Overview of tenant screening in California
Importance of tenant screening in property management.
Most rental property owners want consistent monthly income. They use this income to pay monthly bills, fund grandchildren’s college tuition, take once-in-a-lifetime trips and give back to causes that matter to them. A rental property owner can purchase the best home in the world, and if they have a bad tenant (someone who doesn’t pay rent, damages the property or breaks lease agreements) their dream of collecting monthly rent goes away and they can find themselves living an expensive nightmare. The tenant screening process is the essential step in property management that enables property owners to verify, “Yes, this person is who they represent themselves to be.” The tenant screening process enables a property owner to select a tenant with verified assurance that they are entrusting their property to someone who will pay rent in full on time, maintain the property, and abide by the conditions of the lease agreement. You have worked hard to own this rental property, we need to make sure the most qualified tenant lives there!
Steps in the Tenant Screening Process
Tenant application.
An outstanding residential property management company will market your rental home on over 50 of the premier online platforms. By ensuring you have the correct application, you can follow their playbook. When a prospective tenant finds the property on one of these websites, reviews the photos, and falls in love with the home, they can submit an application. All applicants 18 and older must fill out a separate application. They must provide:
-Full name
-Date of birth
-Driver’s license number
-Social Security/tax id number
-Phone numbers
-Name of all other proposed occupants who would live in the property
-Pets
-Make, model, year, license plate number of vehicles
-Emergency contact information
-Answer if the applicant has been party to an unlawful detainer or filed bankruptcy within the last 7 years
-Answer if the applicant has been asked to move out of a residence
-Answer if the applicant has ever been convicted of or pleaded no contest to a felony within the last 7 years
-Provide current and previous residence history including the reason for leaving
-Provide employment and income history including the employer name, the length of employment, the position held, and income generated
-Provide creditor information including the name of the creditor and the monthly payment
-Provide banking information including the name of the bank and the dollar amounts in each account
-Provide the contact information for personal references including the type and length of the relationship
-Provide contact information for the applicant’s nearest relatives
As part of the application process, the applicant agrees to provide a copy of their driver’s license or other acceptable identification. They authorize the “housing provider” who is either the property owner or property management company to verify the information provided, obtain a credit report, and obtain an “investigative consumer report” (“ICR”). When an applicant signs the application they also authorize the housing provider to disclose information to prior, current or subsequent owners and/or agents with whom the applicant has had or intends to have a rental relationship.
Background checks
We want the renting process to be as smooth as possible for prospective tenants. These are the people who will eventually be living in your property! Most property management companies charge an application fee. We do not charge applicants an application fee, ever. Instead we send them a link directly from “TransUnion/SmartMove” https://www.mysmartmove.com/ where applicants submit their own information into the third party background check provider. Applicants pay TransUnion/SmartMove for the service and none of that money goes to our company. This process reduces the cost of submitting an application for applicants and it enables us to process information faster. TransUnion/SmartMove runs a credit check, eviction history, and criminal history and provides us with the results.
Credit checks
Once an applicant provides their financial history to “TransUnion/SmartMove” it provides a detailed record of the applicants loan history (which shows if they have made payments on time or if they have missed any payments). The report also shows if the applicant has gone into collections, if they have consolidated their debt or if their debt has been written off. For most rentals in the San Luis Obispo and Santa Barbara County areas, landlords require applicants to have a credit score of 650 or higher to be considered as a tenant.
Rental history verification.
Verifying rental history is an essential part of gaining a full understanding of the applicant. The best way to collect this information is by calling previous landlords and speaking with them directly. We verify the location, date, and rental amount. We also verify if the tenant was ever late to pay their rent or if they violated any terms of the lease.
Personal references.
Applicants are asked to provide personal references as part of submitting their application to rent a property. We call these references to verify that the applicant is who they say they are.
Best Practices for Tenant Screening
Consistent screening criteria
Federal, state and local laws require the tenant screening process to be consistent for all applicants. We have a written procedure that we follow for every applicant who submits an application. Adherence to the written procedure ensures that applicants are treated fairly despite the type or location of the property.
Compliance with fair housing laws
California tenants are protected from discrimination under the Fair Employment and Housing Act (FEHA), the Unruh Civil Rights Act as well as the Federal Fair Housing Act. It is illegal for property owners or property management companies to discriminate or harass tenants or applicants based because of a protected characteristic. Protected classes include:
-Race
-Color
-Ancestry
-National origin
-Citizenship
-Immigration status
-Primary language
-Religion
-Disability (mental or physical)
-Sex and gender
-Sexual orientation
-Gender identity
-Gender expression
-Generic information
-Marital status
-Familiar status
-Sources of income
-Military or veteran status
-Age
The Civil Rights Department of California (CRD) provides helpful information that homeowners can use to ensure they are in compliance with state and federal laws. https://calcivilrights.ca.gov/housing/#whoBody
We find that most property owners are not as familiar with these laws as they should be. A professional residential property management company or an experienced local attorney can ensure that the most qualified tenant is selected in accordance with Fair Housing requirements.
Clear communication with applicants
Finding the perfect rental can be a challenge for most tenants. Especially in California there are a lot more renters then rentals. One way we can make the process easier is by clearly communicating with applicants. Every time our phone rings, we receive a text, an email hits our inbox, or a notification from our online portal dings, we consider this an opportunity to help someone. This is our way of making the world a better place. Professional residential property management companies should communicate clearly and quickly with applicants. If applicants dread calling the property management company then something is wrong and both the applicant and property owners suffer as a result.
Legal Considerations
Privacy and data protection
When applicants sign the rental application they give permission for the property manager to contact the provided references and collect information. However that information must not be shared with others. The information applicants provide is highly sensitive and contains a detailed history of their financial and housing life. It is the residential property management companies obligation and legal requirement to safeguard that information. California law requires us to maintain a record all applications, information provided and correspondence from the applicants.
Handling rejections and adverse action notices.
Applicants can be denied if another applicant has a higher credit score, stronger employment/housing references, or makes more money. An adverse action notice is a document that informs applicants they have been rejected as a tenant due to information in their credit report. California law requires property managers to inform applicants if they have been denied because of information on their credit report.