Resident, and any member of the resident's household, guest(s) or other person(s) on the premises with the resident's consent shall not engage in criminal activity, including drug-related criminal activity.

We also have a huge number of criminals that are addicts on our streets. 

First you have 2 problems, one is civil, one is criminal. 

If you get that much interest, my first thought is that you are probably under-priced.Start by "pre-screening" them with a cut/paste response that asks them how much they make, if they are willing to submit to a credit/criminal background, if they have pets, or whatever.

Regarding any potential legal action, I come from a law enforcement background, so I am trying to look at it from a criminal and civil law issue.  

Existing situations are less likely to be reported because it has been that way for a long time.Jail is pretty extreme for a consequence, but if someone gets harmed, you could be held responsible for criminal negligence.

Imagine the background check coming back with:"a lengthy criminal record with prior arrests on allegations of assault, disorderly conduct, destruction of property, resisting arrest, theft, public intoxication, and possession of marijuana"I've applied for CCW.

Quote from @Bruce Woodruff: Quote from @Jay Hinrichs: maybe make it like a Lenders license I have U have full fbi criminal and personal financial and credit report.. does not mean you have to be super star but just cant be bad.To get my GC in Cali, I had to do a full fingerprinting and state and federal background check.

Unfortunately, the only serious applicants I've received either have a criminal history, poor references from previous or current landlords, or have faced evictions in the past three years.

Yes, some will probably end up on the wrong side of a criminal or at least cease and desist directive.