Tenant Background Check Tips to Avoid Liabilities with Your Jacksonville Rental Property

The tenant screening process is designed to protect you and your property against bad tenants. You’re looking for renters who can pay rent on time, take care of their home, and follow the specific terms of the lease agreement. 

To find these Jacksonville tenants, you need a solid set of qualifying criteria and a consistent screening process. 

Any good screening process will include running various background checks. You want to get an idea of a tenant’s financial situation, criminal history, and rental history. You want to know how much they earn and whether it’s enough to cover the rent. You also want to know if there are previous evictions. 

We always run a thorough background check on the tenants who apply for our properties, but we also know that we have to screen within the law. Federal fair housing laws are in place to ensure there is no discrimination against the people applying to rent homes. 

It’s easy to make a mistake when screening, especially if you don’t know the laws. 

Unfortunately, those mistakes can be expensive. If you ask a prospective tenant whether they’re married or have children, for example, you could be violating fair housing laws. If you ask about their religion or which country they’re from, you could be opening yourself up to a fair housing complaint. 

Here are some of the best tenant background check tips we can provide that will do two things:

• Ensure you have a solid and effective screening process.
• Protect you against risk and liability.

Renting to a terrible tenant is risky. Here’s how to avoid it.

Understand the Fair Housing Act

There’s a liability in not following fair housing laws. That’s why it’s essential to know the laws, particularly the Fair Housing Act. This prohibits discrimination against any tenants or applicants. As you may know, the law establishes seven protected classes. You cannot deny housing to anyone based on:

• Race
• Color
• National origin
• Sex
• Familial status
• Disability
• Religion

If a tenant or a prospective tenant files a fair housing claim against you, there will be a lengthy investigation process and if you’re found to have violated the law, you could be fined several thousands of dollars. It’s hard to recover from that type of mistake. So make sure your tenant screening process is compliant. We recommend that you document it in writing and follow it consistently every time you screen an application. 

One way to protect yourself while screening and conducting background checks is to include qualifying information in your listing. You can spend less time screening by limiting your tenant pool to those who are likely to qualify. 

For example, always include the rental amount in your listing. When you do that, you’ll only hear from people who can afford that amount. State whether pets are allowed, what type of income and credit standards you have, when tenants will be able to move in, and the length of the lease term you’re looking for. When you include as much information as possible in your listing, you know that only qualified tenants will apply. 

You also want to provide potential applicants with a documented list of the standard rental criteria you’re looking for when you screen them. Maybe you have a specific credit score that serves as a threshold to determine whether applications are approved or rejected. Maybe three times the rental amount must be proven as income. Whatever your standards are, put them in writing and provide them to applicants before they move any further in the process. 

Income and Credit Background Checks

Check credit backgrounds before approving a tenant. No one is likely to apply for your home with perfect credit, so don’t set unreasonably high standards for what you want to see. Decide what kind of credit score you’re comfortable with and make sure your background check includes a deeper dive into financial history and credit. There may be some concerns – even with a high credit score. Look for:

• Money owed to former landlords, property managers, or apartment communities 
• Delinquent housing-related accounts such as utilities, cable, etc. 
• Prior evictions (these won’t always show up on a credit report, so check the national eviction database as well)
• A lengthy history of court judgments, unpaid debts, and collection accounts

Debt to income ratio is also an important benchmark. When you’re setting standards, maybe you don’t want to see debt that exceeds 40 percent of an applicant’s income. 

When you’re checking income, best practices say that you should look for someone who earns at least three times the rental amount. This means if you’re asking for $1,800 in rent, you’re looking for monthly income from all adult tenants that exceeds $5,400. Make sure you have a way to verify that tenants earn what they say they earn. You can ask for proof of income through pay stubs, employment contracts, tax filings, and bank statements. 

In our experience, having these financial standards in place establishes accountability and protects our owners against the risk of tenants who can’t or won’t pay rent.

Criminal Background Checks 

A criminal background check is another important part of your screening process.

You’re likely not going to deny someone because of civil lawsuits or minor traffic offenses. But, if you find something with a criminal background that would potentially put your property at risk, you need to consider whether this is a person you want in your property. You don’t want to rent to anyone with a history of violence, theft, or other dangerous criminal convictions. Check national criminal records as well as local; you’ll want more than a local police report. 

Some property owners wonder whether or not they should allow tenants who have a criminal record from many years ago. Sometimes, considerations will be made on a case-by-case basis. You can ask for full explanations in the application that might help explain a conviction. Make sure your criteria reflect what kinds of criminal past will lead to an automatic denial and what types of situations will warrant consideration. 

Jacksonville Tenant Background Checks and Rental References 

A lot of landlords will check credit and verify income but stop short of confirming rental history. 

This is a mistake because rental reference checks can be an important step in the screening process. A current or former landlord can give you a clear understanding of how your prospective tenant behaves in the property they rent. 

On the application, ask for at least two landlord references. Verify the contact information so you aren’t calling the applicant’s friends or family members. If someone had a bad experience with landlords in the past, they won’t want you talking with them. 

Call or message the landlords who are serving as references for a prospective tenant. Ask them:

• The dates of the tenant’s residency.
• The amount of rent that was paid.
• Whether there were any security deposit deductions.
• If the tenants provided proper notice before leaving.
• Whether there were pets in the property and if so, did they cause any damage?
• If rent was paid on time.

Finally, ask if they’d rent to your tenant again. If you hear an enthusiastic “yes,” you know you’re probably screening a good potential tenant. 

It can be time-consuming to contact former landlords and ask these questions. However, you’ll get some good information on what you can expect from a particular tenant. 

Avoiding Liability while Checking Tenant Backgrounds

There’s a legal liability and then there’s the liability you face when you allow an unqualified tenant into your property. 

Avoid the risk of fair housing claims and other potential lawsuits by doing these things:

• Make sure the rental application grants you permission to check background information, including incomes, criminal histories, and credit. You need your tenant’s signature to confirm that they understand you’ll be contacting people and asking for information. 
• Always provide the standard rental criteria before a tenant applies.
• Document the process and your reasons for approving or denying a tenant.
• Follow a consistent process that ensures every application is screened the same way. If you deny one tenant because they have a 550 credit score but the tenant you ultimately approve has a credit score of 530, you may have trouble explaining that. 
• Send out the necessary denial letters in accordance with the Fair Credit Reporting Act.

The full screening process shouldn’t take more than a day or two, depending on how quickly you’re able to access the information you need. Don’t drag it out. Be efficient and quick about letting tenants know whether it’s a yes or a no. 

Avoid the liability of approving the wrong tenant by:

• Thoroughly checking credit, income, criminal history, and rental references.
• Prescreening tenants by asking when they want to move, how much money they earn, and why they’re moving.
• Collecting an adequate security deposit. 

If you’re not sure you have the resources or the time to conduct a legally compliant and complete background check, get some help from Jacksonville property managers. We’re here to help. Please contact us at Red Rooster Property Management. We are your local experts when it comes to rental properties in Jacksonville, St. Johns, and Orange Park.