Automatically Eliminating Criminal Records? Not so fast, says HUD

General Landlording & Rental Properties
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Automatically Eliminating Criminal Records? Not so fast, says HUD

Mindy JensenPro Member
BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes

Criminal record? For years, landlords have been able to automatically disqualify any tenant with a criminal record - as they were not a protected class under Fair Housing Laws. 

Recent recommendations from HUD are calling this practice discrimination.

Automatically disqualifying them based on their criminal record - which could be decades old, may not ever have resulted in a conviction or jail time, and gives no consideration to their behavior since the arrest - can be a form of discrimination.

The reasoning behind this recommendation is that nearly 1/3 of Americans have a criminal record, and a disproportionate amount of those with a record are minorities. To discriminate solely based on having a criminal record "... results in a disparate impact on a group of persons because of their race or national origin."

People with criminal records are still not a protected class - and in some cases, turning them down based solely on their conviction is justifiable. Think recent felony convictions for murder, rape, theft or drug manufacture or distribution.

But blanket statements regarding arrest records might get you into hot water.

HUD is recommending that you examine each tenant on a case by case basis.

We've been having a lively in-house discussion here at BiggerPockets, and @Brandon Turner said "HUD wants us to look at each case specifically and decide if it was ‘bad enough?" That is just asking for a lawsuit. Making tenant screening subjective is a terrible idea."

Here's the link to the entire paper. Office of General Counsel Guidance on Application of Fair Housing Act Standards to the Use of Criminal Records by Providers of Housing and Real Estate-Related Transactions

Do you discriminate against criminal records? Do you look on a case by case basis or blanket discriminate? 

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Russell BrazilBusiness Member
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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
10y

I wish I could vote up @Account Closed post 100 times.

I will rent to people with a criminal record in a heart beat depending on the record.  Anything marijuana or alcohol related, I do not care about what so ever. Anything that is relatively old I will probably look over. Anyone who only has 1 thing on their record I will probably gloss over.  Things I will typically not overlook are violent crimes, domestic abuse situation, sex offenders, crimes involving fraud.

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  • Lynn McGeein
    Real Estate Agent · Virginia Beach, VA · Member since 2012 · 2k+ posts · 1k+ votes
    10y

    I just read this article and wondering if I should be worried as I always put in my rent listings, Must have clean credit, rental history and criminal background check.     

    1Reply
  • Dawn AnastasiPro Member
    Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
    10y

    If someone has something minor from 20 years old on their record, why would anyone really discount them?

    I can understand if someone was a sex offender and the property was near a school, the person could not live there.

    But let's say they had a petty theft from 20 years ago. That doesn't mean they are a criminal now.

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  • Account Closed
    Investor · Henderson, NC · Member since 2016 · 484 posts · 208 votes
    10y
    Originally posted by @Dawn Anastasi:

    But let's say they had a petty theft from 20 years ago. That doesn't mean they are a criminal now.

     Unfortunately, common sense is about as uncommon among landlords, as it is everywhere else. Too many think they are somehow protecting themselves by blindly sticking to a set of ridiculous qualifications.

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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    10y

    I wish I could vote up @Account Closed post 100 times.

    I will rent to people with a criminal record in a heart beat depending on the record.  Anything marijuana or alcohol related, I do not care about what so ever. Anything that is relatively old I will probably look over. Anyone who only has 1 thing on their record I will probably gloss over.  Things I will typically not overlook are violent crimes, domestic abuse situation, sex offenders, crimes involving fraud.

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  • Matthew Olszak
    Real Estate Broker · Chicago, IL · Member since 2015 · 1k+ posts · 2k+ votes
    10y
    Originally posted by @Account Closed:

    But let's say they had a petty theft from 20 years ago. That doesn't mean they are a criminal now.

     Unfortunately, common sense is about as uncommon among landlords, as it is everywhere else. Too many think they are somehow protecting themselves by blindly sticking to a set of ridiculous qualifications.

