Let’s say you found a realtor you like (hopefully Ali Safavi Real Estate helped with that). You then found the perfect rental property, laid down the deposit and are now the proud owner of a real estate investment. Congratulations! Now, if all the repairs and renovations are in order, it’s time to find the new tenant. You might see this as “the easy part,” but beware. Choosing a bad tenant can have dire consequences on your real estate investment. Furthermore, you don’t want to get yourself into trouble by asking the wrong questions. There are strict laws in each state dictating what you can and cannot ask during the tenant screening process.
Since Ali Safavi Real Estate is based in California, we’ll be looking at laws specific to that state. Be sure to check the laws wherever you may life.
While you don’t have to carry out a criminal background check in California, many landlords do – and you should. As long as you perform the check and use the information it throws up in a way that complies with federal and state law, you are free to interpret the results in any way you choose. In theory, you are free to set a renting standard that rejects every applicant with felonies or criminal activities on their record. Remember, you cannot ask a tenant if they have been arrested.
Understand Fair Housing
The Unruh Civil Rights Actand the California Fair Employment and Housing Actprevent landlords from discriminating between would-be tenants on the grounds of their sex, race, color, religion, sexual orientation, marital status, ancestry, national origin, source of income, disability or medical condition.
Rejecting applicants based on an “all entries” approach to their criminal background could be considered arbitrary discrimination. To stay on the right side of the law, you must show that the past crime affects the applicant’s ability to meet the tenancy obligations or presents a direct threat to the health and safety of other residents. There’s no hard and fast rule here. However, certain types of crime, such as burglary, assault, arson, sex offenses and drug dealing convictions will be more relevant than traffic offenses, and older convictions are typically less relevant than newer ones.
Avoid the Small and Spent
It is illegal to refuse to rent to someone because of past drug use, though you can consider a history of drug manufacture and dealing. California law prohibits any consumer report from including arrests, indictments or misdemeanors that did not result in a conviction, or crimes that are spent by more than seven years. If you reject an applicant based on these factors, you’re likely committing arbitrary discrimination. In other words, you have to look beyond the crime at the facts and circumstances surrounding the individual conduct.
Apply the Standards Consistently
Fair housing laws require you to apply background check and screening criteria consistently to every applicant. In other words, if you turn one would-be tenant away because of an entry on his criminal check but accept another ex-offender, you’re breaking the law. You’ll also need the tenant’s permission and signature before you can run the criminal check. If you say you’re going to conduct a criminal record check, you must do so for every single applicant. You may, however, narrow the field by screening only those applicants who pass other checks, such as a credit report.
Here Are Some Things You Can Ask About:
- Income and employment.Making sure that they have adequate and reliable means to pay rent on time. Ask your applicants to provide pay-stubs and employer phone numbers so you can verify their employment status. Some property managers use the 30 percent rule, where at minimum the monthly rent must amount to no more than 30 percent of the tenant’s monthly income.
- Number of occupants. It’s reasonable for you to want to know how many people will be living in a rental house and even to require all tenants over 18 to be part of the lease. Landlords must follow occupancy guidelines and should check with state rules on the maximum number of people allowed in a rental home.
- Credit check approval.Property managers and landlord are allowed to run credit checks for tenant screening purposes only, but they have to get approval first. Make sure your application includes a section that acquires an applicant’s permission to run a credit and background check.
- Eviction history.Prior evictions can be symptoms of problematic behavior. Tennant with priors should be avoided. Asking your applicants directly about past evictions gives them an opportunity to explain the situation. Online tenant-screening services let landlords check eviction reports and will expose the truth if your applicant lies.
Author: Ali Safavi
Ali Safavi is a Los Angeles based real estate investor.
Ali’s impressive executive corporate experience stretches across several household name companies, including Hewlett-Packard, Sara Lee, Levi’s, Haagen-Dazs, P&G and Disney. While at Procter and Gamble in a key brand management role, Ali led the company’s most significant and successful brand launch in Febreze Air Effects – worth $200 million in profitable revenue. Ali Safavi’s passion is real estate investing. He owns multiple cash-flowing properties across the nation, allowing him to retire before the age of 40.