Tenant screening thirty years later: a statutory proposal to protect public records.

Author:Kleysteuber, Rudy

NOTE CONTENTS INTRODUCTION I. EVICTIONS, TENANT SCREENING, AND THE PROBLEMS OF TENANT-SCREENING REPORTS A. The Realities of Eviction B. Tenant Screening and Its Problems 1. Errors and Misleading Information 2. Abuse 3. Frustration of Legislative Objectives and Public Policy II. TWO STRATEGIES FOR REGULATING TENANT-SCREENING REPORTS: ENSURING ACCURACY AND LIMITING ACCESS A. The Standard Approach: Ensuring Accuracy B. The Better Approach: Limiting Access 1. California's First Attempt: Censoring Unfair Items 2. California's Second Attempt: An Access-Based Approach C. Why Accuracy Isn't Enough III. A DEFENSE OF OUTCOME-BASED RESTRICTIONS A. Reasons To Keep Eviction Records Private by Default 1. Efficiency 2. Privacy 3. Legislative Priorities 4. Fairness and Due Process B. Reasons To Keep Eviction Records Public by Default 1. First Amendment Doctrine and the Common Law 2. Other Values C. Examples and Parallels CONCLUSION INTRODUCTION

[W]ith the advent of the computerized consumer reporting industry, it has become possible [for landlords] to purchase a great deal of tenant information that would otherwise be too expensive or impractical to obtain. (1) The trend of gathering information about tenants, which began to raise eyebrows almost thirty years ago, has continued to grow in magnitude and concern. (2) Today, landlords regularly purchase "tenant-screening reports" (3) that chronicle landlord-tenant disputes (4) and court filings, often regardless of their outcomes. (5) Indeed, the tenant-screening industry has mushroomed in recent years. Informal estimates suggest that as many as 650 companies provide tenant-screening reports, (6) and a recent trend toward consolidation (7) means that many of these companies provide reports with national scope. The ease with which these reports are obtained means that landlords increasingly rely on them at the first stage of their selection process to separate out potential bad apples. As one seller of these reports recently told the New York Times,

It is the policy of 99 percent of our [landlord] customers in New York to flat out reject anybody with a landlord-tenant record, no matter what the reason is and no matter what the outcome is, because if their dispute has escalated to going to court, art owner will view them as a pain.... (8) In an ideal world, tenant-screening reports would help landlords know which tenants are more likely to fall behind on their rent payments, commit waste, or irritate their neighbors. (9) With good intentions, both landlords and municipalities have looked to tenant-screening reports as a potential miracle cure both for the landlord's private fear of fair housing lawsuits (by providing an objective reason to deny an application) (10) and for society's public problems of crime and drug use. (11)

But the truth is that tenant-screening reports create at least as many problems as they solve. As I elaborate in Section I.B, these reports may contain errors, are open to abuse, and may even work against democratically endorsed public policies. Therefore, for reasons of both justice and economic efficiency, I believe that there are items that these reports should and should not include. An actual eviction for nonpayment of rent would be a legitimate item, but an unmeritorious lawsuit brought by a landlord solely for "arm-twisting" would not. (12)

Errors in tenant-screening reports--the first problem noted above-arise from the practical limitations in the methods agencies use to compile their reports (13) as well as from a market that tolerates or even rewards inaccuracy in the direction of overinclusive reports. And even accurate reports can be misleading. For example, most eviction actions end in settlement, (14) yet judgment routinely enters in the landlord's favor for procedural reasons, (15) meaning that a report might appear more negative than it should. (16) Furthermore, many court records are either unclear or simply incomplete with regard to the disposition of cases. (17)

Second, screening reports are open to abuse not only because they make the threat of an eviction action a stronger tool for disciplining tenants (because the action will be "reported") but also because the item on the report is fundamentally a description of the landlord's actions (18) (whether she filed an eviction) instead of the tenant's actions. (19) Reports of such abuse are frequent in the media and in scholarship on tenant-screening reports. (20) The following "advisory" letter from a landlord to a tenant demonstrates the opportunity for abuse inherent in tenant-screening reports:

