Choosing the wrong tenant can lead to lost income, litigation costs and damage to your property. Conducting a background check on prospective tenants is a wise way to ensure a mutually successful experience for you and the applicant, and it is an effective risk management tool. Although background checks do present some costs, taking on a tenant without having performed this screening carries significant risk and can cost you a lot more money in the long run.
Many applicants have a criminal record, but they do not disclose this information. Therefore, consider these advantages of pre-screening:
• Discourages applicants from hiding a criminal background or falsifying their credentials.
• Eliminates any uncertainties about applicants.
• Encourages honesty while going through the leasing process.
Extent of Background Checks
At a minimum, it is advisable to review an applicant’s criminal history, as it may be a factor to consider when allowing him or her to become a tenant. Searches for criminal records might include federal, state and county records.
Beyond the basic criminal background check, take a risk-focused approach to determining additional levels of screening, which might include identity verification, employment verification and professional license verification.
An additional level of verification that is essential for a background screening of a potential tenant is a credit check. This can provide additional verification of social security and employment information and can reveal crucial information about the applicant’s ability to make payments responsibly.
The background check will be more efficient, more valuable and less costly if the application contains certain elements, such as a statement that all information is accurate and that any untruthfulness or omissions are legal grounds for termination of the lease. A standardized format that consistently collects all necessary information will also speed the background screening process. Some other helpful elements include:
• Detailed contact information for references, including contact information for past landlords.
• Any other names used by the tenant.
Using a Background Screening Provider
To simplify the task, you may find it helpful to outsource the process to a background screening service provider. For many screening tasks, such as criminal background checks, outside providers can be faster and more thorough. It is important that when selecting a provider you consider its financial statements and health, its hiring and employment processes, identity theft safeguards and, of course, its service offerings.
One way to streamline the process is to use an online application that requires certain fields necessary for the screening to be completed. The completed fields can be linked directly to the screening provider’s website, which will extract the necessary information for the background check. When a need for revision arises, the form can be easily modified.
You have several obligations to the applicant under the Fair Credit Reporting Act (FCRA):
• Any applicant on whom an institution performs a background screen must give his or her written authorization to conduct the report.
• If you ultimately deny the application, you must provide notification through pre-adverse action and final adverse action notification letters.
For More Help
Contact Warren G. Bender Co. if you need more information about protecting yourself from liabilities associated with tenants. Our insurance experts can keep you covered and give you peace of mind.