Posts Tagged Screening Tenants

HUD Issues New Rule On “Discriminatory Effect” a.k.a Disparate Impact

Feb 20

Posted by Tristan R. Pettit, Esq. in AASEW, Fair Housing / Discrimination, Legislation, Protected Classes, Screening Tenants | 3 Comments

HUD has issued a new Fair Housing “disparate impact” rule that may cause problems for landlords during the screening process.  The new rule creates a new provision entitled “Prohibiting Discriminatory Effects” which defines “discriminatory effect” as situations in which a facially neutral (i.e. not discriminatory) housing practice can become discriminatory if it actually or predictably has an effect on a group of persons that are members of a protected class.

The concern is whether or not this new rule will restrict landlord’s use of criminal background checks on prospective tenants.  Recently Pepsi Co. agreed to pay $3.13 Million to resolve allegations of hiring discrimination against African-Americans based on Pepsi’s use of the African-American’s arrest records.

This recent settlement when read in conjunction with HUD’s new rule causes concern regarding whether it will be considered discriminatory to use a person’s criminal arrest or conviction as a basis for rejecting a rental applicant when such use would result in members of a protected class being rejected as tenants.  For more on this issue and
please read Tim Ballering’s blog post entitled ‘Will Criminal Background Checks For Screening Be Restricted By Proposed Federal Rule?”

In light of this concern, the AASEW’s Executive Committee submitted the following comments to HUD:

The Apartment Association of Southeastern WI, Inc. is a trade association representing approximately 575 owners and managers of rental housing in the Metro Milwaukee area.

Our organization supports Fair Housing as well as community efforts to reduce the effects of crime within the neighborhoods that our members own and manage rental housing.

We are concerned that this proposed rule will restrict the  legitimate and necessary use of criminal arrest and conviction records in screening tenants to exclude those who will cause disruption and harm to other occupants, the neighborhoods those properties are located in, and to our properties.

Many communities in southeastern Wisconsin have “Nuisance Property Ordinances” that hold owners accountable for the misdeeds of their tenants.  For example Milwaukee’s Nuisance Ordinance does not require the conviction, nor the arrest of the tenant or their invitees, rather simply repeat law enforcement activity will trigger the enforcement provisions of that ordinance.

As part of your proposed rule property owners need “bright line” guidance, establishing what background screening criteria and methods will remain acceptable under this proposed rule as well as protections from potentially conflicting local requirements.

It would be inequitable, causing unnecessary costs and harm to property owners if such guidance is not provided in advance of the implementation and enforcement of this proposed rule.

Hopefully additional guidance will be provided.  If and when it is I will be sure to provide everyone an update.

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CCAP Committee’s Recomendation To Change Wisconsin’s Expungment Laws Shot Down

Feb 14

Posted by Tristan R. Pettit, Esq. in CCAP, Legislation, Screening Tenants | 2 Comments

Last year Wisconsin’s Joint Legislative Council created a Special Committee On The Review of Records Access of Circuit Court Documents – what I affectionately referred
to as the CCAP Committee.  Landlords were very fortunate that in the end the committee made no recommendations to change or alter information on CCAP or limit its access by landlords or any other group.  The committee’s sole recommendation was to call for the liberalization of Wisconsin’s criminal expungement statute.

The proposed bill, if passed would have done the following:

1.  Defined what is meant for a court to expunge a court record (and yes, this did include removing any reference to the conviction from CCAP)

2.  Clarified that an expunged record may not be considered for employment or housing matters.

3.  Stated that a person may petition the circuit court at any time to expunge the following:

-  any court record of a person who was under the age of 25 at the time the crime was committed and who was found guilty of a forfeiture, misdemeanor, and certain (lessor) felonies, that are punishable by up to 6 years in prison.

- any court record of a person charged with an offense punishable by a forfeiture, misdemeanor, or felony in which all charges were dismissed or for which the defendant was acquitted AND the court determines that the person will benefit by the expungement and that society will not be harmed by the expungement.

So as you can see, the proposed bill would have negatively affected landlords in the screening process and if passed would mean that a landlord would find no record of the applicant having ever been charged and convicted of crime x, y or z (or charged and acquitted or charged and the later dismissal of the case), if the applicant had applied for and received an expungement.

