The laws around tenant screening in California can be notably stringent and differ significantly from other states. So, as a landlord, you’re not just seeking reliable tenants; you’re also aiming to comply with complex state regulations and avoid costly legal missteps.

In this article, you’ll learn the essential legal aspects of tenant screening in California. From understanding specific regulations to navigating fair housing laws, we’ll guide you through the best practices for your tenant screening process.

Key takeaways about tenant screening laws in California

Maximum screening fee

In California, the most you can charge for a tenant screening fee is $62.02 (as of December 2023). This fee must reflect the actual cost of the credit reports you’re accessing and the reasonable value of your time obtaining information about the applicant. Charging more than this amount could lead to legal complications.

Additional requirements for screening fees

When charging prospective renters a screening fee, you must provide an itemized, written receipt. The application fee should be refundable if it isn’t used for its intended purpose on a tenant screening report. 

Additionally, if you use the screening fee to obtain an applicant’s credit report, you must provide a copy of the report if the applicant requests it.

Reusable credit reports

Applicants can purchase reusable credit reports and submit them to multiple landlords within a 30-day period (as of January 2023). While landlords aren’t obligated to accept a reusable credit report, if you do take one, you can’t charge an application screening fee or a fee for accessing the report from a third-party provider.

Security deposit limits

As of July 1, 2024, new California laws limit security deposits to one month’s rent for furnished and unfurnished units. 

However, if you’re a small landlord with no more than two residential rental properties, you can still collect up to two months’ rent as a security deposit. This exception doesn’t apply if the tenant is a military service member.

Background and criminal checks

California law restricts how you can use background and criminal checks for tenant screening. You’re prohibited from considering arrests that did not result in a conviction, expunged or sealed records, and certain types of juvenile records. Be sure your screening process complies with these limitations to avoid potential discrimination claims.

Compliance with fair housing laws

Both federal and state fair housing laws require you to treat all applicants equally and avoid discrimination based on race, color, religion, sex, familial status, national origin, disability, and other protected classes. It’s crucial to have a standardized screening process that helps ensure compliance with these laws.

How to screen a tenant in California

Step 1: Pre-screening

Ask pre-qualification questions once you begin communicating with prospective renters. This step helps gauge whether the applicant meets your basic requirements, such as income level, rental history, and move-in timeline, before moving forward with the formal application process.

Step 2: Application process

Collect all necessary information and documents from applicants during this step. That should include the applicant’s contact information, current and previous addresses, employment history, proof of income, and consent for background checks. 

Remember, as of 2024, California law caps the screening fee at $62.02 per applicant, adjusted annually with the Consumer Price Index. Check that your screening fees comply with this limit and are refundable if not used for the intended purpose.

Step 3: Background checks

Conduct thorough background checks, including credit reports, criminal background checks, and rental history. 

However, be mindful of California’s legal limitations. You can’t use arrest records that didn’t result in convictions or certain juvenile records. Additionally, some local ordinances, such as those in San Francisco, may prohibit specific types of background checks, so familiarize yourself with the regulations in your area.

Step 4: Evaluation and decision-making

Assess your rental applications using consistent criteria, such as credit scores, rental history, and income verification, to help ensure fairness and compliance with fair housing laws. Once you’ve made a decision, let the applicants know promptly. 

If you deny an application, provide clear reasons to avoid potential disputes and ensure transparency in your selection process.

Fair housing and criminal history rules

The State of California Civil Rights Department provides specific guidelines to help ensure housing providers don’t unlawfully discriminate against applicants with criminal histories. Following these rules helps promote fair housing practices and protects both landlords and tenants.

1. Applicable laws

California’s Fair Employment and Housing Act (FEHA) and the Unruh Act are the primary laws governing the use of criminal history in housing decisions. These laws prohibit discrimination based on protected characteristics such as race, color, national origin, religion, marital status, disability, gender identity, and more. 

While having a criminal history is not a protected characteristic, misuse of this information can lead to discriminatory practices.

2. Violations due to discriminatory effects

A housing provider violates California law if their policy or practice regarding criminal history disproportionately affects members of protected classes. That means even without intent to discriminate, certain policies could disadvantage groups who may experience higher rates of arrest and incarceration. Avoid policies that result in unjustified discriminatory effects.

