Municipalities Turn Their Attention to Tenant Screening

In the last decade, media attention with respect to criminal background checks has largely focused on use of such information in the context of employment purposed reports. Now, however, the tide may be shifting to a new industry: the landlord and tenant industry. Starting in 2017 and as recently as this year, two cities (Seattle and New York City) enacted laws that restrict a landlord or property manager’s ability to consider criminal, eviction or other derogatory information about tenants, with New York City also regulating background check fees that may be charged of tenant applicants. While both laws clearly impact landlords and property managers, consumer reporting agencies that furnish consumer reports for tenant screening purposes also are affected and, thus, should take steps to consider how these laws impact their current processes and make any necessary changes that not only will ensure their customers are compliant but also avoid getting themselves in the crosshairs of local governments and plaintiffs’ attorneys.
First, in 2017, the City of Seattle enacted the “Fair Chance Housing Ordinance,” which makes it an unfair practice for any “person” (broadly defined to include landlords/property managers and their agents) to, among other things, “[r]equire disclosure, inquire about, or take an adverse action against a prospective occupant, a tenant or a member of their household, based on any arrest record, conviction record, or criminal history.” The exceptions to this general rule are rather narrow (e.g., single family or detached guest houses where the owner resides on the premises or certain properties that receive federal funds and are legally required to consider criminal history). The law does, however, allow landlords and property managers to consider a tenant applicant’s status as a registered sex offender, but an applicant can only be denied on this basis if there is a “legitimate business reason” to do so.
While at first blush it appears the ordinance only restricts the information that landlords and property managers may request and consider, the City’s FAQ expressly states that “[u]nless there is an exclusion, neither landlords nor any person may run criminal background checks,” adding that “any person” includes, but is not limited to “property managers, owners, screening companies, etc.” As a result, background check companies should consider modifying their processes to ensure that criminal history information, aside from sex offender registry status, is not reported to Seattle landlords and property managers, absent clear proof that an exception applies.
More recently, we learned in June 2019 that New York amended the city’s landlord-tenant law to (1) limit the amount of fees that landlords and property managers can charge prospective tenants during the application process and (2) restrict consideration of prior landlord-tenant disputes in connection with an application for a tenancy. In terms of fees, the amended law allows landlords and property managers to charge applicants the cost of any required background check or credit report, unless the applicant provides the prospective landlord or property manager with a report prepared within the previous 30 days. This does not mean that a new background check or credit report cannot be obtained. It simply means that if a prospective landlord or property manager wishes to run their own checks on all applicants, and not rely on one provided to a different landlord or property manager, it cannot charge a fee to those who present a recently run report.
New York also amended the city’s law to make it unlawful for a landlord or a property manager to refuse to offer a lease to potential tenants based on their involvement in a landlord-tenant dispute. Application of this new prohibition might only seem to apply to landlords and tenants, but it is important to remember that New York City’s Human Rights Law, which covers housing and tenant issues, recognizes an “aiding and abetting” theory of liability, which makes it unlawful for any person or entity to “aid, abet, incite, compel or coerce the doing of any of the acts forbidden under” the Human Rights Law. While the new prohibition against considering landlord-tenant disputes is in a separate law, it is possible that New York City could take the position that a violation of the landlord-tenant law is a violation of the Human Rights Law. Thus, consumer reporting agencies that offer tenant screening services to New York City landlords and property managers should work with experienced counsel to determine whether to continue reporting landlord-tenant disputes, including eviction records, to decision makers in that city.
Although only two jurisdictions presently have laws that impact the tenant screening industry, we anticipate the trend will continue. We recommend that consumer reporting agencies that offer a tenant screening product review their current processes in New York City and Seattle to ensure compliance. We will continue to monitor legal developments in this evolving area of the law.
By Jennifer L Mora, Senior Counsel with Seyfarth Shaw LLP