    The cause of this problem is HUD themselves and Fair Housing. With how easy it is to be the victim of an overzealous discrimination complaint, many landlords transformed their rental policies to be absolutely rigid. That is fine for certain crimes as others have mentioned (ie murder), but since these same rigid landlords don't want to take the time to list out each possible crime that could fall under their 'no-way-never' policy, they take the easy way out and say 'no-way-never' to ANY criminal record. There should be crimes that fall in the absolute category, and others that after x years aren't considered. And even others that aren't considered no matter the time frame. But suggesting a policy of case-by-case begs for a lawsuit.

    Unfortunately, a blanket background rejection policy allows for unscrupulous landlords to use  a legal reason to cover their real discrimination. Example - 48 yr old mother of 3 teenage sons. Landlord living in 2nd unit in duplex doesn't want kids and their noise, knows that he can't discriminate on that basis, so he rejects the application due to a retail theft conviction mom had when she was 18. "Failed" background check.

    For that reason (and others), I would like to see reform as far as the rights of those who have a background. However, I worry about how far the government is going to take this policy, and certainly hope background checks don't become entirely illegal.

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  • Omar Merced
    Real Estate Investor · Las Vegas, NV · Member since 2016 · 399 posts · 260 votes
    10y
    The problem I see with this is that government agencies have never been known for common sense. And I can see how this would become a major issue. Thankfully the apartment industry has some major lobbyist that'll probably shut this down or at least we hope. I agree discriminating on all criminal activity is not really fair. I've seen from personal experience as the owner you decide what you can do it just has to be documented and followed accordingly. If not you are opening yourself to a fair housing suit.
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  • Marie R.
    Real Estate Agent · San Jose, CA · Member since 2016 · 16 posts · 7 votes
    10y

    Interesting... I had some lady that wanted to rent a unit from a company I used to work for, but we turned her away because she had a felony for using pepper spray on some guy she claimed was trying to attack her. She claimed she had a bad lawyer that wasn't able to remove the conviction from her record and the court ruled that it wasn't self defense so now she has this felony on her record. 

    I agree with @Russell Brazil "Things I will typically not overlook are violent crimes, domestic abuse situation, sex offenders, crimes involving fraud." However, mistakes do happen (hanging out with a wrong crowd) or wrongful convictions so if the applicant can prove that they are a righteous citizen now, then I would personally feel that it would be ok to rent to them if they have a track record of paying bills on time and good landlord references etc. 

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  • Mindy JensenPro Member
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    BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
    10y

    @Matthew Olszak, I wonder if the more tenant friendly states would jump on this and make it even more restrictive?

    Reform sounds good, but I can see the Government taking it too far. But without guidelines, how are landlords going to follow the law correctly? 

    Are we going to have to stop advertising that a background check will be performed? Can we ask about felony convictions?

    You made a great point - with how easy it is to have discrimination complaints lodged against them, landlords have become ultra rigid - while still staying within the law.

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  • Jorge Borges
    Investor · Port St Lucie, FL · Member since 2015 · 37 posts · 14 votes
    10y

    WSJ Article Today:

    Landlords Face Pressure on Criminal Background Checks

    0Reply
  • Penny ClarkPro Member
    Sacramento, CA · Member since 2014 · 513 posts · 319 votes
    10y

    @Mindy Jensen, excellent post! However, after recently attending the annual legal seminar for Sacramento Valley Rental Housing Association, the attorneys there informed landlord owners to be wary of discriminating against applicants solely on criminal background checks. The reason? It may unfairly target and affect certain groups and that the courts are still reviewing these on a case by case basis.

    What they recommended is that to avoid possible legal action, you don't deny an applicant strictly based on their criminal background history but on other rental criteria in addition to it. Usually if you have a stringent rental criteria based on that person's financial, rental, and credit history, you shouldn't have to use it as the sole reason for denial.  

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  • Joe SplitrockPro Member
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    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    10y

    @Mindy Jensen thanks for posting.

    If the problem is minorities being targeted and prosecuted unfairly, maybe the federal government should look at their own court system and judges. Asking landlords to fix a problem created by an unfair justice system is ridiculous. This reminds me of a realtors response when I told them I wasn't interested in buying a house next door to a registered sex offender. The realtor said, well often it is not that bad. You need to look at it case by case. I looked and he raped two teenage girls. Perspective tenants don't want to live next to a sex offender or a violent criminal regardless of the circumstances.

