When screening potential tenants, what is the proper way to turn them
down, and the legal implications if the tenant asks for more details?
The "proper" way to turn someone down depends on why you decided to turn him or her down. As long as you did not decline to rent to a tenant because of information you learned in a credit report or commercially available criminal background check, you are not required to notify them. However, it is a good business practice to notify them in writing as Nij's post suggests. However, it would be a good idea to keep a copy of the letter for you records and possibly write down some notes. Such as, "other applicants had higher income," or "could not verify rental history." These kinds notes one the letters you mail out will be you friend should you ever be accused of improper discrimination on the basis of race, gender, religion, etc..
Declining to Rent Based Upon a Credit Check or Commercially Available Background Check:
The federal law that governs credit checks and commercially available background checks is the Fair Credit Reporting Act ("FCRA"). The FCRA regulates "consumer reports," which includes credit reports and criminal background checks that are assembled by companies. (The FCRA does not apply if you, yourself, are going to the state police or courthouse to get background check records).
Under the FCRA, requires that people who make decisions against someone based on information in a credit or background check, notify that person. The FCRA calls this decision against someone an "adverse action" and requires that you provide the affected party the following information:
- The name, address and telephone number of the company that supplied the consumer report, including a toll-free telephone number for companies that maintain files nationwide;
- A statement that the company that supplied the report did not make the decision to take the adverse action and cannot give the specific reasons for it; and
- A notice of the individual's right to dispute the accuracy or completeness of any information the company furnished, and the consumer's right to a free report from the company upon request within 60 days.
The FCRA calls this notice an "Adverse Action Notice." See 15 U.S.C. 1681m. An adverse action notice can be oral, written, or electronic. Obviously, written or electronic would be the best since you can prove that it was sent.
Also, be aware that the FCRA has civil penalties if it is violated.
The Federal Trade Commission has a helpful guide that lists some of the basics of when you do and do not need to provide adverse action notice.
Website: Using Consumer Reports: What Landlords Need to Know
Brochure: FTC Facts for Business
However, it does not cover criminal background checks, which have many of the same rules as the credit checks under the FCRA.