It also would have meant that even if the landlord somehow learned of the conviction (or acquittal or dismissal) and the later expungement, that the landlord could not use that information when making a decision on whether or not to rent to that individual.

Furthermore, it would have meant that a landlord would be precluded from inquiring as to the existence of any expunged record from a rental applicant whether that question
be on the rental application itself or verbally when talking to the applicant.

Thankfully we do not have to worry about this proposed bill being passed as it never even got introduced.  In a notice dated January 20, 2012, the Director of the committee wrote to the members of the committee to inform them that their recommended bill was not approved for introduction by the Joint Legislative Council by a vote of 13 to 6.  While a petition can be circulated to have the matter reconsidered, I have not heard of that happening.

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Update on Landlord Pre-Emption Bill

Oct 10

Posted by Tristan R. Pettit, Esq. in City of Madison, Legislation, Screening Tenants, State of Wisconsin | 4 Comments

It has been awhile since I updated everyone on the pro-landlord legislation that is being addressed in Madison.  Senate Bill 107 (SB 107) — referred to as the Landlord Pre-Emption Bill —  has been passed by the Wisconsin Senate and is currently being reviewed by the House this term (AB 155).

You may recall that SB 107 prohibits any municipality from enacting any ordinance that limits a landlord from obtaining or using various types of information about a tenant or prospective tenant, such as household income, occupation, court records, rental history, and credit information, or limits how far back in time a prospective tenant’s
credit information, conviction record, or previous housing may be considered.

The bill has received much opposition from local municipalities and their lobbyists, not for the substance of the bill, but rather for the fact that if passed, the law will
restrict a municipality’s ability to draft certain ordinances.  Essentially the municipalities feel this to be a breach of their own sovereignty and an example of the state overstepping its bounds.  Many feel that this is really just a Madison problem — since it is the City of Madison that has enacted many of these restrictions on what information a landlord can consider when making a rental decision – and therefore should be dealt with at the city level.

Another group of critics believe that the bill discriminates against African-Americans.  Four Dane County Board Supervisors, two Madison City Council members and one Madison School Board member, sent a letter to Governor Walker and legislators on September 7, 2011, asking that the provision of the bill that will allow landlords to deny housing to tenants with criminal histories be removed because is discriminates against African Americans.

They argue that allowing a landlord to deny a rental applicant housing based on his/her criminal convictions will unfairly affect African-Americans because while they
only comprise 6% of the state’s population they account for almost 50% of those with arrest and conviction records.  Thus the critics of the bill argue that to allow a landlord to deny a rental applicant based on his/her criminal record is to allow landlords to deny housing based on race.

The critics are relying on the doctrine of “disparate impact.”  The disparate impact doctrine holds that certain laws may be discriminatory and illegal – even if the law is neutral on its face — if they have a disproportionate “adverse impact” on members of a minority group.

This disparate impact argument is ignoring a key ingredient – one’s choice to engage in criminal activity.  One’s race is not something that a person has control over – we are born into a certain race.  On the other hand, individuals do have control over whether or not they engage in criminal activity.  Committing a crime is a volitional act.  Being born African-American is not.  We are dealing with apples and oranges here.

Disparate impact arguments are often raised when a law unintentionally affects a minority group through no fault of their own.  This small group of critics, are trying to apply the disparate impact doctrine to individuals that made a voluntary decision to engage in criminal activity.

 

UPDATE – 10-28-11 — On Wed. Octo 26, 2011, By a vote of 59-34 the Assembly voted to suspend a rulling on AB155.  An amendment was made by Rep Chris Taylor (D-Madison) that would protect some local control within the bill – the amendment was tabled by a vote of 60-33.

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AASEW’s Next Meeting Focuses On The Topic of Credit Reports – Monday, July 18th

Jul 15

Posted by Tristan R. Pettit, Esq. in AASEW, Credit Checks | 2 Comments

Would you like to know if your prospective tenant is a good credit risk?

Then join the Apartment Association of Southeastern Wisconsin (AASEW) at our General Membership meeting on Monday, July 18th, 7:00 p.m, at the Best Western, 1005 South Moorland Road in Brookfield.  Kathy Haines, of Landlord Services, LLC will present “Credit Reports 101:  How To Determine If Your Prospective Tenant is a Good Credit Risk”

 At 6:30 p.m. right before our meeting, come to network with others in the industry and enjoy free appetizers!