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  • Rob Krach
    Lender · Chicago, IL · Member since 2013 · 82 posts · 27 votes
    10y

    @Mindy Jensen great article, I am curious is there a law or a requirement of landlords that they have to provide a reason, can't they just treat it the same way a lot of companies treat job applicants and state: "we have elected to go with a candidate who better meets our qualifications" and leave it at that?

    I agree tenants should be reviewed on a per applicant basis but taking my analogy further what is the difference between a landlord saying no and a potential employer saying no because of a criminal record? If they change the law for one, wouldn't the other have to follow or am I completely off here?

    Cheers,

    Rob

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  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    10y

    Everyone would be wise to go to the source: CLICK HERE

    The media is blowing this out of proportion, as are most people in the field of property management and Landlording. Read the actual source document and it's not nearly as dire.

    The bottom line: you can discriminate against criminals but you must be able to justify your reason (e.g. safety of people or property). For example:

    1. A guy shows up on the sex offender registry for an offense in 2004 as a 34-year-old man. I would not let him rent in an apartment complex where he may be a danger to others. However, I may allow him to rent a single-family home on a 4-acre spread because he doesn't pose an immediate danger to anyone.

    2. An applicant has a felony drug conviction. If he just got out of prison six months ago, I would deny him because he has not provided a long-term record. If he got out five years ago and could show clean credit, criminal, and rental history, then I would rent to him as long as he met all my criteria.

    The key is to establish a written policy that is based on objective criteria and then apply it equally to all applications. This is nothing new and what every Landlord/PM should already be doing.

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  • Roy N.Pro Member
    Rental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes
    10y
    Originally posted by @Mindy Jensen:

    Do you discriminate against criminal records? Do you look on a case by case basis or blanket discriminate? 

    [This seems like an appropriate place for my 5000th post].

    Yes and Yes, but rarely.  While it is not - nor about to become - discriminatory to refuse an applicant based upon a criminal record here in Canada, access to criminal records are far more difficult to obtain.  The tenant applicant would have to submit the request for a criminal record check and authorise us to see the results.  

    Even then, the results we actually see may only tell us the basic nature of the offence (misdemeanour, property crime, assault, etc), whether there was a conviction and/or if time was served.

    Back to the situation in your country, after reading the HUD document, I do not think the objective is to make it an offence to disqualify an applicant based upon a criminal history, but rather to cause landlords to actually look at the situation rather than apply a broad tool that could weed-out anyone with an arrest record (even if there was not subsequent conviction). As an outsider reading the document, it seems like a tangential approach to try and offset some of the biases in the policing and judicial system(s).

    1Reply
  • Ben Leybovich
    Rental Property Investor · Phoenix/Lima, Arizona/OH · Member since 2012 · 4k+ posts · 4k+ votes
    10y

    This is where it pays to outsource the qualifying to third party. I've started using Buildium recently, and the system does the checking and just spits out recommendation. So, if Buildium checks nation-wide database, finds criminal history, and makes a recommendation for me not to rent - I don't rent. And if HUD wants to take it up with Buildium, as long as they don't bother me in my Tesla, they can do whatever they want and I'll just follow Buildium's system.

    Easy - should have done it sooner :) This business is really so very nice as long as you don't work in it! 

    4Reply
  • Samuel Sedore
    Real Estate Agent · Kitchener-Waterloo-Cambridge, Ontario · Member since 2013 · 408 posts · 90 votes
    10y
    Originally posted by @Roy N.:
    Originally posted by @Mindy Jensen:

    Do you discriminate against criminal records? Do you look on a case by case basis or blanket discriminate? 

    [This seems like an appropriate place for my 5000th post].

    Yes and Yes, but rarely.  While it is not - nor about to become - discriminatory to refuse an applicant based upon a criminal record here in Canada, access to criminal records are far more difficult to obtain.  The tenant applicant would have to submit the request for a criminal record check and authorise us to see the results.  

