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Legally, you can use the information you receive through a background check in your rental decisions.  But beware: you must follow state and federal laws very carefully when you (1) obtain a background check and (2) notify a tenant of a housing request denial.

Get permission to do a background check in writing

When you do run a background check, federal law requires you to get a prospective tenant’s written permission.  Smart landlords typically will include this request in their housing applications so they get everything they need at once.

Determine your rental criteria and apply them fairly

You are free to set your own business standards for using tenant background checks in application decisions.  However, it’s in your best interest to ensure that you and any employees you may have are consistent in how you apply these standards to avoid charges of discrimination.

Understand the dos and don’ts of adverse actions

Federal law also requires that you notify a tenant in writing if information from a background check results in an “adverse action” against the tenant.  An adverse action can take the form of:

  • an outright denial of the housing application
  • requiring the prospective tenant to pay extra security deposit
  • having him/her get a co-signer

If you do take an adverse action against your applicant, you must inform the person of the name and contact information of the credit bureau or tenant screening agency, as well as information on how the tenant can get a free copy of this report.

Watch out for criminal background exceptions

While it’s legal for you to deny a prospective renter housing because of a criminal background, a significant exception does exist to this rule.  You can refuse an applicant who has conviction for drug sales or manufacture, but federal disability laws protect recovering drug users.  Bottom line: you cannot use a conviction or simple possession or use of drugs to deny someone housing.

Keeping so many important details straight is one of the most daunting tasks busy landlords face.  But Herman Boswell can help.  Our real estate experts make it their business to stay abreast of all the rules and regulations that affect property management. For the peace of mind you deserve, contact us today!