July 2019

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Landlords Need A Fair Housing Cloud – So We’re Building One
Tackling Identity Fraud And Its Effects In The Multifamily Rental Industry

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Volume 20 • Issue 7

JULY 2019



3600 South Yosemite Street Suite 828, Denver, Colorado 80237

thsnews@thslawfirm.com www.thslawfirm.com

Denver Phone 303.766.8004 FAX Completed Eviction Forms To: 303.766.1181 or 303.766.1819

Colorado Springs Phone 719.550.8004 FAX Completed Eviction Forms To: 719.227.1181


Many who regularly attend our classes and events know that we are developing a fair housing cloud (FHC) for landlords. Disability requests include both reasonable accommodation requests and reasonable modification requests. Some landlords have policies and procedures for handling disability requests (DR/ DRs) but many do not. Few landlords have sophisticated systems to handle DRs. Our goals in developing the FHC are to streamline disability-related requests, to ensure consistency of request handling, and to centralize documentation and reporting. Few of these goals are currently being met by the dearth of DR systems. With the number of DRs skyrocketing, landlords need a system to efficiently process and manage these requests and to limit potential legal exposure.

Under fair housing laws, disabled tenants and prospects can make DR requests. A landlord commits fair housing discrimination when it refuses to allow reasonable modifications of existing premises, if such modifications may be necessary to afford such person full enjoyment of the premises. A landlord commits fair housing discrimination when a landlord refuses to make reasonable accommodations in rules, policies, practices, or services when such accommodations may be necessary to afford such person equal opportunity to use and enjoy a dwelling. Whether a modification or accommodation request, DR requests can simply be viewed as a request for an exception. With modifications, a request for an exception (change) to physical structures. With accommodations, a request for an exception to a rule.

DRs became the law of the land with the adoption of the 1988 Fair Housing Amendments. In the beginning, the number of requests was small. Requests

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One of the most challenging situations in today’s multi-family rental industry is the statistical fact that 75% of management companies with less than 30,000 units and an incredible 100% of management companies with more than that number of units are victims of fraud. We have reviewed material from recent articles and comprehensive statistics that have been published dealing with Synthetic Identity Fraud in the multifamily housing industry and we have condensed/merged some of the most recent information available on this topic from several primary resources that include the NAA, Experian, Idanalytics, Corelogic, CheckpointID, TransUnion and Forbes Magazine. As the NAA has pointed out, there is no question that apartment operators and managers, unfortunately, are very familiar with the detrimental effects that identity fraud can have on their business and know that no property is safe from the four basics types of identity fraud:

1. First-Person Fraud: The applicant is acting

for another person when renting an apartment.

The applicant uses his or her real identity infor-

mation on the application but isn’t the person

who’ll be residing in the apartment

2. Third-Party Fraud: The applicant assumes a

stolen identity and uses the victim’s personally

identifiable information (PII), including name,

Social Security number (SSN), and date of birth


3. Identity-Manipulation Fraud: The applicant

alters some of his or her own identifying infor

mation in a way that looks as if it could be a typo

or spelling error. Common examples include an

SSN that’s off by one number or includes transcontinued on page 2


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began to accelerate after 2000. The number of tenants’ (meaning both tenants and prospects) disability requests has gone through the roof. At a recent legal conference, one large landlord reported that they have received over 4000 requests since the start of the year. Client situations involving DRs are consistently at the top or near the top of the THS situation board. Depending on the client, requests for Emotional Support Animals (ESAs) comprise between 75% and 90% of DR requests made by tenants.

If DR requests are not handled correctly, they can quickly go wrong. In the most contentious fair housing lawsuit I ever handled, the landlord promptly gave the tenant everything they requested. However, because the DR request was not properly documented, the tenant was able to lie about what they had asked for and when they asked for it. This case should be a powerful reminder to all landlords. Failure to accurately document a DR creates potential legal exposure.

Unfortunately, the status quo is woefully lacking when it comes to systematically documenting and processing DR requests. Landlords currently deploy a literal hodgepodge of solutions that are, for the most part, neither methodical nor comprehensive. Some landlords at least have standardized forms for tenants to make DRs. However, the forms often are of little use because they have been simplified to the point where they don’t collect the necessary information to evaluate the DR. Frequently, onsite teams are not properly trained on how to use the forms. Some landlords do deploy more well thought out policies that include centralized processing and documentation. But again, their onsite teams are frequently not trained on the policies. Further, in some instances the policies and procedures are confusing and even contradictory. Finally, since the policies are often either inflexible or not comprehensive, scenarios arise that are not covered by the policies. When this occurs, it paralyzes the onsite team or regional manager handling the DR. We have only seen one client that has a centralized compilation of DR documentation.

