If you are a landlord or property manager doing work in California, it’s time to pay attention because some local laws are changing, and these changes might make a huge difference in how you handle business.

Tenant screening is a skill that you as a landlord have honed over time, but that process is now going to change. Exactly what changes will happen are still a bit unclear, but we can give you some essential points about how a recent court case has affected the rental industry.

A Table of Contents For New Tenant Screening

The Court Case: Connor vs. First Student

In a recent court case, the California Supreme Court ruled that employers and other management groups that conduct background checks must follow the Investigative Consumer Reporting Agencies Act (ICRAA) instead of the less-detailed rules that were previously used.

In a 7-0 ruling, the court decided that two laws that play out in relation to employment, housing, and credit decisions must be followed by all related industries:

  1. Notice and authorization must be given before running certain types of background checks.
  2. Agencies gathering information must use it appropriately (This law is focused more on consumer practices & credit decisions)

ICRAA vs. CRAA

Keeping the tenants of each of these laws straight can be confusing, so let’s review them together.

  • ICRAA
    The Investigative Consumer Reporting Agencies Act requires that the person requesting the report has written permission to do so after giving the consumer all the necessary disclosures.

    This rule applies to any type of background check that gives the requester information about the consumer’s “character, general reputation, personal characteristics, or mode of living.”
  • CRAA
    This rule only applies to credit-related situations that show the consumer’s credit-worthiness, and it does not require any type of written authorization or notice from the consumer.

While these rules existed before this ruling, many employers, companies, and housing providers were using the rules of the less strict Consumer Credit Reporting Agencies Act. The CCRAA does not require that notification be given to tenants or employees whereas the more strict ICRAA does.

In the past, employers and housing providers were typically following the previously-determined idea that cases which check creditworthiness (such as a background check) fall under the CRAA only, so they did not need written authorization.

Now, everyone is required to follow the ICRAA in cases where any part of the consumer’s “character, general reputation, personal characteristics, or mode of living” is being tested.

This means that anyone who uses background or eviction checks in their hiring, rental, or similar contract-driven fields will need to change their processes and give proper notice to the person the report is being filed about.

Effects On The Rental Industry

While this case had nothing to do with the rental industry directly, the fallout from the Connor vs. First Student decision will force some changes in this industry.

Here are the key facts that you need to know:

  • Who these changes will affect:
    Anyone who uses eviction and/or criminal background checks in their tenant screening process.
  • What will be changing:
    You and your screening companies must follow more strict requirements each time that you use eviction and/or criminal background reports in your rental business. You will need to notify the potential tenant and get proper permissions according to the law.
    It is still possible to run these reports, but there are some changes. Before you run a criminal background or eviction report, you must disclose your exact intentions to the tenant in question beforehand, and you must clearly lay out exactly what information will be provided to you.
    Additionally, you must give the person in question the option to receive a copy of the report. A simple check mark on the disclosure given prior to running the check will suffice. Once you receive the results, a copy must be given to the person in question within three days.
    This notification is necessary to allow them to correct any false information in the record and also to help lower the risk of identity theft going unnoticed. Additionally, it gives them the exact information about who gave out the information and who received it.
  • What is at risk:
    If you do not follow the rules of the Investigative Consumer Reporting Agencies Act, you could be held responsible for a crime and responsible for a minimum of $10,000 in addition to damages and attorney’s fees.
  • What hasn’t changed:
    The current laws for requesting and using credit reports is the same as it was previously.

Due to these changes, landlords and tenant-screening companies around the state will need to update their provisions to ensure that they do not cause any undue problems by illegally using or requesting information.

Keep Up With The Latest News

Keeping up with changes in these types of laws can be complicated for landlords who are used to doing things a certain way. While it may take some time for all of the rules to be fully adjusted, it is your responsibility (and the responsibility of any tenant-screening services that you hire) to follow the letter of the law.

As such, it is important that you become familiar with both this ruling and the ICRAA so that you can protect yourself from the risk of a costly violation!

About the author

I believe the biggest mistake you can make in life is not learning from them. I've been a landlord since 2009 and still learning all the time.