Also at 6:30 p.m. come to our Traders Corner if you are interested in buying or selling rental property and bring your listings with you!!

Have a question for a seasoned landlord?  Stop by for Meet your Mentor, at 6:30 p.m. as well!

We hope to see you there!

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What Questions Should You Ask An Applicant’s Current and/or Prior Landlord During The Screening Process

Nov 19

Posted by Tristan R. Pettit, Esq. in Screening Tenants | 3 Comments

Screening applicants/potential tenants is the single most important element of landlording in my opinion.  As I have mentioned in prior posts, if you properly screen your applicants you will have a better chance of finding a good tenant that pays rent on time and does not abuse your investment property.

Landlords should require each adult person to completely fill out a written rental application.  After you have all this good information about your applicant you now need to confirm that info.  You have not conducted a thorough screening until you have confirmed all of the information that was provided to you in the application. 

Some of that info is more important than others.  In my experience the most important information that you need to confirm about a potential tenant is: (1) the applicant’s current and prior rental history, (2) the applicant’s employment information, and (3) whether or not the applicant has been evicted, had a money judgment taken against them, or been charged/convicted with a crime  — this information, at least for now, can be obtained through CCAP.

This post will focus on item #1 – the applicant’s current and past rental history.  The way to confirm this information is to communicate with both the applicant’s current landlord AND their prior landlord.  You are probably asking yourself, “why is it necessary for me to talk to more than just the applicant’s current landlord?”  The answer is simple — if the applicant is a bad tenant then the current landlord may tell you anything (even a bunch of lies) in order to get rid of their problem tenant.  A less than honest landlord who is trying to unload a bad tenant may neglect to tell you that the tenant has loud parties every weekend, pays rent late every single month, enjoys hoarding pit bulls, and thinks its funny to rev the engine on his crotch rocket when he comes home after bar time.  While it would be nice if all landlords realized that we are all in this together and were truthful to one another, that is not always the case.  If you think that a fellow landlord would not lie to you in order to pass on a nightmare tenant then I want to let you know that I have a new ebook for sale which I just completed writing – and which I am selling for the unreasonable low price of $79.95 – that I guarantee you will teach you how to make a million dollars in 30 days through investing in real estate, even during this recession : )

A prior landlord – one tht is at least one landlord removed from the applicant’s current landlord – has no reason to lie to you.  They no longer have any connection to their old tenant and therefore have no personal interest in whether you accept him or her as your new tenant.  So it is always reccomended that you talk to both the applicant’s current landlord AND their prior landlord.  Now that you know who you should be talking to and why, the next hurdle is determining what questions you should be asking. 

Oftentimes, the current/prior landlord is going to want to confirm that the applicant has authorized you to talk to them about the applicant and his/her information.  This may involve having the applicant call the landlord and verbally telling them that they can talk to you, but more often than not it involves providing the landlord with a written authorization signed by the applicant.  If you are using a good Rental Application then you may already have the authorization language in that document. 

When providing the authorization to the current/prior landlord be careful to only provide the landlord with the authorization language, the applicant’s signature, and the date that it was signed.  While the current or prior landlord most likely already has all of the applicant’s personal information – you do not want to take the chance and divulge personal info that you shouldn’t have.

Prior to calling a landlord you should be aware that sometimes an applicant will list a friend or a family member as their current or prior landlord.  They may do this for any number of reasons such as: (1) they have no prior rental history, (2) they have been evicted by their prior landlord, (3) or they know that they are a less then stellar tenant and that their landlord will not have positive things to say about them.  As I’m sure you can guess, a family member or friend that is standing in for the applicant’s real landlord is going to have nothing but glowing things to say about the applicant. 

In order to avoid having this ruse played on you, you should attempt to confirm that the person you are speaking to is the actual current or prior landlord.  There are several ways you can do this but none of them are foolproof.  One trick is to call the alleged landlord and act as if you are a tenant inquiring about a vacancy.  If the listed “landlord” is a friend or family member they will probably not respond appropriatley to your inquiry.  I have caught one person applying to rent from me by this method.  The person I called responded along the lines of “what are you talking about — you must have the wrong number – I ain’t renting out sh*t.” 