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posed numbers, a slightly different name, or an

altered birthdate.

4. Synthetic Fraud: The applicant creates a

fake identity by fabricating all identifying

information (SSN, name, date of birth), cob-

bling together

an identity from

multiple stolen

sources, or

doing a mix of

both. Real SSNs,

typically from

children, the

elderly or deceased people, are often used in

combination with made-up names and birth

dates, but even the SSN can be fabricated.

Of the four types of identity fraud that commonly occur in the multifamily industry, the fastest-growing and the largest percentage of identity fraud that occurs in the apartment rental industry is synthetic fraud. Industry experts estimate that synthetic fraud accounts for 85% of all identity fraud in the country. Despite the revenue losses and the increased liability for resident safety that this situation creates for apartment communities, synthetic fraud is difficult to identify during the leasing process.

The most common format for synthetic fraud entails using a real SSN, typically stolen from a child, an elderly person or a deceased person, in combination with a fake name and birthdate. It is not uncommon for a SSN to be fabricated altogether. Such fabricated SS numbers can easily be purchased from online disreputable sources that sell the false SSN as a credit profile number, or CPN, for use on financial applications such as leases.

One of the reasons synthetic fraud works so well in multifamily housing is that every inquiry sent to a credit bureau results in the creation of a credit file. Thus, if a SSN is being used for the first time, the process creates a new credit file with no negative records. That means that

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The rental industry’s DR handling status quo is failing for many other reasons as well. To begin with, there are no automatics, for the most part. Under the law, while some factual patterns will result in consistent denial or granting of a DR, overall there are not hard rules for most DRs. Courts have stated countless times that each DR is a highly specific factual inquiry. Each DR is determined on a case-by-case basis. Both onsite teams and regional managers are already swamped with responsibilities. They don’t always remember to follow-up, especially when the tenant doesn’t provide necessary information or return completed forms. Generally, they don’t have the time or expertise to make these determinations. When you add industry turnover and lack of consistent training to the mix, landlords have little chance to proficiently execute the handling of DR requests with any consistency.

Again, ESA requests comprise a huge percentage of DR requests. We have come across ESA mills with over 300 mental health professionals in the network. These networks and providers have honed their methods and tactics. On the landlord side, most folks tasked with responding to these requests simply don’t have the requisite experience to deal with the flimflam of these ESA mills. To deal with the ESA mills, you have to have a high level of knowledge and experience. It is not enough to know the general legal requirements. You need to know the nuances of the legal requirements and psychological professional standards. You also need to know the lingo so you can translate the documentation provided, know when an ESA document provider is uttering gibberish, and be able to respond with language that demonstrates your fair housing commitment and that minimizes risk. For all of these reasons, proficiently handling a rapidly increasing volume of DR requests in a manner that minimizes legal risk is a daunting proposition.

Based on our substantial experience and ongoing daily involvement in DRs for clients, we concluded that the status quo for handling DRs is severely broken and needs to be changed. Accordingly, we have been hard at work developing a comprehensive cloud-based system to handle DR requests.

To begin with, any system for handling DR requests has to be understandable by onsite team members with a minimum of training, say an hour or less. The status quo requires onsite team members or regional

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an inquiry using a fake SSN, a child’s SSN, or the SSN of someone who has died and has been removed from the credit bureau records counts as a new file. The first time the inquiry is made, the response will show that no credit file exists for that identity. In addition to adopting a false SSN, synthetic-fraud perpetrators will use fake paycheck stubs to make it look as though they earn enough money to qualify and because of the nature of how the identity is created a synthetic-identity is often difficult to spot because no “victim” exists who reports the activity right away.

With fake identities so easy to produce, it is challenging for multifamily operators and managers to protect their properties? Using Resident-screening software technology can alert management when an applicant might be using a fake SSN, based on a discrepancy between the date the SSN was issued and the date of birth or age the applicant provided. Similarly, an alert might indicate an address discrepancy between previous addresses listed on the rental application and those listed on the credit report.