    Even then, the results we actually see may only tell us the basic nature of the offence (misdemeanour, property crime, assault, etc), whether there was a conviction and/or if time was served.

    Back to the situation in your country, after reading the HUD document, I do not think the objective is to make it an offence to disqualify an applicant based upon a criminal history, but rather to cause landlords to actually look at the situation rather than apply a broad tool that could weed-out anyone with an arrest record (even if there was not subsequent conviction). As an outsider reading the document, it seems like a tangential approach to try and offset some of the biases in the policing and judicial system(s).

     Happy 5000th Can you remember your first lol?

    Have never heard of someone in Canada using this practice, mainly because it's so difficult. Just wondering how often you do this as it seems you have some experience in the matter.

    My opinion would be that if the criminal has great references from landlords and jobs, along with strong credit and a NOA that checks out, why not rent to them? Repeat offenders would be a different situation, but everyone makes mistakes.

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  • Matthew Olszak
    Real Estate Broker · Chicago, IL · Member since 2015 · 1k+ posts · 2k+ votes
    10y
    Originally posted by @Mindy Jensen:

    @Matthew Olszak, I wonder if the more tenant friendly states would jump on this and make it even more restrictive?

    Reform sounds good, but I can see the Government taking it too far. But without guidelines, how are landlords going to follow the law correctly? 

    Are we going to have to stop advertising that a background check will be performed? Can we ask about felony convictions?

    You made a great point - with how easy it is to have discrimination complaints lodged against them, landlords have become ultra rigid - while still staying within the law.

    Oh yes - I can already imagine my Illinois politicians (or at the very least Chicago alderman) trampling over one another to be the one who "protects housing opportunities for minorities and stops discriminatory practices from landlords". That's unfortunately what this release has transformed into, courtesy of the media. The protected-classes already have a ton of protection, but the way all of these articles that've been popping up today are written you'd think we are still using separate drinking fountains. Unfortunately, the root problem I believe this opinion covers - blanket policies against ANY criminal background, has gotten lost behind a shadow of racial sensationalism.

    Personally, I'd keep asking for complete disclosure of credit and criminal history on an app. If they lie, deny. If they disclose, have written procedure based upon the circumstances. If there is a denial, don't disclose the reason except that they don't qualify.

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  • Roy N.Pro Member
    Rental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes
    10y
    Originally posted by @Samuel Sedore:

    Have never heard of someone in Canada using this practice, mainly because it's so difficult. Just wondering how often you do this as it seems you have some experience in the matter.

    My opinion would be that if the criminal has great references from landlords and jobs, along with strong credit and a NOA that checks out, why not rent to them? Repeat offenders would be a different situation, but everyone makes mistakes.

    Samuel:

    We've only asked for a criminal background check four, maybe five, times.  In every case, but one, it resulted in the individual withdrawing their application.  The one who did provide us with access to the results of a background check only had a misdemeanour long in their past.

    0Reply
  • Ryan Dossey
    Real Estate Broker · Indianapolis, IN · Member since 2014 · 3k+ posts · 2k+ votes
    10y

    This is one of those areas where I avoid "Even the hint of impropriety." If there is something minor, old, or not a threat to my property I don't worry about it. Some of the best people I know have records. Some of the worst folks I know don't. If they're "rehabilitated" or it was petty I don't care. 

    I do keep an eye out for drug manufacturing, violent crime, and any fraud.

    1Reply
  • Walter Jones
    Real Estate Broker · Hazel Crest, IL · Member since 2014 · 20 posts · 1 vote
    10y

    You can't dismiss that Chicago has had a long history of discriminating housing practices in her past. If you're playing with in the rules of fare housing laws it shouldn't be a worry. 

    0Reply
  • Carolina E.
    Investor · NW Indiana · Member since 2012 · 833 posts · 197 votes
    10y

    I wonder if the landlord can be sued if they decide to give someone with a felony a chance, being that they have shown to be a "good" citizen, and they end up doing something to another tenant living in the same building?