Another option is to check online property data records for the munucipality in which the current/prior landlord’s property is located to see if the name on the property records matches the name of the alleged landlord.  This method does not always work.  If the property is being managed by a management company then the name that the applicant gave you is most likely that of the manager and not the owner.  Additionally, if the property is legally owned by a business entity then there will be no individual person’s name listed on the property data.  Most municipalities have their property data infromation available on the web.  I just googled “property data” and the name of various municipalities in Milwaukee County and came up with 4 sites in just a few seconds — Milwaukee, West Allis, Greenfield, Wauwatosa.  Short of the above methods you will just need to remain attentive during your conversation with the person and see if they “slip up” while talking with you.

Some landlords will be happy to answer your questions orally over the phone while others — especially the larger landlords and management companies — will only respond to your questions in writing.  This means that you will need to send them written questions.  This is normal and should not be a cause for concern.  These companies are merely trying to protect themselves as they will now have proof of the answers they provided you should the tenant accuse them of false statements or sue them for slander.

Whether you are asking your questions verbally or in writing you should insure that you use the same questions for every applicant when talking to their current/prior landlord.  If you fail to do this you may end up inadvertantly violating Fair Housing (discrimination) laws.  To make this simple you should prepare a script of questions that you will use.  I would suggest that you have an experienced landlord, property manager, or landlord-tenant law attorney review your questions prior to using them.

There are no hard and fast rules as to what questions you should ask but any questions posed should include the following:

1.     Confirm that the applicant is/was a current/prior tenant.

2.     Confirm the address of the current/prior rental unit.

3.     Confirm the dates that the applicant resided at the current/prior landlord’s property.

4.     Confirm the rent amount that the applicant is currently paying or paid in the past.

5.     Ask if the applicant has ever been late in paying their monthly rent.  If the answer to this question is “yes” then you should follow up with a few additional questions such as:  how late was the rent paid; was the rent paid late more than one; and how many times was the rent paid late?

6.     Ask if the applicant has ever violated any other terms of the rental agreement (i.e. damage to property, loud parties, unauthorized guests, illegal activity etc).

7.     Ask if the landlord ever had to serve the applicant a 5-Day or 14-Day notice.  If the answer is “yes” then you should attempt to learn additional info about the breach.

8.     Finally, you should ask the landlord if s/he would ever rent to the applicant again.

Remember that your goal in talking to the current/prior landlord and asking them these questions is to try and obtain as much pertinent information as you can about the applicant so that you will be better able to determine whether or not the applicant will be a good tenant for you.

It is important to realize that some landlords may not be comfortable answering these questions – especially the more detailed questions – as they may be fearful of retaliation by the tenant or being sued by them.  This fear is the primary reason why some landlords will only reply to written questions with written answers.  I have personally experienced landlords who would only give me “yes” or “no” answers to my questions and refused to provide any detail.  On the other hand I have talked to more than one landlord that told me way more about an applicant then I would ever want to know (and way more than a landlord should ever knowabout his/her tenant).  You take what you can get! 

Remember that if a landlord is unwilling to verify the applicant’s information then you have a valid and legal reason to deny housing to that applicant, assuming that verification of information contained in the application is part of your written screening criteria.

I hope that it goes without saying — although I will say it anyway – that during this “vetting” process you should only ask relevant and non-discriminatory questions.  If you stick to asking questions about the topics listed above you should be OK.

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UPDATE ON AB-340 (CCAP BILL)

Oct 9

Posted by Tristan R. Pettit, Esq. in CCAP, Rep. Marlin Schneider, Screening Tenants | 3 Comments

As many of you know a public hearing was held on AB340 – the proposed bill by Rep. Marlin Schneider that would restrict who can use CCAP and what information would be contained on CCAP — at the State Capitol in Madison last week.

Several board members from the AASEW (Dave Ohrmundt and Richard Bishop) and the head of Milwaukee RING (Brian Fleming) attended the hearing to make sure that landlords’ voices were heard.  We appreciate you guys taking the time out of your busy schedules to attend.

