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Colorado Enacts New Restrictions on Tenant Background Checks

By Michael Klazema on 5/9/2019

For prospective tenants, the rental application process can be as stressful as applying for a new job. For landlords, considering those applications includes deciding who is likely to pay rent on time and who will treat their investment property with respect. In making these determinations, landlords rely not only on the information supplied on the application but also on supplemental sources. These can include background checks and credit reports, such as those offered by backgroundchecks.com. Many landlords charge application fees to offset the cost of ordering such checks. In Colorado, 

Governor Polis signed the Rental Application Fairness Act into law in late April, implementing changes to both the application fee system and the rules governing how landlords can use background checks. According to a report in Denverite, respondents to a survey conducted by fairness advocates indicated that fees often represent an added burden to the housing search. 

Under the new rules, landlords can only use application fee money to fund the cost of ordering credit reports and conducting background checks. Otherwise, their usage is prohibited. Landlords also face a requirement to make a "good faith effort" to return any unspent portion of the fee after the evaluation process concludes. With a stated goal of preventing fees from contributing to profits and barring lower-income individuals from applying, these modifications aren't the only effort to re-balance the scales: the law also targets the use of background checks.

Instead of giving owners carte blanche to consider everything about an applicant's history, the Rental Application Fairness Act stipulates that landlords can't consider convictions older than five years from the date of application. Some exceptions exist, such as sexually-related offenses. Landlords will be barred from considering non-conviction-related arrests, though background checks don't often report such information. Only seven years of credit history can factor into the landlord's determination of suitability.

Ultimately, the new rules expand the number of opportunities available for those who often have the most difficult time securing stable housing. Lawmakers and advocates hope that the new rules regarding application fees will ensure that landlords can continue to conduct their due diligence fairly without hamstringing their efforts to make safe, smart choices.

Understanding the background of the individuals to whom you may rent a property is vital; no landlords want to rent to a tenant who they may later need to evict. Access to the right tools to evaluate credit and the applicant's criminal background is often essential. At backgroundchecks.com, we provide a range of products to simplify the process of evaluating applicants, including credit screening and our multi-jurisdictional US OneSEARCH background check. With these tools and an understanding of how to use them, landlords can review applications with confidence and compliance. 


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