HUD Sends Reminder on Owner Obligations Regarding Tenant Screening and Notice Requirements

person A.J. Johnson today 05/28/2023

The Department of Housing & Urban Development (HUD) recently published a reminder for HUD multifamily-assisted property owners of relevant legal requirements relating to the use of tenant screening reports and the disclosure of the contents of those reports to tenants.  For example, multifamily-assisted property owners must provide written notice of denial under HUD rules, and any housing provider that uses reports to make adverse tenant decisions must provide adverse action notices under the Fair Credit Reporting Act (FCRA). The most efficient way to comply with both obligations is to include the FCRA notice in writing as part of the denial letter that owners are required to send to denied applicants.

Notice Obligations Under HUD Rules

Under HUD rules, multifamily owners must promptly notify applicants in writing of the denial of admission from Multifamily Housing rental assistance programs. Owner's written rejection notices must include the following information: (1) the specific reason(s) for the rejection; (2) the applicant’s right to respond to the owner in writing or request a meeting within 14 days to dispute the rejection; and (3) that persons with disabilities have the right to request reasonable accommodations to participate in the informal hearing process. Note: owners should also remember the VAWA notice requirements for rejected applicants.

In addition, any meeting with the applicant to discuss the applicant’s rejection must be conducted by a member of the owner’s staff who was not involved in the initial decision to deny admission to the property.

The owner must advise the applicant in writing of the final eligibility decision within five business days of the owner's response or meeting.

Recommended Best Practice

When a multifamily assisted property owner denies an applicant, HUD strongly encourages the owner to:

  • Provide written adverse action notices as part of the denial letter; and
  • Provide a copy of any tenant screening report that was relied on when the adverse determination was made. A written notice paired with a report copy allows owners to demonstrate they have fulfilled their legal obligations under the FCRA and also permits applicants to understand the basis for any denial, fully assert their rights with tenant screening companies, and more effectively correct their records.

Notice Obligations Under FCRA

Under FCRA, landlords or property managers are required to inform rental applicants what played a role in the rejection of the applicant. This requirement is known as the "adverse action notice." Failure to provide the notice correctly may subject owners to legal liability under state and federal law. As Federal Trade Commission (FTC) guidance explains, the adverse action notice must include the following information:

  • The name, address, and phone number of the screening company;
  • That a consumer can receive a free copy of the report from the tenant screening company within 60 days;
  • That a consumer has the right to dispute any information that is incorrect; and
  • That the tenant screening company did not make the decision to take the adverse action and cannot give specific reasons for it.

Bottom Line

Property owners must provide written notice of denial under HUD rules and include adverse action notices under the FCRA if reports are used for adverse tenant decisions. It is recommended to include the FCRA notice in the denial letter to comply efficiently. The FCRA notice must include the screening company's information, the right to a free report copy, the right to dispute incorrect information, and that the company cannot provide specific reasons for the adverse action.

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