Costs to your bottom line caused by applicants who become residents through synthetic fraud include lost rent, attorney fees, court costs, law-enforcement service fees, locksmith and cleaning fees, property repair and replacement costs, storage fees, remarketing expenses, and labor and operational costs. Added to the preceding tangible costs are the intangible costs of reputational damage. But, the expense of synthetic fraud goes beyond monetary value. Fraudulent applicants who are concealing criminal histories, such as being registered as a sex offender, might commit new crimes that could endanger your current residents and employees. Accepting applicants into your community who are committing synthetic fraud increases your potential liability and jeopardizes the safety of all who live and work there.

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managers to have a high level of DR expertise. Again, based on our experience, this is not workable. Only somebody that frequently and regularly evaluates DRs has the knowledge and experience to accurately assess requests. Accurately assess, means knowing when to grant, when to deny, when to press for more information, and how to press for that information. Further, even denying a DR requires experience and knowledge so that it is done in a manner that minimizes risk and demonstrates a landlord’s good faith commitment to fair housing laws.

Our system is designed so that team members can utilize it with very little fair housing knowledge. It also has the ability to educate them so they can become experts, if that is the end goal. All of the documentation for each request is compiled. Landlords can look at a request. See how it was handled. Study the communications and responses to the tenant and their providers. In short, all of the information that is necessary to learn the legal requirements, the nuances, and the language is readily accessible.

Along these same lines, our system is being designed to be flexible. The system can be operated with very little input from the onsite team because the responsibility of deciding the requests is delegated to us. The FHC can also be run independently by a landlord, as a system of record, with the landlord making the ultimate call on each DR.

Any DR system has to be able to handle a high volume of requests. This means that the FHC has to be automated to the greatest extent possible. We learned over the years there are too many moving parts with DR requests for the onsite teams to handle consistently. A typical scenario illustrates how easily a DR can get derailed. Prospect makes request. Landlord states “of course we will consider this because we are a dedicated fair housing provider. We have forms to facilitate. Let me get you one and help you fill it out.” Prospect then says, “I don’t have time to do it right now”. Team member hands the form to the prospect. Prospect often gets approved and moves in. The now tenant never fills out and returns the form. Weeks or months later, the now

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Steps you can take to help prevent synthetic fraud at your property are:

1. Use Additional Verification Methods Use multiple layers of authentication to validate the identity of a prospective resident. Additional documents may include state- or government-issued photo identification, Social Security cards, Green Cards (also known as Permanent Resident Cards), passports, W-2 forms, a copy of the applicant’s most recent utility bill, a paycheck stub and so on.

2. Keep Your Resident Application Criteria Updated Review and analyze your resident-screening criteria for operational processes and procedures. These criteria should be clearly stated on your company’s application for residency in accordance with company policy and state and federal laws.

3. Go Beyond SSN’s In a world where consumers are doing business predominately online, don’t rely solely on Social Security numbers to authenticate a prospect’s identity. You can avoid confrontations with prospects and stay within FHA guidelines and reduce your company’s liability by using multiple layers of authentication to validate the identity of a prospective resident. Additional documents may include state- or government-issued photo identification, Green Cards (also known as Permanent Resident Cards), passports, W-2 forms, a copy of the applicant’s most recent utility bill, a paycheck stub and so on.

4. Educate Your Team A key to preventing fraud is awareness. Educating your teams about the potential warning signs during the application process can help diagnose fraudulent activity. It’s also important for employees to understand the best way to respond to an applicant whom they suspect has committed fraud.

5. Use Technology to Reduce Your Risk and Ensure Compliance and Security Today’s resident-screening software technology not only takes the bias and guesswork out of deciding which applicants should become residents but reduces company liability, as well. Resident-screening technology can use Machine Learning models to catch synthetic fraud or provide alerts when there is a potential fraud. A third-party screening company can give you best practices for handling synthetic-ID fraud and suggest

potential changes to your screening criteria that would provide additional fraud alerts.

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tenant says, “what’s up with my request?”.

With our FHC, the onsite team member just needs the prospect’s name and email. The FHC then automatically sends a reminder to the tenant (former prospect) that they were given a DR Form, but it’s not been completed and returned. Eventually, if the tenant doesn’t return the form, the FHC sends the tenant an email stating that we assume that they are withdrawing their request or if some information has already been provided that the request will be determined based on the information which has been provided. Similarly, DRs frequently get delayed or derailed because the prospect or tenant fails to send the request for supporting documentation to their provider. The FHC eliminates this problem by automatically requesting the documentation from the prospect’s or tenant’s provider, and then sends repeated reminders to the provider if the provider does not return the information.

