SCREENING PROSPECTIVE TENANTS

Posted by Tristan R. Pettit, Esq. in Screening Tenants / Comments

UPDATE - APRIL 15, 2016 ---- Please review my April 15, 2016 blog post on HUD's new guidance regarding the consideration of a rental applicant's criminal history in the screening process as it may impact or alter the information in this blog post.

Screening prospective tenants is the single most important aspect of the rental process regardless of whether you are renting residential or commercial property. If done properly, screening can save a landlord a lot of money, a lot of time, and a lot of headaches. Setting up a proper and legal screening process, which includes the drafting of a Rental Application and written Screening Criteria, can help reduce the need to evict a tenant, defend yourself against a claim that you violated the Wisconsin Administrative Code's Residential Rental Practices (ATCP 134), defend yourself against a claim for discrimination under the Fair Housing laws, and preserve your property from physical damage.

There are several steps to a good screening process. First, you must verify that the applicant is who s/he says there are. The best way to do this is to require each adult applicant to completely fill out a rental application. You should also ask each adult to provide you with a valid photo identification. Request a copy of the applicant's prior utility bill or cable bill as well. You want to ensure that the address on the bills is the same as the address listed on the photo identification and the rental application. You should also obtain the applicant's date of birth and social security number. Require that they provide you with any prior names that they have used in the past few years such as maiden names, if they are recently married, or married names if they are recently divorced. If you are renting to a business entity verify its existence with the Secretary of State's Department of Financial Institutions. Obtaining all of this information early will greatly assist you later in the screening process.

Second, have written screening criteria in place before you start accepting rental applications and ensure that your criteria is applied consistently. Your criteria should set forth the minimum requirements that are necessary to rent your property as well as what will cause an applicant to be denied. You can provide the written screening criteria to each prospective applicant along with the application, or at the very least, you should memorialize the criteria in writing, date it, and keep it for at least 3 years. It is important to remember that if you make an exception to your screening criteria for one applicant that you have now lost the protection of having the criteria in the first place ---- so avoid making any exceptions.

Your screening criteria should not be subjective. Rejecting an applicant because they give you a "bad feeling" or because you did not "connect" with them will only run you afoul of Fair Housing laws. You criteria needs to be objective. Federal laws contain seven (7) different protected classes and the state of Wisconsin has twelve (12) protected classes. You may not deny an applicant because they are a member of any of the following protected classes in Wisconsin: race, color, national origin, sex, religion, familial status, handicap, marital status, sexual orientation, lawful source of income, ancestry and age (18 years old and over). Some local municipalities (the city of Madison comes to mind) have added additional protected classes. So it is important to check all local ordinances where your rental properties are located prior to drafting your screening criteria.

A common misconception is that you cannot reject an applicant who is a smoker, who has a money judgment against them, or who has previously been evicted. Smokers, debtors, and people with past evictions are not members of a protected class and therefore legal screening criteria can exclude them without violating Wisconsin or federal discrimination laws. Other examples of proper screening criteria include the following: (1) Applicant must have monthly income of 3 times the monthly rental amount; (2) Applicant must have no unsatisfied money judgments against them; (3) Applicant must have a credit score of at least 600; (4) Applicant must complete all questions on the rental application; failure to answer all questions or provide an acceptable reason for not answering all questions are grounds for denial of your application.

Third, you should run every applicant's name through Wisconsin's Consolidated Court Automation Program (CCAP). This website lists all criminal and civil legal actions filed throughout the state. By becoming adept with CCAP's search capabilities you will be able to discover if a prior landlord has started an evictions action against your applicant, if your applicant has ever been charged with a crime, or if they have been sued for owing money to someone and whether or not they have satisfied that judgment. Best of all CCAP is free and open to the public.

Fourth, you should obtain a credit check for applicant that is still under consideration after checking CCAP. A landlord may require the applicant to pay the actual cost of the credit check up to $20 if they so wish. In order to charge this fee however you must obtain the credit report from a consumer reporting agency that compiles and maintains files on consumers on a nationwide basis (TransUnion, Experian or Equifax) and you must notify the applicant of the cost before ordering the report and provide them with a copy after it is received.

These four steps for screening and qualifying a prospective applicant for your rental property are the bare minimum that should be done to ensure that you are protecting your investment.

UPDATE - APRIL 15, 2016 ---- Please review my April 15, 2016 blog post on HUD's new guidance regarding the consideration of a rental applicant's criminal history in the screening process as it may impact or alter the information in this blog post.