[W]e now subscribe to a service that records all filings on [eviction] actions. As this service is used by landlords, it will be impossible, in the future, to rent an apartment if you have been served a legal action. We are advising you of this, as the failure to pay your rent on time[] will result in your name being placed in the file, and you will be unable to secure any apartment in the future. (21) While that threat might sound exaggerated, recent press accounts suggest that it is not. In New York City, vacancy rates are low (less than 1%) and landlords "can afford to be picky." (22) A recent New York Times article stated that at least 20% of apartment applicants in Manhattan received a "reject" rating from a tenant-screening agency and, furthermore, that "a history of litigation against a prior landlord usually triggers automatic disqualification." (23)

Finally, tenant-screening reports may be contrary to established public policy because, while many legislatures have passed laws to protect tenant rights during disputes with their landlord, (24) these reports punish a tenant who chooses to vindicate those rights in court. Legislatures also have regulated consumer reports to improve accuracy, (25) but those regulations alone do not prevent the misleading items that are swept up in overinclusive reports. And even if the tenant successfully invokes the protections granted by the legislature and wins the summary process action, her mere involvement in an eviction action might significantly diminish her future chances of finding housing. (26)

Three strategies have evolved to deal with the problems of tenant-screening reports and credit reports in general. The first strategy is to require that any disseminated information be accurate. Failing that, the second strategy is for legislatures simply to prohibit reporting agencies from disseminating certain types of information regardless of whether it is accurate. The third strategy--the least common but the one I ultimately endorse--is to restrict the release of government records to the reporting agencies in the first place.

Most legislatures regulating tenant-screening reports have focused on the first strategy of ensuring the accuracy of the information disseminated by reporting agencies. At the federal level, even though it focuses primarily on credit reports, the Fair Credit Reporting Act (FCRA) already provides mechanisms for tenants to correct errors, (27) including the right to be informed of decisions that rely on an adverse report, to obtain a copy of the report, to dispute items, and to add notes to their files. (28) Yet tenants usually do not learn of erroneous information in their tenant-screening reports until after they have been denied housing, limiting the usefulness of these measures. (29) Moreover, abuse remains a problem, and public policy goals are still frustrated.

States also have pursued the second strategy--prohibiting agencies from disseminating certain types of information. For example, California passed a law in the early 1980s prohibiting tenant-screening agencies from reporting on eviction actions unless the tenant lost in court. (30) But this approach forces states to strike a difficult balance between First Amendment values on the one hand and empowering tenants on the other. (31) The approach also may be ineffective; one tenant-screening agency announced its intent to circumvent the California law by not disseminating the prohibited information and instead simply opining that landlords should "reject this applicant." (32)

This Note endorses the third strategy of having courts withhold information on eviction actions until the landlord prevails in court--an approach that has been used in California for more than fifteen years. (33) It has also been endorsed by a judge in that state (34) and suggested, in the abstract, by the Supreme Court. (35) But thus far the strategy has received little scholarly discussion, (36) and no other states have pursued this approach.

The strategy of limiting access to sensitive information would be more effective at curtailing abuse than an accuracy-based approach, while it poses fewer constitutional issues than does a censorship-based approach. Under this proposal, it would become logistically easier for tenant-screening agencies to document cases in which landlords prevailed than those in which tenants prevailed or the parties settled. (37) But courtrooms would remain open and their records available to the parties in eviction lawsuits, their designees, journalists, and others upon a showing of good cause.

Part I of this Note describes the real-life effects of tenant-screening reports and the abusive behavior they enable and engender. Part II discusses existing statutes that seek to regulate these reports. Part III outlines the proposed statutory strategy and offers reasons why such statutes would be theoretically justified under principles of efficiency, privacy, legislative discretion, and judicial discretion, as well as fairness and basic practical concerns. Part III also examines parallels in the criminal context (in which records are often expunged based on the outcome of the trial) and mounts a defense of outcome-based record disclosure against criticisms that it would violate the First Amendment or principles of open government.


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