Look Closely

Criminal Background CheckBackground checks can protect your community, but the landscape is filled with legal and regulatory land mines. Beware what you scrutinize.

Background checks can be complex, precarious and occasionally contradictory. But many community associations conduct a variety of investigations when hiring employees, considering prospective tenants and even vetting board members. Associations can obtain information about criminal convictions, credit history, licensing status, previous employment and educational credentials. But should they?

Some associations are required by law to perform certain background checks and can face lawsuits for not obtaining and acting on information. And yet they may be limited in what they can ask, what they can receive and what they can do with the information. Cooperatives are a different story since owners collectively decide who lives in the building.

If you’re wondering whether your association should be conducting background checks on job applicants or prospective tenants, here’s the bottom line: It depends.

It depends on local and state laws and regulations, your governing documents, the nature of the job that needs to be filled, the type of housing to be leased, the information you’re seeking, how you plan to use the information and much more.

About the only thing more worrisome than conducting a background check is not conducting one, say some legal experts and association leaders. Laws and rules change almost by the day, and gray areas are common. Associations should confer with legal advisors regularly to ensure their practices are effective and current.

“Are they going to be one hundred percent effective? Absolutely not. But you’ve got to take the step,” says Bruce Gran, CMCA, AMS, PCAM, CEO and president of Gran Community Association Consulting Group in Scottsdale, Ariz. “It’s your community. You’ve got to protect it.”

Many mid- to large-sized associations use reputable background screening firms. But some small, self-managed associations either don’t screen job applicants or tenants, or they attempt to do it themselves online. This type of investigation can yield incomplete, inaccurate or difficult-to-interpret data, in part because court and other records discovered online can be outdated, include confusing terms or be taken out of context.

“I always recommend outsourcing it to a professional. They do it better. They know the best practices and the legalities,” says Gran.

In addition to prospective employee and tenant screening, some associations conduct criminal background checks on board candidates. In fact, a Florida law bars most persons convicted of a felony from serving on a condominium board.

However, associations need to rely on the honor system when it comes to board members, according to Donna DiMaggio Berger, a shareholder with the law firm Becker & Poliakoff in Fort Lauderdale, Fla., and a member of CAI’s College of Community Association Lawyers. “There’s no mechanism in Florida statutes for the association to compel prospective board members to submit to criminal history searches to verify whether they are eligible to serve.”

Employment Investigations

Board members and managers frequently are urged to run their association like a business. A good practice used by many large and small employers: the background check.

“Small businesses really have the most to lose,” says Jason Morris, founder, president and chief operating officer of EmployeeScreenIQ, a background check firm based in Cleveland. “One bad hire will sink you.”

Background checks can reveal fraud or theft from previous employers and violent crimes, such as sex offenses.

Experts say the overarching legal principle to keep in mind when screening applicants is that everyone must be treated equally. Some experts suggest obtaining job candidates’ consent in writing before investigating.

“It’s very important for boards to conduct proper background checks on job applicants to avoid a negligent hiring claim should an association employee rape, injure, kill or otherwise harm association residents or fellow employees,” says Berger.

Employment is a complex process with mounds of paperwork. Many hiring managers rely heavily on the interview, including a gut feeling about each applicant. Often, the applicants with the most to hide focus on making a good impression in person and exclude damning information from job applications.

“A lot of people don’t answer honestly and hope that you don’t check,” says Andria L. Ryan, a partner in the law firm Fisher & Phillips in Atlanta.

What does an association do when a promising applicant has a history of criminal conduct? Ryan recommends that associations use a three-to-five person committee to evaluate the situation. “Look at all the factors,” especially those listed by the Equal Employment Opportunity Commission as elements to be considered when evaluating such candidates. (See “Limiting Look.”)

If a background report finds a conviction, but the applicant didn’t reveal it in a job application, “Ask them why,” suggests Ryan. Indeed, sometimes there are plausible explanations.

When a job candidate is being considered for a position that requires a license, the association must verify that the license is active.

Lisa A. Magill, also a shareholder with Becker & Poliakoff in Fort Lauderdale, recommends that the association investigate whether there has been any disciplinary action against the licenseholder.

Pulling credit reports for job applicants is more problematic under federal and state laws. Generally, say legal experts, homeowners associations that rely on credit history in the hiring process must be able to demonstrate the information is a business necessity and relevant to the job. For example, a conviction for theft would reflect strongly on a candidate for a job handling association funds but less so for an applicant for a maintenance position.

Boards should have background check policies and procedures in place before they consider hiring new staff. A standard policy, which applies to all job candidates, will help protect the association from unnecessary and expensive lawsuits by prospective, current or former employees.

A typical, basic pre-employment background check can cost as little as $50 depending on the specific information you request and in how many places the job applicant has lived. The results are usually available in one to three days.

Once associations obtain background information on individuals, they must be vigilant in keeping that information secure. “Fair housing and privacy laws come into play. You have to be very careful,” says Susan Saltsman, CMCA, AMS, a management supervisor with real estate services firm Wallace H. Campbell & Co. near Baltimore.

Screening Tenants

Renting a property can mean the difference between an owner keeping it and paying assessments or losing it to foreclosure—a prospect association leaders want to avoid. Yet a tenant who damages common areas or creates a nuisance can cost the owner dearly. Owners are responsible for all damages caused by a renter and the association’s costs for legal action against a renter.