3. Compliance obligations

Compliance with California’s fair housing laws is mandatory for various entities, including landlords, property owners, property management companies, homeowners associations, public housing authorities, real estate agents, and tenant screening companies. These entities must follow the state’s legal guidelines to ensure they do not discriminate when considering an applicant’s criminal history.

4. Prohibition of blanket bans

Housing providers are prohibited from advertising or implementing blanket bans against applicants with criminal records. Statements like “No Felons” or “We Don’t Allow Criminals Here” are unlawful. While housing providers can advertise that they conduct lawful criminal history checks, they must avoid blanket exclusions.

5. Lawful criminal history checks

While housing providers can check an applicant’s criminal history, they must base any denial or adverse action on past criminal convictions that are directly related to a legitimate interest, such as safety. Providers should consider the nature and severity of the crime and the time elapsed since the criminal conduct occurred.

6. Prohibited information

Certain types of criminal history information are off-limits for consideration, such as arrests that didn’t lead to convictions, detentions, infractions, participation in diversion programs, and sealed or expunged convictions. Juvenile adjudications are also generally prohibited unless a court order allows their use.

7. Policy requirements

If considering criminal history, housing providers must tailor their policies narrowly and focus on directly related convictions. They must offer applicants an opportunity to present mitigating information and verify the accuracy of any criminal history used. Providers should also delay criminal history checks until after financial qualifications are verified.

8. Mitigating information

Mitigating information helps evaluate whether an applicant with a past conviction poses a risk. Factors like someone’s age at the time of the offense, time elapsed, rehabilitation efforts, and conduct since conviction should be considered. Credible mitigating information can significantly impact the housing decision.

9. Third-party criminal history checks

Housing providers may rely on third parties to perform criminal history checks but are still responsible for ensuring compliance with fair housing laws. They should request detailed reports from third-party agencies to make lawful assessments. 

Be aware that consumer reporting agencies can’t report criminal information older than seven years from the date of disposition, release, or parole.

Tips and best practices for screening tenants in California

To help you maintain compliance with California state laws during tenant selection, consider using these best practices:

• Thorough records and documentation: Retain detailed records of all applications, communications, and decisions throughout the screening process. That includes keeping copies of credit reports, background checks, and written correspondence. Proper documentation can protect you in case of disputes or legal challenges.
• Consistency in the screening process: Apply the same criteria and procedures for every potential tenant to ensure fairness and compliance with anti-discrimination laws. Use standardized forms and checklists to evaluate each application objectively and consistently.
• Handling disputes and rejections: When rejecting an application, provide a clear, written explanation outlining your reasons for denial based on objective criteria. This transparency helps avoid misunderstandings and potential legal issues. Offer applicants the opportunity to dispute inaccuracies in their reports or provide additional information.
• Mitigating information: Consider mitigating factors when evaluating applicants with criminal histories. Look at the nature and severity of the offense, time elapsed, rehabilitation efforts, and conduct since the conviction. This approach encourages a fair assessment of the applicant’s current risk level.
• Transparent communication: Keep the lines of communication open with applicants throughout the screening process. Respond promptly to inquiries, update applicants on their status, and be upfront about your screening criteria and decision-making process.
• Third-party screening services: If using third-party services for credit and background checks, ensure they comply with all applicable laws and provide accurate, detailed reports. You are responsible for ensuring the screening process is legal and fair, even when outsourcing these tasks.

Take your tenant screening to the next level with Stessa

Are you a landlord in California looking to streamline your tenant screening process and find the best tenants? Stessa offers a powerful suite of leasing tools to help you list vacancies, review applications, screen tenants, and sign lease agreements. 

Additionally, you can manage your entire rental portfolio more effectively and with less effort, all while enjoying robust security with multi-layer encryption and strong access controls:

• List vacancies effortlessly: Syndicate your listings to Zillow’s family of websites for maximum exposure to high-quality tenants.
• Conduct comprehensive screenings: Utilize RentPrep’s integrated service to obtain an applicant’s full credit report, eviction history, and criminal background, including bankruptcies, judgments, and liens. Benefit from live support and additional premium add-ons like income verification for greater peace of mind.
• Legal documentation made easy: Access a full library of legal documents and utilize DocuSign’s eSigning capabilities to keep your leasing process speedy, smooth, and efficient.

Set yourself up for long-term success with Stessa. Click here to learn more about how Stessa can help you improve your tenant screening process.