A fellow landlord-tenant law blogger from the Wausau area (Dr. Rent a/k/a John Fischer) also attended the public hearing and even testified wrote a recent blog post on the bill and the hearing that gives you his views on the proposed bill and what his thoughts are regarding if it will succeed.  Dr. Rent writes a great blog and if you enjoy my blog you should also sign up for his blog.

Arguments were presented both for and against the propsoed legislation.  On a practical level I thought it was very telling the the director of state courts (who under the proposed bill would be in charge of registering CCAP users and monitoring their searches) felt that the cost and time involved would be a huge undertaking.  It might have been a good idea for the bills’ sponsors to have spoken with the director of state courts and attempted to get him on their side prior to the public hearing.

Two recent articles written about the hearing and AB340 in general were published.  The Milwaukee Journal Sentinel wrote an article on the hearing and the Racine Journal Times also had a good piece on the proposed legislation.  Columnist, Patrick McIlheran, of the Journal Sentinel also wrote a recent piece on Schneider’s proposed CCAP bill.

The Wisconsin State Journal also published an editorial regarding AB-340.

I was also interviewed for an article by the Wisconsin Law Journal about the proposed CCAP legislation. This article does not focus on how AB340 will affect landlords but rather how it might affect lawyers ability to screen their own clients and related issues.

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The Importance of Using Written Screening Criteria During The Tenant Selection Process

Oct 2

Posted by Tristan R. Pettit, Esq. in Rental Documents, Screening Tenants | 3 Comments

           Those of you that have attended one of my landlord-tenant law seminars or read my prior posts on screening tenants know that in my opinion the screening process is the single most important aspect of being a landlord.  If done properly, the screening process can save a landlord from many headaches such as: having to evict a bad tenant, repairing your damaged rental property, dealing with other tenants complaining about your loud and disruptive tenant, and/or having your rental property declared to be a public nuisance due to the bad behavior of  your tenant and his/her guests.  By properly screening your tenants you will significantly reduce your exposure to the above situations.

          One key aspect of the screening process is having and using written screening criteria.  Screening criteria sets forth the minimum requirements that an individual must meet in order to be able to rent from you.  Looking at it another way, screening criteria also sets forth what will cause an applicant to be denied rental from you. 

          Here is an example of written screening criteria.  Please be aware that this screening criteria is pretty stringent.  I am not saying that you should or should not use this criteria -  you must determine what criteria works for you and that is based on many factors which  I will not be addressing in this post.  I am linking to this sample screening criteria so that you have some examples of permissable (and legal) criteria so that you can better understand this post. 

          You should think of your screening criteria as a checklist that you go through when reviewing each application.  By utilizing screening criteria a landlord is reminded that s/he should be making a decision to rent to an individual based on objective reasons rather then subjective ones. 

          An objective reason to deny an applicant  is something that is quatifiable and verifiable.  Examples would include whether or not the applicant has ever been evicted before, whether their prior landlord would rent to them again, whether their gross monthly wages are at least 3 times the amount of your monthly rent.  Subjective reasons cannot be verified and as such can lead to allegations of or actual instances of discrimination. 

          A subjective reasonson the other hand, cannot be quantified or verified.  Examples of  subjective reason for denying an applicant would be because you got a “bad feeling” when talking to them or you didn’t feel like you “connected” with them.  You should not be making a decision to rent to someone based on a subjective feeling; by doing so you may inadvertantly and unconsciously be discriminating against them.

          You should have your screening criteria in place prior to taking your first application.  Screening criteria should not be created as you go.  Ideally you should spend some time thinking about what would cause you to deny an applicant and conversely what would cause you to rent to an applicant.  Think of objective reasons such as: do they have a prior rental history, have they been employed at their current job for a period of time, do they make enough money that they can afford to pay the rent and still have extra money to live on, have they ever been evicted before, do they have prior money judgements against them, would their prior landlord rent to them again, have they been arrested and/or convicted of a crime.  Think about what caused you to accept or reject your current tenants.  This information will serve as the initial draft of your screening criteria.

          Next, take a seasoned landlord that is familiar with discrimination/fair housing laws to lunch and ask him/her to review your draft criteria or hire an attorney that has experience with the fair housing laws to give you some feedback.  You need to insure that your criteria is legal and does not violate any aws before you begin to use it.