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  • Andrew SyriosPro Member
    Moderator
    Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
    10y

    This just seems like a horrible rule, if it goes into place. We deny felonies, unless they're old, but will usually tolerate a misdemeanor, unless it's recent. But yeah, if the whole point behind fair housing is to literally make screening objective and now they want you to look at criminal records subjectively. It's all but an oxymoron that will probably just give busy body regulators and attorneys an excuse to sue landlords. Pretty soon they'll probably try to sue landlords for letting in felons (particularly in apartments) who commit any violence against fellow tenants (assuming that hasn't happened already). 

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  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    10y

    @Roy N. congrats on your 5,000th post :)

    HUD rules dictate no public housing assistance for convicted felons, in that category we have crimes involving sexual predators and rape, violent crimes, drugs and money fraud, grand theft. Those applicants would be turned away at the Housing Authority.

    Non-violent felonies, like your 3rd DWI and felonies involving a vehicle accident are another matter. Age and time heal a lot of behavior issues, were they 22 years old and was an incident 20 years ago or was it last year and the guy is 54? 

    I haven't read the HUD statement, but I'd think what they are saying is be reasonable.

    To complicate your life even more, we have the Fair Housing Act, but we also have unfair business practices that can be the basis of tortuous conduct claims, yes, anyone can sue for anything but if your selection process is fair and reasonable you don't need to lose sleep.

    The real question is will the applicant pose any threat to the safety, security and quiet enjoyment of others and how likely are they to conduct criminal behavior on the property? The subject property plays a role too, is there a high concentration (higher risk) of tenants in an apartment complex or is it a single family dwelling with low risk?  

    I also know that in many areas, the attitude of those on a jury is pretty much, "if they weren't guilty they wouldn't be here", regardless of their instructions by the court, that still plays in the minds of many people. 

    An arrest isn't good enough to deny housing, if they aren't convicted or plead guilty and did some bargaining then they are clean, Scott free.  

    @Jerry      

    Need to deal on a case by case basis, what the conviction was, when it was, how old were they, conduct since and have they demonstrated good citizenship? Those that just say they kick out any applicant are taking the lazy way out and can have legal issues while they think they are avoiding them. 

    Other than with the Housing Authority, using their guidelines, my basis was pretty much if the can qualify for a loan then they qualify to lease from me. :) 

    @Jerry W.undefined any comments?

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  • Brandon Hicks
    Investor · Avilla, IN · Member since 2013 · 796 posts · 769 votes
    10y
    Easiest way around this? Have a decent product that will attract multiple applicants. Don't reject anyone....approve someone else.
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  • Michael Hayworth
    Contractor · Fort Worth, TX · Member since 2015 · 379 posts · 740 votes
    10y
    Originally posted by @Brandon Hicks:

    Easiest way around this?

    Have a decent product that will attract multiple applicants. Don't reject anyone....approve someone else.

    How many of us have had a bad feeling about a potential tenant, but been unable to quantify an objective reason why? And then later, your gut proved right when he was  a deadbeat, or tore up the property, or.......but we rented to him because we were afraid of getting sued, because of rules the government, that bastion of efficiency, set up. Nobody wants to make judgment calls, because they open you up to having your judgment questioned if a pissed-off applicant sues. So many landlords went to using the best objective criteria they could - no criminal record and a minimum credit score. It's objective, at least. Can't get sued for it. Except now, maybe you can.

    Brandon has it right. Multiple applicants makes a big difference.

    I make sure my rental properties are well renovated, fairly priced and will rent quickly. I only do showings at open houses. So far, I've always walked away with multiple applicants. That allows me to approve the best applicant, not just try to find a reason to deny an applicant my gut says is wrong, but meets minimum standards on paper.

    And yes, I will approve felons - there was another recent thread on this - but I have to see evidence they've turned their lives around. (Or it's  a conviction for weed, booze, or something I couldn't care less about.) One of my best tenants had a record, and had trouble finding a place. I know he's going to treat my house well, pay rent on time, and be a good tenant because he doesn't want to have to look again for someplace that'll approve him.

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