Tenant Screening Tips: Legal Updates for Landlords

Landlords face a complex balancing act. On the one hand, they want maximum income from the property or properties they manage. Still, they want to protect their investment and keep maintenance expenses low. Informed tenant selection is a critical part of achieving those goals. Today, many large corporate property managers automate the tenant screening process. However, individual landlords can afford careful selection during housing shortages.

Evaluating suitability requires more than a completed rental application. The tenant background check is a pillar of this process. Avoiding discrimination or unfairness during this process is essential. Unfortunately, not every property owner operates impartially. Some may use any background report that isn’t 100% clean as a reason for denial. Many may never even inform applicants of the reason, even if the law may require them to do so.

Regulations exist to create a more equitable environment to control how landlords can use tenant screening reports. Federal agencies warn landlords not to base their decisions entirely on criminal history. These records alone might not tell the whole story about an applicant. States and cities have also engaged in rule-making to level the playing field. Quickly review some key facts and notable state rules currently in effect.

Landlords Retain Extensive Rights for Screening Rental Candidates

As of 2024, almost no places in the country ban tenant screening outright. One of the rare exceptions is Alameda County in California. Landlords in that area can’t ask rental candidates about their criminal history. Indeed, they can’t order a background check on the individual under any circumstances. They must use other information to determine suitability.

There is still a broad recognition of the importance of screening. More than just protecting the property, due diligence helps protect other tenants and neighbors. Nationwide, landlords can still be as thorough as they choose—provided they follow the rules. There are guideline suggestions that property owners should review, too.

Understanding HUD’s Non-Binding Guidelines for Landlords

The Department of Housing and Urban Development (HUD) protects tenant rights and helps clarify and guide laws such as the federal Fair Housing Act. To help landlords, HUD has published several guidelines about using background check results. These directives determine that blanket bans on tenants with criminal records are discriminatory and could violate the FHA.

HUD also has numerous other guidelines to consider. However, these are suggestions—not requirements. Even so, landlords should review this guidance and incorporate its insight when reviewing a potential tenant’s rental history. Using HUD guidelines as your basis can help you operate within the bounds of best practices. Some things to know include:

  • Arrest records aren’t grounds for denying housing. Arrests aren’t convictions, and they don’t indicate guilt. At backgroundchecks.com, we never report arrest data to our clients.
  • Evaluate information about convictions on a case-by-case basis. Consider the crime, the individual’s age, circumstances, time since the incident, and rehabilitation.
  • Apply the same process equally to every applicant.
  • Have transparent guidelines for what is potentially disqualifying, i.e. assault convictions.

Though HUD’s suggestions aren’t binding, they provide essential guardrails for avoiding discrimination claims.

California Landlords Can Allow Tenants to Provide Their Own Reports

California is often home to first-in-the-nation regulations. Alameda’s ban on background check requirements is a good example. However, California tenant screening laws urge landlords must broadly adapt to new rules now. In 2023, a new law went into effect that changed the landscape of tenant screening in the state. Previously, landlords could require tenants to pay an application fee for a background check with every submission. Those fees quickly add up when someone must apply for more than one property.

Tenants can now pay for a particular version of their own credit and background check report. This portable and reusable report can replace individual checks and income verification. This voluntary program does not mandate all landlords to accept these reports. However, the reports can streamline the tenant selection process. Landlords anxious about possible falsehoods can continue to require their own checks.

Are Ban-the-Box Laws Coming to More States?

In the rental industry, employers have faced restrictions on background checks for years. Ban-the-Box rules prohibit asking about criminal convictions on a job application. Could these rules also apply to landlords? In one state, that’s already true. In 2021, New Jersey banned the box on rental applications. Landlords must now make a conditional housing offer before they can use a background check. The goal is enabling landlords to determine if someone is a financially suitable tenant via confirming employment history before criminal records enter the picture. Landlords may request a pay stub as proof of income.

New Jersey is the only state to enact such tenant screening laws. Some individual cities, like Minneapolis, have also banned the box. So far, however, this movement has not gained as much momentum in the rental space. Some in the US Congress have proposed banning rental background checks. However, the legislation never left the committee and seems unlikely to find enough support. Landlords should continue to monitor local regulatory action.

Considering Screening Reports Demands Care and Consistency

New tenant background check laws don’t appear as frequently as they once did. However, that doesn’t mean the current environment is user-friendly for landlord navigation. There are still potential pitfalls and compliance concerns to navigate. For example, consider guidance from the Consumer Financial Protection Bureau (CFPB).

The CFPB warns landlords that they might make decisions based on outdated information. Consumer reporting agencies may not always have the most up-to-date criminal record data. The CFPB has cautioned that many of the procedures landlords use today could violate the law. Discrimination, improper refusals, and even Fair Credit Reporting Act violations are commonplace.

For example, many landlords issue denials because of an item on the background report. However, they neglect to provide the FCRA-required adverse action notice. Applicants can’t dispute inaccuracies in their reports if landlords don’t notify them of the reason.

Such a failure in the tenant screening process for individual landlords can have considerable consequences. These issues create legal exposure and potential future lawsuits. Defending against an FCRA violation as a private landlord can be exceedingly costly—especially if you lose. Landlords must act like employers. Always understand the requirements you face under the FCRA. Provide adverse action notices as demanded by the law. When applicants initiate disputes, work with your tenant screening services to investigate—otherwise, the potential legal risks of noncompliance compound.

Developing and Maintaining Effective, Legal Tenant Background Checks

Criminal background checks, credit scores, and address histories are helpful tools. Landlords are interested in protecting their rental property and neighbors from harm. Though states may limit tenant screening, landlords retain many rights. However, you must stay informed about each change in local and federal law. As scrutiny of the selection process increases, so too may regulation.

Stay current on these changes and be ready to change your procedures. At backgroundchecks.com, we support robust tenant screening programs for our partners. Centralize your process in one place. Explore helpful tenant screening tips and compliance information in our Learning Center. Find the resources to keep your process safe, competent, and compliant today.

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Michael Klazema

About Michael Klazema The author

Michael Klazema is the lead author and editor for Dallas-based backgroundchecks.com with a focus on human resource and employment screening developments

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