Criminal Background Check
A criminal background check is a tenant screening tool used by landlords to review an applicant's criminal history, including convictions and warrants, to assess potential risks to property and other tenants.
Key Takeaways
- Criminal background checks are essential for tenant screening, helping landlords assess risks and ensure safety.
- Landlords must obtain written consent and comply with the Fair Credit Reporting Act (FCRA) and Fair Housing Act guidelines.
- Avoid blanket denial policies; instead, conduct an individualized assessment considering the nature, severity, and recency of any offenses.
- Utilize reputable third-party screening services to ensure accuracy and legal compliance in the screening process.
- Proper screening protects property, enhances tenant safety, and reduces legal and financial risks for investors.
What is a Criminal Background Check?
A criminal background check in real estate investing is a crucial component of the tenant screening process, designed to reveal an applicant's criminal history. This investigation typically uncovers felony and misdemeanor convictions, outstanding warrants, and sometimes arrests, providing landlords with vital information to assess potential risks associated with a prospective tenant. The goal is to ensure the safety of other tenants, protect property, and comply with legal obligations, all while adhering to fair housing laws.
Why It's Crucial for Landlords
For real estate investors, conducting criminal background checks is more than just a formality; it's a strategic risk management tool. It helps mitigate various risks that could impact the investment's profitability and the well-being of the community.
Key Benefits for Property Owners:
- Tenant Safety: Reduces the risk of renting to individuals with a history of violent crimes, ensuring a safer environment for other residents.
- Property Protection: Helps prevent property damage or illegal activities that could devalue the asset and incur significant repair costs.
- Legal Compliance: Assists landlords in fulfilling their duty to provide a safe living environment, potentially reducing liability in case of incidents.
- Financial Stability: Minimizes the likelihood of costly evictions or vacancies due to tenant issues, protecting cash flow.
The Process of Conducting a Criminal Background Check
Conducting a criminal background check involves several steps, often facilitated by third-party screening services to ensure compliance and accuracy.
- Obtain Written Consent: Always start by securing explicit written consent from the applicant. This is a legal requirement under the Fair Credit Reporting Act (FCRA) for any background check that involves consumer reports.
- Select a Reputable Screening Service: Utilize a professional tenant screening service that specializes in real estate. These services are knowledgeable about federal, state, and local regulations, including FCRA and Fair Housing Act guidelines.
- Submit Applicant Information: Provide the necessary details, such as the applicant's full name, date of birth, and Social Security number, to the screening service. Ensure data privacy and security throughout this process.
- Review the Report: Carefully analyze the criminal history report. Focus on the nature, severity, and recency of any offenses. Avoid making blanket exclusions; instead, assess each case individually in relation to the tenancy.
- Adhere to Adverse Action Procedures: If you decide to deny an applicant based on information from the criminal background check, you must follow FCRA's adverse action procedures. This includes providing the applicant with a copy of the report and a notice of their rights.
Real-World Example
An investor, Sarah, owns a multi-family property in Phoenix, Arizona. She receives an application from John for a vacant unit. After obtaining John's consent, Sarah uses a reputable screening service for a criminal background check. The report reveals that John was convicted of felony assault five years ago. While John has since completed his probation and maintained steady employment, Sarah must consider the recency and nature of the crime.
Sarah's decision-making process:
- She reviews her rental criteria, which states that felony convictions within the last seven years for crimes against persons or property are grounds for denial.
- She considers the Fair Housing Act guidance, which advises against blanket bans and encourages individualized assessments.
- Given the severity and recency of the felony, and its direct relevance to tenant safety, Sarah decides to deny John's application. She then provides John with an adverse action notice, including the contact information for the screening agency and his rights under FCRA.
Frequently Asked Questions
What kind of information does a criminal background check reveal?
A criminal background check typically reveals felony and misdemeanor convictions, outstanding warrants, and sometimes pending charges or arrests. The depth of information can vary by state laws and the specific screening service used. It generally does not include sealed or expunged records.
Are there legal limitations or regulations landlords must follow when conducting these checks?
Yes, landlords must comply with the Fair Credit Reporting Act (FCRA) when using third-party screening services, which requires obtaining written consent and following adverse action procedures. Additionally, the Fair Housing Act prohibits discrimination based on protected characteristics, and HUD guidance advises against blanket exclusions for criminal records, urging individualized assessments based on the nature, severity, and recency of offenses.
Can a landlord deny an applicant based on any criminal history found?
No, a landlord cannot deny an applicant based on any criminal history. Federal guidance under the Fair Housing Act suggests that landlords should not implement blanket policies that automatically deny applicants with any criminal record. Instead, they should conduct an individualized assessment, considering factors like the nature and severity of the crime, how old the conviction is, and evidence of rehabilitation. Denials should be directly related to legitimate business interests, such as ensuring tenant safety and property protection.
How often should landlords conduct criminal background checks?
Criminal background checks are typically conducted during the initial tenant application process. They are not usually performed on existing tenants unless there is a specific, legally permissible reason outlined in the lease agreement or by local law, such as a lease renewal that explicitly states new screening will occur. Regular, unsolicited checks on current tenants could violate privacy rights and tenant protections.