Smart landlords take every step possible to mitigate risk in their rental businesses, including implementing careful screening procedures for qualifying new renters. As part of your overall risk mitigation strategy, it’s a good idea to update your tenant screening process regularly to make sure it is fully compliant with any recent laws that have been passed in your state or county. As of January 1st, 2022, legislation came into effect that updated the tenant screening laws nationwide. Here’s what you need to know to make sure your screening process is compliant with the new legislation:
What are the 2022 changes to the tenant screening legislation?
Your state or county may have additional requirements, so it’s always a good idea to check your state’s tenant screening laws specifically, in addition to following the updates to the national legislation listed here:
Medical marijuana cards:
Beginning in January of 2022, property managers are no longer allowed to ask prospective residents about their status as medical marijuana patients. Since medical marijuana cards are only obtainable through a doctor, information about whether an applicant possesses one is considered privacy-protected under HIPAA laws as part of the applicant’s health records. The possession of a medical marijuana card will not show up on a criminal background check, since it is not a criminal offense. (Any past criminal charges related to illegally obtained marijuana will still show up on background checks.)
Prior evictions:
As part of an effort aimed at stopping the cycle of homelessness, criminality, and arrest, several types of prior eviction court filing records can no longer be used to deny a prospective applicant:
Judgements more than 5 years old: An eviction filing more than 5 years old is no longer grounds for rejecting an application.
Cases won by the tenant: If the tenant won their prior eviction case, that filing can not be considered grounds to deny their application.
Pandemic timeframe eviction records: Additionally, a filing can’t be considered if the event/reason for the prior eviction occurred between April 1, 2020 and February 28, 2022 (essentially: during the Covid-19 pandemic). Even if the judgment was entered outside of that time frame, if your applicant violated their lease during the above time frame, that violation can’t be used as a reason to deny them housing.
An important note: It is still a good practice to look at prospective renters’ rental histories before making a decision. If an applicant has multiple evictions in their history that don’t fall into the categories above - in other words, if evictions are clearly a consistent issue in their rental history - or if previous landlords have shared that this applicant still owes money, that may be a legitimate reason to select a different renter.
However, just because an applicant has had a past eviction does not necessarily mean they are currently at risk for an eviction. If you do decide to reject an application based on past evictions, just make absolutely sure that you do so within the bounds of the new legislation above and the Fair Housing Act regulations. If you are willing to accept a resident with an eviction history, you can take certain steps to minimize your risk, including requiring lease guarantee rent coverage.
Criminal history:
Just as with eviction history, the 2022 legislation stipulates that only certain parts of an applicant’s criminal history can be taken into account. However, in this case, the legislation specifies that convictions and pending charges can be considered for acts that are considered illegal in the state you're in. Some examples include crimes against persons (including assault and other violent crimes), sex offenses, and financial crimes.
Prior arrests with charges: The legislation’s openness around criminal history also stretches to prior arrests, as long as the applicant was charged with a crime. If a potential renter was arrested and charged for any of the above crimes, those may be considered as reasons to deny housing.
Prior arrests without charges: Landlords are not allowed to refuse to rent to an applicant based solely on arrest records with no charges, since the Housing and Urban Development guidelines state that “arrest is not a reliable basis upon which to assess the potential risk to resident safety or property posed by a particular individual.”
How do the changes to tenant screening legislation impact property managers?
These new policies will change how landlords go about screening future residents. If you’re proven to have denied an applicant based on any grounds that are now considered illegal, you could face some hefty financial penalties. However, you can still take steps to protect your property and current residents while respecting and upholding all of the new rules and regulations for renter screening.
How to update your renter screening process, stay compliant, and protect your assets:
The latest changes in tenant screening legislation have shown how important it is for property managers to stay up-to-date with rental laws. To keep all of your processes updated and make sure that you are staying compliant, it’s a good idea to routinely check your local landlord-tenant laws. Each time the laws are updated, you’ll need to:
Adjust your renter screening criteria in accordance with new legislation.When you’re looking at applications, stay aware of the factors you are and aren’t allowed to take into consideration. Background checks continue to be important, but must be used in accordance with the Fair Housing Act and all applicable local renter screening laws.
Seek additional protection for your rental income and properties. If you’re concerned that new renter screening laws may make it more challenging for you to find reliable renters, one of the best courses of action is to start using a lease guarantee product. A lease guarantee product allows you to increase conversions and approve renters who may not meet your application standards, while securing your rent roll in the event that your resident defaults on their rent. It’s a great way of both mitigating the risk of renting to applicants with non-standard income sources, such as freelancers, and safely widening the pool of applicants you can qualify.
Any landlord found to have denied a person residence based on factors that are illegal to consider under the new legislation will face consequences, but by staying up to date on local and national landlord-tenant laws (and changing your screening process accordingly), seeking the additional protection of lease guarantees for your renters, and enlisting the help of a company that screens potential residents using an unbiased AI algorithm, you can greatly mitigate your risk of accidentally denying a renter for a reason that is no longer legally permissible - and increase the speed, ease, and safety with which you qualify new renters.
Lease guarantee rent coverage from TheGuarantors provides a way for property managers to feel comfortable extending a wider search net for residents. We’re here to help with answers to your questions, and a variety of coverage tools to keep you and your properties protected, and profitable. Contact us today and see what we can do for you.
*All information and content is for general informational purposes only. The information provided here is not legal advice. Readers should contact their attorney to obtain advice with respect to any particular legal matter. No reader, user, or browser of this site should act or refrain from acting on the basis of information on this site without first seeking legal advice from counsel in the relevant jurisdiction.