It’s become increasingly challenging for housing providers to attract desirable tenants while balancing risk management, legal compliance, and fair housing protections. These practices are especially important in the new year as California continues tightening rules around fees, disclosures, and discrimination.
The greatest predictor of dysfunction in a rental relationship is prior dysfunction, yet prospective tenants will go to great lengths to hide failed rental relationships. In fact, California law is on their side. For example, Assembly Bill 2819, passed in 2016, is a significant tenant protection law that automatically seals limited unlawful detainer (eviction) case records if the landlord doesn’t win within 60 days.
When It’s Unsealed (Public): The record becomes public only if the landlord wins the
case (gets a judgment) within 60 days of filing (unless a default or default judgment is set aside).
60 days may seem like ample time for housing providers to prevail, but not with a phalanx of tenants’ attorneys adept at delaying eviction proceedings. What this means is that despite all of the marvels of technology we have to uncover information on people, the most alarming red flag of them all – a prior eviction – can go unnoticed. Some old-fashioned personal sleuthing is in order, then. It’s critical to check references from prior landlords.
Another Red Flag: Landlord Lawsuits
We’d venture to say that no one in their right mind would rent to someone who has sued their past four landlords. Because lawsuits are public records, they can be found by searching for serial litigants by name and location through county court records. This information often appears in the public domain for years.
Beware the Highest Bidder
The adage applies – if it sounds too good to be true, it just might be. After the landlord has a vacancy and they’ve spruced up the unit to command a high rent, be wary of a rental candidate who offers to pay a premium rent, but their prior landlord provides an ambivalent reference at best.
Contrast that with another applicant who says they cannot afford the high price tag, but has a list of stellar references, and housing providers have a decision to make. Above all else, they should not invite dysfunction into the building. It may be prudent to accept lower rent from a more ideal tenant than selecting a tenant committed to paying more, but who has question marks about their history.
Sometimes, we see tenants all too willing to pay higher rent because no one else wants to rent to them. Housing providers can be thrilled to find a prospective tenant ready to move in and pay top dollar, only to be horribly disappointed to learn that the tenant is unable or unwilling to make timely rent payments or worse, create costly damage to the unit.
This can be avoided by thoroughly evaluating rental applicants on the front end. Remember, the best type of eviction is one that doesn’t occur at all.
What’s the Rush?
Whenever a rental applicant needs to urgently move, the question we have to ask is why? What is the rush? Is the hurried candidate vying for a unit facing an eviction at their last residence? Normally, a move from one set of surroundings to another is a well-planned project. If the tenant wants immediate possession of the rental unit, this can be a concerning red flag.
Consistent Rental History is Vital
It is also concerning to see gaps in rental history. If there is a long period – months or years – where the tenant’s living arrangements were unaccounted for, we need to ask why. Were they evicted? Were they incarcerated?
That’s the number of landlords who have discovered fraudulent tenant
documents, with 84% reporting they have uncovered false income or bogus claims of employment, according to HousingWire. Many of these prevarications are perpetrated by career scammers who bounce security deposits, lie on applications, and defraud housing providers to the tune of hundreds of thousands of dollars.
Verify Applicant Information
It’s not enough for an applicant to present impeccable credentials to rent a unit. Rather than taking the applicant’s word for it, this information should be verified. Here are a handful of tips for housing providers to know who they are actually renting to and how to avoid nightmare tenants:
Ask for proof of rent payments to the previous landlord, dating back at least six months. While it’s comparatively easy to forge documents, it is harder to doctor false evidence that the last landlord was consistently paid rent.
When an applicant provides the name of their employer, do a Google search on the name of the business and call the published number of the business. Too often, prospective tenants provide phone numbers of family or friends who are willing to lie about the applicant’s place of employment and income.
When conducting credit checks, make sure that the credit report is tied to the applicant’s cell phone number to ensure that the applicant is who he or she says they are. There are tools to compare self-reported data against the databases of credit reporting agencies to flag discrepancies like fraud or deceased alerts.
Insist on secure payments with a bank check or secure payment methods through verifiable platforms if paying electronically. There are a host of rules surrounding how a tenant can pay rent. Housing providers need to familiarize themselves with them.
Screen all adult tenants who apply, not just one. Failure to screen all adults leaves you vulnerable to lease violations, property damage, and costly evictions, even if another occupant seems responsible.
Ensure that the applicant has all of the funds necessary to move in. If a prospective tenant does not have the wherewithal to move in, this is a huge red flag that may be an indication that the landlord will be paid in installments when the monthly rent is due.