          Once you have your screening criteria in place, the next step is to insure that you apply it evenly and consistently.  You should not make exceptions to your criteria.  If your screening criteria says that an applicant will be denied rental if they have ever been evicted in the past  — and your applicant has a prior eviction judgment on their record –  then you should deny them.  Once you start making exceptions to your screening criteria you lose the protection of the screening criteria because you are once again resorting to subjective decision making such as “I know that s/he was evicted last year but they seemed like such a nice and honest person that there must have been a misunderstanding.”  Does this sound familiar? Do not make exceptions.

          Screening criteria does not have to be distributed to the applicants.  Many larger landlords do give their criteria to potential renters as a form of self-screening with the intent that potential applicants will read the criteria and not submit an application if they do not meet the criteria – thus saving the landlord time and money of reviewing an application that will be denied in the end anyhow.  Many other landlords choose not to give out their criteria but rather use it internally to assist in the screening process.  Either option is legal and both options have pros and cons.

          The most common complaint I receive from clients that have started using screening criteria is that they feel “bound” or “restrained” by the criteria.  If that is how you feel when you start using it then you know that it is serving its purpose and you are doing things correctly.  Screening criteria is supposed to restrain you –  it is designed to reign you in from making random, spur of the moment, subjective decisions.

          You are able to change your screening criteria over time.  For instance if one of your criteria requires an applicant to have a FICO score of at least 700 and you find that none of the applicants are meeting this requirement and your unit is vacant as a result, then you may need to lower the FICO score requirement.  Nothing is wrong with changing your criteria but you cannot and should not be changing your criteria back and forth day to day, week to week or even month to month.

          If you do change your screening criteria you should make a notation as to when you stopped using the old criteria and began using the new criteria.  If you look at the sample screening criteria linked above you will see that there is a place on the second page of the document for you to indicate the date that you started using the criteria and the date when you stopped using that criteria.  After you have stopped using a certain version of your screening criteria you should retain a copy for a minimum of 3 years but preferably for up to 7 years.  The statute of limitations for most federal and state discrimination complaints is 3 years but there are some that are 7 years.  So if a past applicant should decide to file a discrimination complaint against you 6 years and 11 months later you still want to have written proof of the criteria that you were using at the time of the alleged discriminatory conduct.

          If you review an application and you determine that the applicant does not meet your croteria you should make a notation as to which criteria they did not meet and attach any supporting documentation.  Then file it away with your other important records.

          Screening criteria is also very helpful if you have more than one person screening potential applicants.  For example, if you have multiple employees or have hired a management company to run your rental properties you can provide them with a copy of your screening criteria and tell them that you want them to utilize it.  By having them follow your written screening criteria – which can serve as a checklist – you have a better chance that they will follow it.

          Being a defendant/respondent in a federal or state discrimination investigation is about as much fun as a root canal.  The investigative process is long, tiring, disruptive, and very intrusive.   The investigators will interview your current tenants, your past tenants, current employees, past employees and anyone else that may be able to assist them in determining whether or not you engaged in a discriminatory act.

          I have represented many landlords that have had both federal and state fair housing complaints lodged against them for discrimination arising out of the screening process.  In all of those cases, the first question that the investigator asked me was whether or not my client was using written screening criteria.  Unfortunately in every one of those cases I have always had to answer “no” to that question.  If my clients had been utilizing written screening criteria I would have been able to forward the screening criteria to the investigator along with the documentation supporting which criteria the applicant did not meet and I would have had verifiable proof that the applicant was denied rental based on a non-discriminatory reason.

          Because my past clients were not using written screening criteria it ended up being a case of “he said/she said.”  What I mean by that is my client is saying that s/he didn’t discriminate against the applicant and the applicant is saying that the tenant did discriminate against them.  There is no written proof one way or the other.  It is a crap shoot.  When you are in a “he said/she said” scenario you are in for a long, painful, and often expensive investigation. 

          Do yourself a favor — if you are a landlord and are not currently using written screening criteria, use the information in this post to begin the process of putting together some criteria, have it reviewed, and begin using it during your screening process.

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