Screening tenants in California is not as simple as it is in other states.
While landlords everywhere have to follow the same federal fair housing rules, California has its own laws, and they are actually stricter than what’s found in the federal Fair Housing Act.
This impacts the background checks you can run on prospective tenants. It’s important to screen your tenants carefully, otherwise, you run the risk of placing bad tenants in your rental home, which can lead to eviction property damage, late rent, and lease violation. That’s a lot of liability.
There’s another kind of liability, though, and that’s legal liability.
How can you conduct a robust tenant background check without putting yourself at risk for violating fair housing laws? How can you be sure your screening process is rigorous enough to weed out bad tenants while still complying with the law?
We have some tips for you, based on our experience as Santa Rosa property managers.
You’re looking for renters who can pay rent on time, take care of their homes, and follow the specific terms of the lease agreement. To find these Santa Rosa tenants, you need a solid set of qualifying criteria and a consistent screening process.
Any good screening process will include running various background checks. You want to get an idea of a tenant’s financial situation, criminal history, and rental history. You want to know how much they earn and whether it’s enough to cover the rent. You also want to know if there are previous evictions.
We always run a thorough background check on the tenants who apply for our properties, but we also know that we have to screen within the law. Don’t make an expensive legal mistake while you’re screening.
Understand the Fair Housing Act and California Fair Housing Laws
You take on a lot of liability when you don’t follow fair housing laws. The Fair Housing Act prohibits discrimination against any tenants or applicants. Landlords and Santa Rosa property managers are bound by these laws. As you may know, the law establishes seven protected classes. You cannot deny housing to anyone based on race, color, national origin, sex, familial status, disability, or religion.
State fair housing laws have a long list of protected classes. In California, you must also not discriminate based on:
- Sexual orientation
- Gender identification
- Gender expression
- Veteran or military status
- Primary language
- Marital status
- Source of income
- Genetic information
These protected classes are always evolving, and you have to pay attention when you’re screening. Protected classes have rights that are easy to misunderstand. For example, a tenant with a disability has the right to move into your home with a service or support animal, even if you don’t allow pets. Also, any Section 8 tenants who are qualified have a right to live in your home even if they get their income from a government housing program.
Establish Rental Criteria before Doing Background Checks
Protect yourself from legal liability by conducting background checks after you’ve provided applicants with the qualifying rental criteria you’ll be using to make decisions about who is approved and who is denied. You can spend less time screening by limiting your tenant pool to those who are likely to qualify.
- Always include the rental amount in your listing. When you do that, you’ll only hear from people who can afford that amount.
- State whether pets are allowed
- Write qualifying standards for credit.
- State whether or not you’ll consider tenants with prior evictions.
When you include as much information as possible in your listing, you know that only qualified tenants will apply.
Avoiding Liability while Checking Tenant Backgrounds
There’s a legal liability and then there’s the liability you face when you allow an unqualified tenant into your property.
Balance the risk of both by doing the following:
- Always use a rental application that’s provided by a Santa Rosa property manager or an attorney who specializes in landlord and tenant law. The application must grant you permission to check background information, including income, criminal histories, and credit. You need your tenant’s signature to confirm that they understand you’ll be contacting people and asking for information.
- Providing the standard rental criteria we discussed earlier in this blog.
- Documenting your screening process
- Sending out the necessary denial letters in accordance with the Fair Credit Reporting Act.
The full screening process shouldn’t take more than a day or two, depending on how quickly you’re able to access the information you need. Don’t drag it out. Be efficient and quick about letting tenants know whether it’s a yes or a no.
How can you avoid the liability of approving the wrong tenant? You can thoroughly check credit reports and not just credit scores. You can ask for income to be verified and you can talk to rental references. Pre-screen tenants by asking when they want to move, how much money they earn, and why they’re moving.
Checking Financial Backgrounds
Part of any background check should be a credit check. Don’t go looking for tenants who have perfect credit. That’s going to be difficult to find in a tenant pool. Instead, set reasonable credit standards. If there’s a specific credit score you’re comfortable with, great. If not, spend some time combing through the full credit report to get an idea of how your tenant handles money.
Here are some obvious liabilities that you may find in a credit search:
- Recent bankruptcies
- Money owed to former landlords, property managers, or apartment communities
- Recent foreclosures
- Delinquent housing-related accounts such as utilities, cable, etc.
- Prior evictions (these won’t always show up on a credit report, so check the national eviction database as well)
- A lengthy history of court judgments, unpaid debts, and collection accounts
The debt-to-income ratio is also an important benchmark. When you’re setting standards, maybe you don’t want to see the debt that exceeds 40 percent of an applicant’s income.
In addition to credit, you also want to consider income. When you’re checking income, best practices say that you should look for someone who earns at least three times the rental amount. This means if you’re asking $2,500 in rent, you’re looking for monthly income from all adult tenants that exceeds $7,500. Make sure you have a way to verify that tenants earn what they say they earn. You can ask for proof of income through pay stubs, employment contracts, tax filings, and bank statements.
In our experience, having these financial standards in place establishes accountability and protects our owners against the risk of tenants who can’t or won’t pay rent.
Criminal Background Checks in Santa Rosa
A criminal background check is another important part of your screening process.
In some California cities like Oakland, San Francisco, Richmond, and Berkeley, you’re not permitted to run a background check on your tenants until after an offer has been made.
This is a trend that may work its way into other California markets. If you can check criminal backgrounds, however, it’s worth taking a look. You’d be silly to deny someone because of civil lawsuits or minor traffic offenses. But, if you find something with a criminal background that would potentially put your property at risk, you need to consider whether this is the person you want in your property. You don’t want to rent to anyone with a history of violence, theft, or other dangerous criminal convictions. Check national criminal records as well as local ones; you’ll want more than a local police report.
Santa Rosa Rental References
You reduce the liability that any tenant brings into your property by talking to current and former landlords. Always check the rental references that are provided. A current or former landlord can give you a clear understanding of how your prospective tenant behaves in the property they rent.
On the application, ask for at least two landlord references. Verify the contact information so you aren’t calling the applicant’s friends or family members. If someone had a bad experience with landlords in the past, they won’t want you talking with them.
Call or message the landlords who are serving as references for a prospective tenant. You can even send an email or a text to ensure that the reference checking moves along quickly. Ask those landlords:
- The dates of the tenant’s residency.
- The amount of rent that was paid.
- Whether there were any security deposit deductions.
- If the tenants provided proper notice before leaving.
- Whether there were pets on the property and if so, did they cause any damage?
- If rent was paid on time.
Always ask if they’d be willing to rent to the tenant again.
Thinking about liability is absolutely required when you’re moving through the different stages of leasing and managing your rental home. If you’re not sure you have the resources or the time to conduct a legally compliant and complete background check on the applications you receive, it’s essential to work with a Santa Rosa property management company. Please contact us at Prestige Real Estate & Property Management. We manage homes in Sonoma County, including Santa Rosa, Windsor, Sebastopol, Petaluma, and Rohnert Park.