The Legality of Using Criminal Background Checks in Light of HUD’s 2016 Guidance Memo – by Eviction Attorney, Michael A. Brennan

With permission from AOA

In April, 2016, HUD issued a Guidance Memo concerning the applicability of the Fair Housing Act to the use of information found in criminal background checks to deny housing to applicants with criminal histories. While some believe the Guidance Memo has raised more questions than answers, the truth is that landlords may still use criminal background checks for screening purposes and will not likely face any liability for doing so, provided they follow the requirements set forth therein.

While space limitations prevent an in-depth analysis of the topic, this article will address several key topics in connection with the use of criminal background checks during the screening process, including those criminal background policies strictly prohibited by Fair Housing, those specifically permitted, how to narrowly tailor your policies in connection with the use of criminal background checks, strategies to use when developing your screening policy, and a few mistakes to avoid to diminish the likelihood that you will be found to have discriminated when you do, in fact, deny an applicant housing due to their criminal past.

HUD’s Prohibited Practice

HUD has a single prohibited practice in connection with criminal background checks. Simply stated, landlords are strictly prohibited from using “arrests” without a corresponding conviction as a basis for denying housing to an applicant. The basis for the prohibition is that arrests are simply that; an arrest. Without a corresponding conviction, an arrest means nothing more than the applicant was suspected of committing some type of infraction or crime. The theory is that without a conviction, the individual is, theoretically, innocent.

The problem I see with that belief is that there are a multitude of reasons an individual could be arrested but not convicted when, in fact, they were guilty. For example, there are pretrial diversion programs which place otherwise guilty people on probation and, provided they don’t get in any trouble during their probation period, the case is dismissed. Additionally, it is not uncommon for someone to be arrested yet not tried in exchange for their cooperation with the prosecutor in landing a “bigger fish”. Regardless of the above situations, the use of arrests without corresponding convictions as the basis of a denial is prohibited.

HUD’s Permitted Practices

HUD’s Guidance Memo states landlords may deny housing to an applicant based on two specific convictions; the “manufacture or distribution” of a controlled substance. It is important to be aware of the fact that a conviction for anything other than the “manufacture or distribution” (e.g., the “use” of a controlled substance) does not, by itself, substantiate a denial of housing.

Developing Narrowly Tailored Policies & Criteria

Assuming an applicant’s criminal background check reveals one or more convictions for something other than “the manufacture or distribution of a controlled substance” the landlord will be required to go through an analysis of the conviction to determine whether it justifies a decision to deny the applicant.

In order to deny housing to an applicant based upon convictions revealed by a criminal background check, landlords must first develop “narrowly tailored” policies which demonstrate that the “narrowly tailored” policy “accurately distinguishes between criminal conduct that indicates a demonstrable risk to resident safety and/or property, and criminal conduct that does not.” In other words, landlords must show that their policies are effective at denying housing only to those applicants with convictions for crimes that create a risk to the other tenants in the building and/or property. For example, a policy which denies housing to an applicant convicted of assault and battery, but allows an applicant with a conviction for “possession of marijuana” would likely be acceptable to HUD, since “assault and battery” can be shown to present a direct threat to the safety of the other tenants, while “possession of marijuana” poses little threat, if any.

A short list of crimes for which a denial of housing would likely be acceptable to HUD might include assault & battery, domestic violence, rape, murder, and mayhem, to name a few. Additionally, since HUD appears to recognize a need to protect the safety of both “resident[s] and/or property” arson, vandalism, and grand theft of property might likely be acceptable categories as well.

Finally, it would serve landlords well to consider their approach to white collar crimes. For example, can a landlord demonstrate that a conviction for, say, identity theft, is a direct and/or “demonstrable risk to resident safety and/or property”? While you and I can see how an individual convicted of such a crime could easily pose a risk to the security of the neighboring tenants, is that enough to use as the basis for denying that individual housing? My position is that under the normal circumstances surrounding identity theft, the answer is “yes”. Here you have an individual who is surrounded by other tenants, who all receive mail in a centralized area, share a central trash bin, and receive packages in close proximity to each other. So, for me, this would be a crime for which a conviction would disqualify an applicant.

Factors to Consider for Each Conviction

In addition to developing policies regarding which specific crimes will support a decision to deny an applicant, HUD requires that the use of criminal convictions to deny housing to an applicant must be determined on a “case by case” basis. In other words, even where an applicant has been convicted of a crime for which it can be shown that a “demonstrable risk to resident safety and/or property” exists, the landlord must go further and look at the specific facts and circumstances surrounding the conviction. In fact, criminal screening standards must take into account: 1) the “nature and severity” of the conviction; 2) The length of time between the conviction and the application; and, 3) The landlord must conduct an “individualized assessment” of each applicant, considering “relevant mitigating information” such as: a) the facts or circumstances surrounding the criminal conduct; b) the age of the individual at the time the conduct occurred; c) evidence that the individual has maintained a good tenant history before and after the conviction or conduct; and d) evidence of rehabilitation efforts.

