Criminal Background Checks: Limitations and Policies

Your community doesn’t rent to criminals.  Because criminals are not a protected class, criminal history is a legitimate non-discriminatory business reason for denying a resident’s application.  Arnie Applicant applies to live at your community.  You follow the standard procedures.  You submit the resident’s application to a third party credit verification service.  The credit check includes a criminal background check.  The criminal background comes back clean.  You rent the apartment.  Two months later, another resident demands to be let out of their lease because Arnie Applicant is a registered sex offender.  Why didn’t the criminal background check reveal Arnie’s criminal background?

Two explanations are possible.  First, Arnie’s criminal past may be masked by laws that limit the reporting of criminal background information.  The days where an onsite leasing agent would call references and past landlords during the application process are over.  Almost all rental applications are now submitted to third party credit verification services for credit evaluation and criminal background checks.  Under the law, a third party credit verification service is a consumer credit reporting agency (CCRA).  A CCRA is a company that for a fee regularly engages in assembling or evaluating consumer credit or other information for the purpose of providing such information to third parties.

The law limits the information a CCRA can report about your applicants.  Consumer reports may not contain adverse credit information (lawsuits, judgments, and unpaid accounts) older than seven years.  Consumer reports may not list a bankruptcy older than ten years.  Consumer reports may not list criminal related information (arrests, indictments, or convictions) older than seven years.  The law does create some exceptions to these rules; however, the exceptions only apply to high dollar employment, insurance or consumer credit transactions in excess of $150,000 (insurance and credit), or $75,000 employment.

Types and quality of databases is another reason why a criminal background check will fail to reveal criminal records.  A criminal background check is only as good as the database(s) the check is run in.  CCRA agencies will readily acknowledge that there is a wide disparity in criminal background databases, both in coverage and quality.  You should discuss this issue with the CCRA you utilize for criminal background checks.  Is their database reporting back seven years?  Is their database a national, regional, or state database?  This issue is particularly important given how frequently residents move around.  Are there any other limits to the data (crimes) being gathered?  If your CCRA consistently fails to report crimes within the past seven years, you should consider utilizing another CCRA provider.

Given potential holes in criminal background checks, Colorado Bureau of Investigation (“CBI”) searches may be utilized to run criminal backgrounds.  Colorado is an open records state which allows anyone to obtain arrest and conviction records.  CBI records are not limited to seven years.  However, CBI records are subject to limitations as well.  CBI records are limited to Colorado.  Sealed AND juvenile records are not accessible.  Because an accurate CBI search depends on a date of birth and an exact name spelling, an applicant can defeat a CBI records search by altering the spelling of his name or date of birth.  While some communities have moved away from making copies of driver’s licenses, this is one reason (of many) where you would want a copy of the driver’s license on file.  You may attempt to ensure a more accurate CBI search by utilizing a social security number along with name and DOB.

Because no community is going to run individual CBI criminal checks on every applicant, CBI checks are only useful in specific situations.  First, CBI checks are useful to verify information provided by your CCRA.  If you’re having issues with your CCRA criminal background checks, CBI reports can be utilized to determine the quality of your CCRA reports.  For example, your CCRA reports no crimes.  It is brought to your attention that Ronnie Resident is a convicted felon.  If a CBI check confirms this, you may have serious quality problems with your CCRA provider.  Similarly, if it is brought to your attention that a resident lied on his application about his criminal past, a CBI report may prove the lie if the crime occurred in Colorado. 

If your rental policy is limited to crimes going back seven years, your focus is on the quality of reporting from your CCRA.  If your policy is to deny applicants with criminal backgrounds going back more than seven years, you will need to address the gaps in the system through appropriate application and lease language.  Both your application and your lease should make it crystal clear to applicants and residents that lying on their application will result in eviction.

The first line of defense is your application.  Your application should track your rental policy.  Many applications make the mistake of limiting the criminal inquiry to convictions.  The question should be couched more broadly.  For example, have you been convicted, pleaded guilty or nolo contendere (no contest), received a deferred sentence, deferred prosecution, diversion, continued adjudication, or continued petition of any felony, or misdemeanor sex offense?  If you do not rent to registered sex offenders, your application should ask the applicant whether they are a registered sex offender or under consideration for registration as a sexual offender.  Most applications also fail to ask whether the applicant is currently facing charges.  For example, are you currently facing prosecution for any felony, or misdemeanor sex offense?  Criminals (sex offenders) slip through the cracks because they apply before conviction.

While lease language won’t detect criminals, strong lease language can serve two purposes.  One, strong lease language will deter criminals from signing because they know if discovered they will be immediately evicted for lying on their application.  Second, strong lease language will greatly facilitate the removal of criminals once they are discovered.  For this reason, and others, your lease has to give you the absolute right to evict a resident who has lied on their application.  For example, this Lease is executed subsequent to Resident completing a Rental Application. Resident acknowledges that Landlord is entering into this Lease in reliance on the information contained in Resident’s rental application and any and all other information provided to Landlord by Resident.  If such information is false or materially misleading, then Landlord shall have the option to terminate this Lease upon three (3) days notice to quit.  Resident shall promptly notify Agent in writing of any subsequent change in the information provided by Resident on Resident’s Rental Application.

Even if you have a strong policy that you don’t rent to felons, and you’ve made the effort to close reporting gaps with application and lease language, criminals will still fall through the cracks because of reporting limitations.  Application and lease gap closing measures do not prevent criminals from leasing; they only help you quickly remove them once discovered.  For this reason, you should also address potential problems from other residents caused by the legal limitations on criminal history from your CCRA.  If you manage a significant number of units, eventually another resident will discover a criminal on your property, and demand to be let out of their lease.  To address this situation, your lease should make it clear to residents that you may conduct criminal background checks, but you have no obligation to do so, and that there are practical and legal limitations on criminal background checks.  Your lease should also disclose to residents that information regarding registered sex offenders is available from local law enforcement agencies upon request.

When it comes to criminal background checks, the first step is to determine your policy.  Realize that once you have determined your policy, you will face limitations in enforcing it based on both legal and practical limitations on the reporting of criminal history.  Once you adopt a policy, you should tailor your application, lease, and application procedures to address potential gaps in criminal history reporting, and to put you in the strongest position possible to enforce your policy.  Your policy should also address potential problems from residents when they discover a criminal is residing at their community.

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