If you have ever leased an apartment, house, or storefront, you have probably agreed to a background check or asked the applicant to do so. What you may not know is that the process of looking into someone's background is regulated by state, local, and federal law. Here are five points any landlord, tenant, or screening agency should know about tenant screening laws.
Federal law provides baseline protections for tenancy applicants.
The Fair Credit Reporting Act ("FCRA") requires that applicants both authorize screening and receive notice before any adverse action is taken based on the report. However, unlike for employment screening, tenant screeners are not required to provide an independent disclosure or a pre-adverse action notice. The Investigative Consumer Reporting Agencies Act also requires an authorization by the applicant, but those authorizations are usually subsumed within FCRA requirements. Additionally, the FCRA limits how long various items can remain on a report. While convictions can be reported indefinitely, other facts may only be reportable for seven years.
State and local ordinances often regulate tenant screening more stringently than federal law.
The past several years have seen an uptick in state and local background screening ordinances imposing stricter requirements on landlords, both in terms of paperwork and in terms of what facts may be reported. For example, California requires a certification of compliance with the ICRA and notice of the background check to be given in at least 12-point font. It also strictly construes what constitutes an adverse action triggering the applicant notice requirement; even a denial of an application or an increase in rent might qualify. Additionally, it prohibits background screeners from reporting unlawful detainer actions where the consumer prevailed. Washington also imposes additional disclosure requirements and requires that notice of adverse actions be in writing, specify the specific adverse action, and give the but-for reason based on the tenant's application. Multiple states shorten the length of time a criminal conviction or arrest may be reported. And Seattle's Fair Chance Housing Ordinance states that it is an unfair practice to consider or require disclosure of criminal history, subject to narrow exceptions, and that landlords may not reject an applicant simply because he is on a sex offender registry without conducting an individualized assessment and providing written notice. In California, Oakland's ordinance takes these requirements one step farther and requires that if an adverse action is taken, the applicant must be given instructions on how to file a complaint with the city, a list of legal service providers, a copy of his criminal history and the basis for the decision, and an opportunity to respond.
Credit reporting agencies may be exposed to suit under new ordinances.
In addition to the stricter requirements, some recent state and local laws have extended the liability net to include credit reporting agencies, not just the landlords who improperly seek the information. For example, Seattle's ordinance is not limited to property managers; it applies to screening companies and "any person" who assists in improperly providing the information. Oakland also recognizes this aiding-and-abetting theory of liability, and New York City has proposed an ordinance which would prohibit any inquiry or adverse action against someone who has been arrested or convicted and which includes an aiding-and-abetting provision.
Landlords and property owners may be subject to criminal as well as civil liability under new ordinances.
At least one city has established criminal penalties as well as civil causes of action for reporting violations. Oakland's ordinance authorizes criminal charges to be brought against violators, in addition to a $1,000 fine per violation or individual civil actions for damages. Other localities may follow Oakland's example. Such penalties dramatically raise the stakes for noncompliance, especially where the lines on what is and is not reportable are unclear.
When in doubt, follow the stricter jurisdiction's rules.
For landlords and screening agencies operating in multiple jurisdictions, staying abreast of legal developments, particularly at the state and local levels, is of paramount importance. What is permissible in one neighborhood may result in criminal charges or stiff fines just across the city line. If compartmentalizing compliance by jurisdiction is not practical, or if reporting agencies operate in one state but report information to another state with different rules, they should follow the stricter jurisdiction's requirements if they wish to avoid exposure to liability, particularly in areas that include aiding-and-abetting provisions.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.