For example, a conviction for simple battery can be either a misdemeanor or felony. When reviewing an applicant’s conviction for battery, landlords would be wise to look deeper into the situation. For example, was the conviction based on spitting on someone’s food (in California, such action can lead to a conviction for battery)? Or, on the other hand, was the conviction for beating a motorist in a fit of road rage (which would be charged as a felony)? Has the applicant just been released from incarceration? Or did the conviction take place 20 years ago when the applicant was 18 years old?

As you can see, simply having a policy which sets forth the convictions for which you intend to deny an applicant is not enough to meet HUD’s guidelines. Even where those convictions can be shown to present a “demonstrable risk to resident safety and/or property” when looked at in a vacuum, landlords are still required to analyze the various circumstances and situations surrounding the conviction before implementing a blanket policy of denying an applicant convicted of that specific crime.

Strategies to Think About

While it is clear that landlords may no longer apply blanket restrictions to deny housing to applicants with criminal backgrounds, landlord are still permitted to use criminal background checks as a screening tool. Below are some strategies that can be used to limit the risk of liability for claims of discrimination based on a denial of housing to an individual with a criminal history.

First, if you intend to conduct criminal background checks, take the time to develop very specific policies on the convictions and their connected situations and circumstances for which you will deny an applicant housing. While this may initially be time consuming, the ability to provide such policies in the event of a Fair Housing investigation will demonstrate that you have at least attempted to comply with the requirements by developing your narrowly tailored policies.

Second, implement a policy under which your non-criminal-related screening criteria are considered first, before resorting to criminal background checks in your screening process. In other words, run your standard criteria first. If the applicant doesn’t qualify under the regular screening requirements, (e.g., 2.5 times the rent in gross monthly income, a minimum FICO score, acceptable and verifiable credit and tenant histories, etc.) then there is no need to rely on the information found in a criminal background check to deny the applicant. Rather, base your denial on the inability of the applicant to comply with the standard screening criteria instead. By doing so, you would be able to prove that criminal history never even came into the picture and, therefore, no disparate impact discrimination could have occurred.

Mistakes to Avoid

When contemplating the use of criminal background checks as part of your screening process, avoid making the following mistakes:  1) denying applicants based solely on arrest records; 2) using blanket prohibitions such as denial of housing to persons with any type conviction; 3) denying housing for less serious convictions such as infractions and misdemeanors; 4) failing to review the conviction on a case by case scenario in which you consider the mitigating circumstances and factors; and, 5) keep the decision making in connection with your policies and case by case analysis to owner or upper level management rather than onsite managers. Leaving such decisions to the discretion of an onsite manager may result in disastrous results. Instead, require the onsite managers to submit the applications to the owner or supervisor to assure the acceptable policies and procedures are being implemented.

Conclusion

In conclusion, landlords are, in fact, still permitted to use criminal background checks as part of their screening process, and they are still permitted to use information discovered in those background checks to deny housing to applicants with a criminal history. However, HUD’s Guidance Memo, while not “law”, sets forth prohibitions and acceptable policies in connection with the use of criminal background checks. While landlords may not deny housing for mere arrests in an applicant’s background, they are specifically permitted to deny housing to those convicted of the “manufacture and/or distribution of a controlled substance”. Additionally, landlords may deny housing to applicants convicted of various other crimes, provided three criteria are met, namely: 1) the policies as to which crimes will be used to deny housing are “narrowly tailored” to “accurately distinguish between criminal conduct that indicates a demonstrable risk to resident safety and/or property, and criminal conduct that does not”; 2) the landlord conducts a “case by case” analysis taking into consideration  the “nature and severity” of the conviction; b) the length of time between the conviction and the application; and, 3) the landlord conducts an “individualized assessment” of each applicant, considering “relevant mitigating information”, such as the facts or circumstances surrounding the criminal conduct, the age of the individual at the time the conduct occurred, evidence that the individual has maintained a good tenant history before and after the conviction or conduct, and evidence of any rehabilitation efforts on the part of the applicant.

The foregoing information is presented and intended to address the topic(s) covered above in a general nature, and not as specific legal advice.  Specific situations and their facts should be presented to your attorney for review.  The Brennan Law Firm is one of the premier landlord-tenant law firms in Southern California, representing landlords exclusively in evictions, judgment enforcement, and other landlord-tenant matters. Mr. Brennan is a frequent speaker and contributing author for AOA, and may be reached at (626)294-0500, or toll free at (855)285-2230. Please visit our website at www.MBrennanLaw.com for more information.

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