Minimizing liabilities within your leasing process is an important aspect of protecting you and your property. Without performing thorough tenant screening, providing Adverse Action Notices and a Summary of Rights, and being mindful of national and state-wide legislation, you can easily get yourself in a whole lot of legal trouble. To avoid rental liabilities, be mindful of incorporating these few steps into your leasing process.
The Importance of the Adverse Action Notice
As a landlord, you want tenants that pay their rent on time, don’t pose a threat to your property, and (hopefully) seek to renew their lease. That’s why you utilize tenant screening as a way to ensure your property gets quality tenants, and avoids potential liabilities. In the case where you receive applicants that aren’t the right fit or potentially pose a threat, you legally must send out an adverse action letter to the denied or conditional (modified terms) applicant.
According to Caryn Bennett’s article, “you are to provide the applicant in writing (1) an Adverse Action Notice explaining why the decision was made, (2) a Summary of Rights Under the Fair Credit Reporting Act and (3) any additional forms required in your state.” Your reporting agency, like ApplyConnect®, should provide you with a compliant Adverse Action Notice template for you to use.
Providing an Adverse Action notice to each denied or conditional applicant is vital, so that when the applicant disagrees with the decision, based on information on their tenant screening report, they can initiate a consumer dispute. By correcting any inaccuracies, this will in turn, improve the tenant screening data you rely on.
Still confused? The Federal Trade Commission (FTC) provides guidance on how to legally use consumer reports.
The Influence of “Ban the Box” Legislation and State-by-State Application Fees
Although currently enacted “Ban the Box” legislation has primarily targeted employment screening, as we see in Washington D.C., the movement is slowly gaining traction in the rental industry. “Ban the Box” legislation in the rental industry, in short, aims to remove the ‘box’ on rental applications that ask if an applicant has ever been convicted of a crime. Previous legislation has dictated that landlords must extend a conditional offer of tenancy, and then may only deny applicants if they have specific types of convictions within a specified number of years. For example, D.C.’s B21-0706 only allows denials based off of convictions like murder, assault, arson, sex abuse, robbery and fraud, and only if the charge has occurred within the past 7 years. While this legislation is not yet widespread, laws like these regulate (and change) your leasing process – making knowledge of national, state and local laws a matter of compliance.
In addition to national and state legislation like the proposed “Ban the Box” bills, if you have multiple properties within multiple states, you will need to adhere to the state-mandated maximum on application fees. In California, for example, the original statute stated that the fee cannot be greater than $30; however this maximum has been increased multiple times. In fact, as of December 2016, the Consumer Price Index was adjusted and the maximum fee was reset to $47.72.
Additional Resources to Avoid Liabilities
To further protect you and your property, you’ll want to be familiar with the consumer’s (applicant’s) rights. Knowing where to access a free credit report, how to avoid identity theft and how to secure data stored in your office can heavily minimize potential liabilities.
Although staying aware of new legislation and being mindful that you’re properly using consumer reports can take a lot of time, it can significantly improve your leasing process, minimize liabilities, and give yourself a good reputation. Nothing looks worse than a lawsuit, so you might as well use these steps to your advantage and stay on the good side of the law.
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