Conducting background checks on prospective tenants is a practice more common in condominiums because of the nature of multifamily housing, legal experts say. The checks typically include residential history, character references and criminal history.

However, there is a drawback to screening tenants: The practice disqualifies a condominium from Federal Housing Administration certification, which is a requirement for the low-cost housing loans the agency backs, according to a spokesman for the U.S. Department of Housing and Urban Development.

Associations cannot deny a tenant based upon race, religion, sex, national origin, color, creed, familial status or handicap.

“There are very few reasons for which you can deny somebody” seeking to rent a condominium, says Gran.

In Florida, legal experts say associations can reject a prospective tenant for criminal activity that is recent and could have a major impact on the multifamily community, such as a sex offense. Lesser and older convictions—such as a 20-year-old bust for marijuana possession—might not be legitimate reasons for rejection.

Even so, it’s important to evaluate potential renters, says Saltsman. “You always have to be thinking about the liability of the community.” She says unit owners who initially resist screening their proposed renters often come around “once you explain to them that it’s not meant to be an obstacle to them, that it’s supposed to help them.”

Vicki Bruno, the community association manager at Plantation Point, a 414-unit condominium near Hilton Head, S.C., encountered resistance from owners when she first suggested screening prospective tenants. So she mailed owners copies of newspaper clippings about a murder and prostitution in the community. That got their attention—and their votes for an amendment to governing documents establishing a screening policy. Bruno believes conducting background checks has helped keep crime down in the community.

“It really cleaned things up,” says Bruno, who says she turns down fewer than 10 percent of rental applications—mostly for convictions involving drugs or violence.

Magill notes that association officials need to understand the extent of their authority to deny a lease. “Some communities have only a right of first refusal or a right of substitution,” she says. That means that if the association rejects the prospective tenant, it has to provide a substitute tenant who will rent the property under the same terms and conditions as negotiated by the unit owner.

Some legal experts advise against background checks for renters, explaining that an association’s interests don’t extend to an owner’s relationship with his or her tenant. “Tread lightly,” says Jennifer Alexander, a partner with the law firm Griffin Alexander in Randolph, N.J. “It’s not a role that a community association should be in. You’re violating people’s property rights. You could find yourself defending litigation.”

Whether the association checks the background of prospective employees, renters or even board members, all applications should be examined on a case-by-case basis and reviewed by legal counsel if there are any uncertainties. As for renters, Berger warns that background checks are not a panacea. “There’s no substitute for meeting potential renters in person, discussing the community’s rules and regulations, and helping them determine if the shared-ownership lifestyle is right for them.”

Limiting Look

Various federal, state and local laws and rules limit the use of criminal and credit background checks by community associations. Some apply only to associations with at least 15 employees; others affect smaller ones too.

The U.S. Equal Employment Opportunity Commission (EEOC) is tasked with ensuring that employers don’t discriminate during the hiring process. In 2012, the agency advised employers not to adopt blanket policies disqualifying job candidates who have criminal records, saying that such policies could discriminate against minorities.

The EEOC urges employers to give applicants the opportunity to explain the details of their criminal records and their ability to perform the job. It lists eight factors for employers to consider when assessing a job candidate who has a criminal conviction:

  • Facts and circumstances surrounding the offense or conduct
  • Number of offenses for which the individual was convicted
  • Age at the time of conviction or release from prison
  • Evidence that the individual performed the same type of work post-conviction with the same employer or a different employer and with no known incident of criminal conduct
  • Length and consistency of employment history before and after the offense or conduct
  • Rehabilitation efforts (including education and training)
  • Employment or character references and any other information regarding fitness for the position
  • Bonded status under a federal, state or local program

In addition, some states prohibit employers from including a question on job applications asking whether the prospective employee has been convicted of a crime. Nearly 70 cities and counties have passed similar “ban the box” legislation. Typically, employers in these jurisdictions can conduct criminal background checks later in the hiring process.

The Fair Credit Reporting Act requires that an employer provide a “clear and conspicuous” written notice to a candidate before it can obtain a credit history report for employment purposes. Information obtained from the report cannot be used to violate federal or state employment opportunity laws or regulations. The legislation requires that the job applicant be given a copy of the credit report and a notice of any adverse employment action taken in response to findings in the report.

Several states have passed laws limiting the use of credit reports in hiring decisions. Typically, they allow consideration of such information only for evaluation of candidates for jobs that require handling money or that carry authority to spend large amounts of money.

The federal Bankruptcy Act restricts the use of bankruptcy filings in employment decisions. And associations must be careful throughout the hiring process not to violate the Americans with Disabilities Act, the Genetic Information Nondiscrimination Act and Title VII’s record-keeping requirements.

Laws vary by state concerning use of criminal history and other background information for evaluating prospective tenants. Legal experts say that case law in Florida, for example, supports using criminal records data to reject lease applications where the crime is severe and the rejection is reasonable and does not discriminate.

While some condominium associations examine credit history information when evaluating a prospective tenant, some legal experts advise against the practice. They note that the unit owner, not the renter, bears the responsibility for making payments to the association. —S.B.

by: Steve Bates is a freelance writer in the Washington, D.C., area.

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