How Background Checks Can Be Used in Property Management
If you are a landlord or work for a property management company, it has probably occurred to you to look into the background of a potential tenant prior to approving their application. However, many laws outline the proper use and application of background checks when it comes to property management. Read on to learn when it’s okay to use this sort of information and to what extent.
According to the Federal Trade Commission, tenant background checks can “include a variety of information, including rental and eviction history, credit reports, or criminal records.” In the industry, these reports are typically referred to as “consumer reports.”
When you choose to use background investigations in property management decisions, you are required to abide by the requirements of the Fair Credit Reporting Act (FCRA). To read more about the FCRA, click here.
You are only allowed to obtain a consumer report under the FCRA if you have a “permissible purpose.” Landlords are permitted to obtain such reports on tenants renewing a lease or on new rental applicants. The report requestor is also required to certify to the company conducting the background check that any results will only be used in housing decisions. Results cannot be used or shared in any other manner.
It’s important to review the FCRA guidelines before making any decisions about housing applications. For instance, it may not be legal to deny applicants solely on the basis of certain criminal records. These regulations are subject to change and vary by jurisdiction, so be sure to speak with your background investigation provider for additional information.
If information arises from the consumer report that leads you to reject the application or make a particular decision, that action is referred to as an “adverse action.” Examples of adverse actions include denying the application, requiring a larger deposit, requesting an additional co-signer on a lease, or raising the rent.
A notice that such an action will be taken must be sent to the applicant, but it can be either written or verbal. The adverse action must inform the applicant that they have the opportunity to look at the consumer report and to refute any results they believe to be inaccurate. The applicant is entitled to a free report from the company who furnished it within 60 days of the adverse action notice.
If for any reason a landlord were to request an “investigative report” in addition to the consumer report, they are required to uphold additional FCRA requirements. An investigative report can mean an interview speaking to the applicant’s personal character, reputation, or lifestyle. Notice of this investigation must be provided to the applicant, and they have a right to information about the scope of the inquiry.
Like with any background investigation, consumer reports for housing purposes must meet strict regulations in order to protect the rights of applicants. For more information on background investigations, contact Alliance Risk Group today!
Alliance Risk Group. is a full-service investigative firm that conducts best practice background checks in a variety of industries, regardless of your company’s size or geographic location. Are you interested in learning more about background investigations? Schedule a no-cost webinar to see if our services might be right for you!
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