
Avoiding litigation is the first priority for prior landlords providing references. Thus, you as an inquiring landlord or property manager need to be aware of its causes. To do so, you need to adhere to the guidelines of the Fair Housing Act.
Landlords and their property managers may not screen a prospective tenant based on their race, sexual identity or orientation, age, marital status, disability or religion. [24 Code of Federal Regulations §100.5 et seq; Calif. Government Code §12955]
Violating fair housing laws is the most significant reason prior landlords don’t like to share information about tenants. Some fair housing criteria may seem a bit vague when applied to specific scenarios, so many a landlord prefers simply not to get involved – a good idea for them, but an obstacle to anyone attempting to get an accurate profile on a prospective tenant.
Denial of credit
Landlords and property managers dealing with a prospective tenant need to provide them with a denial of credit notice if they are taking adverse action based on the information contained in a credit report. Adverse actions include denial of the rental application based on the belief the tenant will not be able to make payments. The notice needs to be provided to the tenant within 30 days of the landlord’s receipt of the credit report. [See RPI Form 553-2; CC §1785.2; 15 United States Code §1681m; 12 CFR §202.9]
The tenant may then request a copy of the credit report on which the denial is based. [CC §1785.10.1]
Stick to the facts when speaking about prospective tenants. Don’t make any inquiries regarding protected classes. Ask direct questions about verifiable leasing facts and not the profile of the individual prospect, like rental payments and performance of lease agreements.
No matter how accurate the information you obtain, credit histories are just that – history. Nothing guarantees a prospective tenant’s ability to uphold the terms of a lease agreement – even a third-person guarantee – but diligence in screening tenants saves you the headache of leasing to a tenant who can’t or is likely not to perform as agreed. [See RPI Form 553-1]
This article was previously posted in 2015, and has been updated.