Establish Clear Screening Criteria
What are the characteristics of a successful rental applicant? Is it a minimum credit score, no bankruptcies, positive references, and income that is at least three times the rent? Housing providers should list the criteria necessary to be qualified for the unit.
Where we need to be careful is when a Section 8 client applies. When the applicant has a housing voucher in hand, housing providers cannot discriminate based on the source of income. Rather, landlords and property managers can only focus on the tenant’s ability to pay their portion of the rent. Think pay stubs, bank statements, government benefit award letters, W-2s, and other verifiable documentation.
It’s vitally important to consider where the rental property is located, as certain California cities and counties limit how (and whether) landlords can check criminal histories. Some municipalities have also instituted their own rules concerning when and how credit and other background information can be used in tenant screening. These local ordinances go beyond California state law and can significantly change what screening practices are lawful in those jurisdictions.
Avoid Discrimination
A myriad of California and federal laws prohibit screening practices that discriminate based on an ever-growing number of protected characteristics. Believe us when we say there is no shortage of opportunistic attorneys chomping at the bit to sue housing providers who are caught in the act of discrimination, and these types of lawsuits are hard to defend against.
For example, our office has crossed paths many times with an East Bay attorney who has carved out a lucrative practice in catching unsuspecting landlords and property managers who summarily reject Section 8 tenants.
Most culprits of discrimination in the tenant screening process are good people who are simply ignorant of the law. They may even have good intentions.
For example, a gentleman walking with a cane is told that it is not prudent for him to rent a second-floor apartment. Although genuinely concerned for the safety of the rental applicant and not wanting to be sued in the event he falls down the stairs, the landlord may instead be sued for housing discrimination. Another example is when someone refuses to rent an apartment with a balcony to a mother with a young child for fear that the child will venture onto the balcony. What the landlord just did is exclude a child and invite a discrimination lawsuit.
Staff Training on Discrimination is Key
Even if management is intimately familiar with fair housing laws, that is not enough. Everyone in the organization must understand what to say and what to avoid when fielding rental applications. Who is the first person answering the phones? This first point of contact needs to be well-versed in what constitutes discrimination and avoid potential slip-ups. Training topics should include fair housing laws, protected classes, prohibited acts like steering, false unavailability, and harassment, with an emphasis on best practices, communications, and providing resources for reporting/handling issues to prevent legal issues and foster inclusivity, with regular refreshers recommended.
Complying with California’s Tenant Screening Fee Rules
California tenant screening fee laws are governed by a mix of existing statutes and, most recently, Assembly Bill 2493. This law reflects the public policy that tenants should not expend unnecessary funds paying for application and screening fees when they are not going to be selected for the rental. It also frowns on landlords and property management companies that become a profit center by collecting dozens of application fees when they only have one unit available.
Housing providers and their agents can opt into one of two approaches:
The first approach: A “first qualified, first approved” approach: Landlords do not have
to refund an application screen fee to an applicant whose application is denied after it is considered. Why? The prospective tenant does not meet the landlord’s established screening criteria.
Many people – especially property management companies – do not want to be accused of discriminating against applicants and elect to use first qualified, first approved. This system is clean, it’s easy, and in chronological order.
The second approach: Other people – especially smaller property owners – want to choose the strongest applicant, so they attract several applicants and then look for the most qualified tenant. Of course, discrimination in any form is prohibited. Under the second option, the only applicant they can keep a screening fee from is the successful applicant who is offered the unit, accepts, and signs a lease.
If it’s determined that the latter option is a fit, our strong advice is not to take any application fees at all because these fees will need to be returned anyway.
Housing providers are reminded to follow a host of other rules:
- Fees must reflect real costs: The amount charged must match the landlord’s actual out-of-pocket costs (credit report, background check, etc.) and the reasonable time you spent, and not a penny more.
- Itemized receipt: Provide a detailed receipt listing every cost within a reasonable timeframe.
- Refunds for unused or excess fees: If landlords collect a fee but don’t screen, the unused part must be refunded.
- Credit report delivery: If you run a credit check, give the applicant a copy of the report within 7 days of receiving it.
As the founding attorney of Bornstein Law, Daniel is a well-respected authority in landlord-tenant disputes and property management issues. With over 23 years of experience in handling real estate and civil litigation throughout the Bay Area, he also manages rental properties, is instrumental in completing real estate transactions and is renowned for his educational seminars. For more information, visit www.bornstein.law or call 415-409-7611 or email: [email protected].