Added Concerns for Calif. and Nev. Property Managers in an Already-Unstable Time

By Erika Schnitzer, Associate EditorSacramento, Calif.—With higher vacancies putting pressure on property managers to relax their applicant criteria somewhat, owners and operators are assuming more risk at their communities in order to lease more units. While this is mostly an increased financial risk, it is interesting to examine other areas where property managers are forced to question their standards.California and, most recently, Nevada have legislation in place that makes it illegal for a community or property management company to reject a prospective resident based on sexual offender status. (Affordable housing is excluded from this, as HUD regulations set screening restrictions for certain subsidy programs that are designed to ensure that tax money is not used to subsidize criminals or individuals with a criminal record.)“The state law has been on the books for quite some time. It says that California’s Megan’s Law database cannot be used to discriminate against registrants” in regard to housing, health insurance, employment and education, among others, Debra Carlton, senior vice president-public affairs, California Apartment Association (CAA), tells MHN. “You can’t use this database as a way to weed out residents.” According to a CAA report, “if information is obtained from a criminal background check or other source, the prohibitions in Megan’s law do not apply” but screening criteria must be consistent, so this background check must be applied to all applicants. However, state law limits the fee owners may charge a prospective resident to cover the cost of screening, which can become too expensive for the owner.Carlton adds that the California Apartment Association has proposed various forms of the legislation over the last three years to address this issue, including legislation allowing managers to use the database to make a decision and legislation that indicates that it is not considered discrimination to refuse or evict a registered sex offender.While property managers cannot use the databases to make a housing decision, however, other residents could use it to find out whether they have any neighbors who are registered sex offenders. Carlton notes that when the California database went live and was accessible to the public, some residents chose to leave their properties when they discovered their neighbors were on the list.Elsewhere, some owners have offered incentives for sex offenders to leave the property, says Carlton. However, because a housing decision applies to renewals as well as original leases, managers cannot evict offenders, notes Megan Smale, Esq., corporate counsel, RealPage Inc.This legislation can have costly implications for a community’s occupancy, as well as residents’ safety—or, at least, their feeling of security. “Someone who would present a risk credit-wise—the consequence is only financial. It’s important to keep in mind that all site managers have obligations to ensure safety and health of occupants,” says Smale.In addition to concerns of resident safety, property management companies also need to consider the safety—or concerns—of on-site staff, notes Dave Carner, president, LeasingDesk, RealPage’s risk transfer solution.So is there anything property managers in California and Nevada can do?Smale suggests that industry organizations, the consumer data industry and credit bureaus should actively participate in filing briefs against the legislation. For the independent manager, she says, they should “contact the state assembly or elected official and communicate their business concerns.”Carlton notes that while the CAA has not had any luck in passing new legislation, the organization is waiting for a legal action to help defend. “If a landlord takes action against a registered sex offender, we have asked our people to spread the word that we stand ready to defend” the industry, she says.Smale also questions whether there is any correlation between criminal records and credit scores. “In order to obtain credit, you need to demonstrate gainful employment and a stable income. Someone who had been in prison will have more difficulty establishing themselves from a credit perspective,” she notes.Carner says that  “bifurcating the database” into two classes of sex offenders—high-risk and low-risk—could help to offset some of the safety concerns of neighboring residents.Meanwhile, Carlton notes that some owners ask on their application if prospects have ever been convicted of a felony, but they have no way of determining whether the answers are truthful. Furthermore, she adds, “you have to be extremely clear on which crimes you are not willing to tolerate,” so there is no question of discrimination. She adds, “you can [legally] uncover many things in your application process, if you are consistent.”