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Don’t let your “gut check” go to waste… August 30, 2007

No, I’m not talking about a new abdominal workout but rather advocating that landlords be on top of things when choosing who to rent to. I bring up the topic to highlight that the majority of landlords don’t do this kind of research using instead a “gut check” to determine if someone is lease-worthy; they can end up hurting themselves or others if they aren’t doing the due diligence to know who they are renting to. It’s also on my mind as we had dinner last night with a client (a couple) who was regaling us with stories of him having to out upwards of 3 felons from a property over the past 2 years. Each of these tenants had been renting in the building prior to them buying it so they hadn’t had the opportunity to do a background check of their own and when you buy a property with outstanding leases you can’t require the tenants to undergo a background check - you just get what is handed to you.

In fact, Washington has just recently passed an offender re-entry housing law under HB 6157 that will impact landlord’s liability for renting property to past offenders.

Sections of this bill show the potential of liability being removed from the landlord BUT ONLY IF the landlord follows certain procedures. The full details are in the RHA newsletter publication dated in August 2007, Vol XXI, No. 8, Section A but I’ll paraphrase here by saying that basically you have to disclose to residents in your building that you have a policy of renting to offenders and that you must take steps to report or halt any criminal activity you have knowledge of on your property premises. You can contact Alice Bartley of RHA (publications@rha-ps.com) to see if she has extra copies of this newsletter available.

One way you can opt out of some of this potential for liability is to have a “no felony” policy as part of your rental screening process. There are several ways that you can screen prospective tenants and one of them is to do a background check for criminal history. In the Puget Sound area you can sign up as a member of Rental Housing Association of Puget Sound (www.RHA-PS.com) and get access to their tenant screening services which can include background as well as credit checks. You can also check for sex offenders online at this website. Even if you don’t sign up for RHA, it’s worth your time and money to do some research, but I HIGHLY recommend people get involved in organizations like RHA because they keep you informed and they also lobby regularly on behalf of landlord rights.

In Wichita, KS you can go online to this website for the KASPER search they have available. (KASPER stands for Kansas Adult Supervised Population Electronic Repository.) Apparently it is the “friendly ghost” for landlords and perhaps anyone meeting and dating online. :) I found the boyfriend of one of my KS tenants on this website - she’s been letting him stay at my property (this started prior to my purchase of the building) but they are moving out as of the end of this month. Good. And Goodbye.

If you are a person looking to buy rental property I would recommend that you ask the seller if they have ALL the records for the tenant screening processes that they’ve used in the past to provide during your inspection process and not just the lease records. You will want to know if there are known felons living on the premises especially if you’ll be responsible for possible liabilities due to a tenant’s bad behavior and a new owner must meet the terms of a lease agreement if it is still in place when buying a property.

Another area where I wonder how it will play out over time is that in residential units (1-4 in WA) the State’s required Seller Disclosure Form has a notice stating that sellers need not disclose if there are sex offenders living near their home. If the home is used as rental property, and a known sex offender is renting at the property, will the seller need to disclose it?

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Comments

1. jkjk - August 31, 2007

Can I throw out a reminder that it’s illegal to refuse to rent to people with small kids? This is a frequently ignored law, I unfortunately know from experience. Other than clicking “report abuse” on craigslist I don’t have the time to chase people down, and it would be their word against mine.

2. Reba Haas - August 31, 2007

Hi jkjk, sure, it’s always good to remind people that there are plenty of what are deemed “protected classes” and they will vary by state, county and city. Familial status is one on the list for the City of Seattle, which is more inclusive with its overall list than federal, state and county. Landlords and tenants should know this information to be sure Fair Housing is being upheld.

3. rob - October 7, 2007

Hi Reba,
Nice article. I agree a lot of property owners or should I say people that know there is money to be made in real estate, and treat it like stock and put it in the safety deposit box. Real Estate is only passive for tax purposes. It is a very hands on and is easier when it is.

A favorite system I know of is a property owner I worked with in South Florida. He charged a $100 application fee. If you were denied he refunded the money, if you were approved, he applied it to the security deposit, if you lied he kept it.

A simple credit report tells a lot, not all but a lot. My favorite tenants are the ones that just had their bankruptcy discharged as the audience gasp. The first reaction is no way, let’s think about that. They have no debt and a chance at a start a new life and will work hard to get that new chance, at least for 18-24 months. So you have a good two year tenant. The best thing is to knock on the door of their current residence un-announced and personally take a peek at how they live. Call their references and call their employer. All told it is about 1-2 hours work.

On the background check. I work with a non profit group and we have teams of men volunteer once a month and we go to the homes of single moms and do light maintenance work for two hours. So you can imagine a predator would be drawn to this work. So we do a background check. We did not want to invade the privacy of the men, we just wanted to know if they are a threat. We didn’t care if you got caught smoking pot 10 years ago. So I found a company called Mind Your Business, Inc. So we set it up where I would give them a list of items that I was looking for and the results came back satisfactory or not satisfactory. That way we could assure our care receivers that the men were checked against the Sex Offenders list and for violent crimes.

However the key to staying out of hot water as a property owner is consistency. What ever procedure you have as long as you do it all the time you are pretty insulated. Also I would let all the tenants know what is checked and what is not.

4. Reba Haas - October 8, 2007

All good points, Rob, and I agree with you on them. My parents, who also have lots of rental properties, follow a similar philosophy of liking renters with bankruptcies and such because of exactly the same reasons you describe. If a renter is going to go buy a house in 6 months then you have higher turnover potential.