Why Skipping a Tenant Screening is a Costly Mistake

Landlords can not deny housing to people based on race, color, national origin, religion, sex, familial status or disability. The U.S. Department of Housing and Urban Development’s Fair Housing Act makes these forms of discrimination illegal. Some states have added protections based on marital status, gender identity, and sexual orientation.
That said, in most states it is fully within a landlord’s rights to set their own requirements for tenants, provided they do not include the groups protected by the Fair Housing Act, and that the same requirements apply to all candidates. Some common reasons for rejection are criminal convictions, prior evictions, bad references from employers or past landlords, poor credit history, or insufficient income to pay the rent. Property owners can also specify that renters be nonsmokers and do not own pets.

Every new lease has a certain level of uncertainty. Someone who seems conscientious and responsible might be a horrible tenant. Meanwhile, someone who comes across sketchy might be a model renter. Effective tenant screening offers valuable insight into prospective tenants so a landlord doesn’t need to make judgment calls based solely on intuition.
The questions about prospective tenants that are most important to landlords are:

Failure to thoroughly screen tenants can expose your property and other tenants to risks. Here are some of the potential consequences of accepting problem tenants:

A renter who has some temporary financial trouble and pays late once or twice might be acceptable as a tenant. Someone who is chronically late or seriously in arrears is another story. Failure to pay rent on time is a frustrating and costly situation for property owners. And if it comes to the point of needing to start eviction proceedings, it gets even more expensive.
A good tenant screening needs to include credit data and employment information to ensure that the renter is able to afford the unit.

Maintaining a rental property and making occasional repairs goes with being a landlord. Some tenants, however, make this more work than others, costing property owners a lot of money. It is difficult to gauge how well a new tenant will take care of the rental.
Observing if the candidate is neat in appearance during an interview might offer some clues. Even the condition of their car might help. But first impressions can be deceiving. Gathering and checking references from former landlords during screening can give a much more accurate picture into what they will be like as tenants. Did they keep the apartment clean? Did their children or pets cause damage? Were they rough on the appliances and fixtures? References are a valuable resource.

Renting to criminals or sex offenders could pose a personal threat to a landlord’s other tenants. That is not to say that people with prior troubles with the law are automatically bad tenants. The important thing is to know the facts before handing over the keys.
If you learn of criminal activity from a background check, find out more about the circumstances so you can judge the risk level of renting to the individual. For example, a 40-year-old man with a family and a steady job who was in trouble for a fight at age 20 might be a low risk for trouble. Someone recently released from prison for multiple violent offenses is worthy of more caution.

Let’s say a landlord doesn’t do a background check and unknowingly rents to a criminal. If that person then commits a crime against other tenants on the property, the landlord could be sued for negligence. Ignorance of a tenant’s past is not a reasonable defense. Property owners owe their tenants a reasonable expectation of personal safety. A thorough background check can save you from future legal headaches.

Landlords can interview prospective renters and ask them these and other questions, but there’s no guarantee that they’ll tell the truth. Having a standard tenant screening process is a better option. Tenant screening gives a landlord verifiable data to help them make their decision. And if they must deny an application, screening records can be valuable proof that the decision was not discriminatory, but was instead due to another documented reason.
Here are the things that a good tenant screening will do:

Tenant screening verifies income and employment. It will also examine an applicant’s credit background. This typically includes the credit score, any bankruptcies or foreclosures, existing loan amounts and whether any collection proceedings are taking place. A person’s credit background can measure the likelihood of making payments on time.
A full credit screening will require the applicant’s social security number. It is legal to ask for it, but it is also common for people to refuse. This could be for valid reasons such as the fear of identity theft. A landlord could settle for a copy of a credit report obtained by the individual instead. It’s up to the landlord if this along with verification of employment and prior landlord references is enough to assure them that the rent will be paid.
Most credit checks will also show any eviction proceedings, even if the tenant won the case. This is important information for the landlord to follow up on. Details of the case might help make the decision to deny or accept them as renters.

A criminal background check will search available databases for criminal behavior. Landlords can typically find out the type of crime, and the amount of time served if convicted. Sexual offender registries will also be checked in a thorough screening.
State and local databases will reveal felonies and misdemeanors. Federal records will include data from the DEA, FBI, Homeland Security, and ATF, among other agencies.

Requiring and checking personal and professional references gives landlord valuable first-hand information about the prospective tenant. They can often “fill in the gaps” not covered in an application. For example, a previous landlord might tell you that a tenant with five kids and two dogs is actually an ideal renter. Or that the seemingly quiet single guy often has loud parties that disturb the neighbors.

Possibly the most important thing a tenant screening shows is the trustworthiness of the candidate. If they have lied on the application or were not truthful in the interview, a screening will reveal it. A landlord will be much more likely to give a renter a chance if they are upfront about their past mistakes from the start.

Landlords can screen tenants themselves. It will take time to phone references and there may be fees to access the databases necessary to get thorough background information. This may work if there are only one or two units to rent, but once you have more than that, it can be a full-time job.
Another option is to use a tenant screening service. Some popular agencies are RentPrep, SmartMove, MyRental, Cozy, and TenantAlert. These and many others offer packages costing from about $19 to $30 for a basic report.
Each company includes different statistics in its basic report. Additional information such as a credit check or eviction data might cost extra. Likewise, some, but not all, verify social security numbers, bankruptcies, and sex offender registries. Before signing on with any of these agencies, it is wise to do some research to find out exactly what you’re paying for. Landlords must decide what criteria are most important, and see which company covers them.

Hiring a property management partner like Select Leasing & Management can provide the best solution, especially when the number of units makes do-it-yourself screenings impossible. Not only do they screen tenants for you, but they also have the personnel for day-to-day management, upkeep, and repairs.

Landlords have the right—and the responsibility—to protect their property and other tenants. Denying an applicant based on past issues is not discrimination. If an individual’s past behavior points to potential problems, their application can be legally rejected. Thorough tenant screening is the best way for a property owner to get the information necessary to find the best possible tenants.