One of the biggest issues with DR requests is expectations. With the development of the FHC, we’ve created comprehensive policies that are automatically provided to the tenant once a request is made. Particularly troublesome is the “I want to move in on Friday” scenario. A qualified tenant applies on Tuesday and wants to move in on Friday. As part of the application, the prospective tenant makes an ESA request and wants to know, before being obligated on the lease, whether their ESA is approved. This is simply not enough time to decide most ESA requests. Thus, we have developed policies for dealing with this scenario that is fair to both landlords and to the prospective tenant. Again, once a request is made on the FHC, the policies are automatically sent to the prospect so that expectations and options are clear, including likely timeframes.

Any system has to be able to deal with ESA mills. ESA letter-generating is big business with some networks generating over $250,000 per month. The FHC has the sophistication to deal with the ESA mills. The FHC maintains a comprehensive list of all mental health professionals who provide supporting documentation for DRs, including for ESAs. The FHC learns and evolves from documentation provided by ESA mills. The FHC engages in substantial dialog with ESA documentation providers to determine quality of ESA assessments and whether such assessments meet mental health professional and ethical standards. If it is determined that a mental health provider’s assessment methodology does not meet professional or ethical standards, the provider is flagged for future reference. THS regularly consults with a mental health professional, doing cutting edge work, regarding ESA mental health assessments and uses this feedback to evaluate ESA mill documentation and to develop questions for these providers.

Some landlords are outright denying ESA requests supported by documentation from ESA mills. We don’t oppose this in theory or practice. However, we have two concerns. First, as previously discussed, most landlords don’t have the expertise to make the determination that the documentation provided is inadequate. Thus, most of these denials are based on “gut reactions”. Especially if it looks generic or like a form letter. But it is important to note that some documentation can have this appearance but actually be from a mental health professional that has had a significant and continuing therapeutic relationship with the tenant. Second, even if it is a legitimate denial, the wording of the denial is important. There is a big difference between these two sentences. “Your request is being denied because you aren’t disabled as defined by fair housing laws.” Versus, “your request is being denied because the documentation submitted by your provider does not establish that you meet legal requirements”. This is a significant goal of the FHC. To constantly improve the language used in the legally required dialog.

Finally, any DR system has to have comprehensive

document storage, retrieval, and reporting capabilities. The FHC will have wide range of reports, e.g. how many requests, grants, denials, types of DRs, and time frames for handling of requests. Landlords currently face a huge burden when a tenant files a fair housing complaint. Realistically and unfortunately, if you own or manage many rentals, it is not if, but when a fair housing complaint will be filed against you. Whether HUD or the CCRD is handling the complaint, they always send out a request for information (RFI). A typical RFI asks the landlord to produce all sorts of information in connection with DRs including how many have been made, and how many have been granted. The RFI also asks the landlord to produce all accompanying written documentation. Landlord clients typically spend dozens and dozens of hours responding to these requests. If the client is using the FHC, all of this information can be retrieved in a fraction of the time.

Because the status quo of handling DRs isn’t working, THS realized there had to be a better way. A better way for landlords to handle the increasing flood of DRs and begin developing the FHC. We’ve been working with a client on its development for over a year. Our goal is to make it available to all clients by the start of 2020 or even sooner. If you are interested in or would like to discuss the FHC, please feel free to contact Mark.

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IMPORTANT THS JULY DATESJuly 2nd NO EL PASO COUNTY COURTJuly 4th All COURTS CLOSED THS CLOSED INDEPENDENCE DAY HOLIDAYJuly 5th THS CLOSEDJuly 11th AASC Legal Handbook Class 1:00 pm – 4:00 pm 545 E. Pikes Peak Ave Ste 105 Colorado Springs, COJuly 17th WEBINAR WEDNESDAY 9:00 – 10:00 am Online July 23rd EVICTIONS WEBINAR 9:00 – 12:00 pm OnlineJuly 31st NO DOUGLAS COUNTY COURT

JULY 2019

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It is important for our clients, to recognize and understand the growing trend of synthetic fraud, especially in the multifamily industry; specifically, this type of falsification as well as how to identify it, respond to it and prevent it. Updating relevant policies within your company will help arm your properties with the proper protection. If you have any concerns or questions regarding how you are prepared to identify and deal with identity fraud at your property, THS attorneys would be happy to discuss this with you.