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Property Management Blog

SB 267: How California Landlords Must Adapt to Credit Report Restrictions

Disclaimer: This document and any information contained herein are provided for informational purposes only and do not constitute legal advice. The author of this document is not an attorney, and the information presented should not be considered as a substitute for professional legal advice.

California's Senate Bill 267 (SB 267) brings crucial changes for landlords regarding the use of credit reports when screening tenants who receive government housing subsidies. As a Landlord in California, it's important to understand what this means for your tenant application process.

What Changes

SB 267 limits your ability to run credit checks on applicants who utilize housing subsidies, such as Section 8 vouchers. In short:

  • You CANNOT use credit history as a deciding factor in approving or denying a rental application if the tenant has a government housing subsidy.

  • You MUST offer alternative ways for a prospective tenant to demonstrate their financial responsibility and their ability to pay their portion of the rent.

Alternative Evidence: What Can You Accept?

SB 267 proposes that landlords may consider alternative types of evidence for verification.  This can include:

  • Government benefit payment records

  • Pay stubs or pay records

  • Bank statements

  • Other verifiable documentation of income and financial standing

New Obligations for Landlords

Under SB 267, you must:

  1. Inform Applicants of Their Rights: Clearly inform potential tenants with housing subsidies about their right to provide alternative evidence of financial responsibility instead of a credit report.

  2. Give Reasonable Time for Response: If a tenant chooses to provide alternative evidence, give them a reasonable timeframe to gather and present the documents.

  3. Fairly Consider the Evidence: Carefully and objectively evaluate an applicant’s alternative evidence, even if it differs from your standard screening approach.

Why the Change?

SB 267 aims to address the fact that traditional credit reports can be inaccurate or discriminatory in assessing a subsidized tenant's true ability to pay rent. Low credit scores may be due to factors beyond a tenant's control, such as medical debt or past financial hardships.

Adapting Your Tenant Screening Process

While this legislation might require some adjustment, you can still find reliable ways to assess prospective tenants:

  • Focus on Rental History: Past rental references or landlord verifications can be strong indicators of a tenant's reliability.

  • Scrutinize Income Verification: Pay close attention to pay stubs, bank statements, past rent and utility bill payments, and other forms of income documentation to assess financial stability.

  • Maintain Open Communication: Clear communication with applicants throughout the process remains essential.

By understanding these changes and adjusting your processes accordingly, you can uphold the law while effectively screening potential tenants and ensuring the continued success of your rental business.