California’s SB 267, which became law in 2023, brought changes to how property owners and property managers screen tenants. This law affects the way you evaluate rental applications, especially for tenants receiving government rent subsidies like Section 8.

Many property owners are still unclear about these new rules. This article will help you understand SB 267 so you can stay compliant and make the most of your rental property.

How SB 267 Changes Tenant Screening

The law now requires property owners to adjust their tenant screening process, especially when it comes to credit checks. You can no longer rely only on an applicant’s credit history when deciding whether to rent to them. Instead, you must give tenants the chance to provide other documents that show they can pay their rent.

Key Requirements for Tenant Screening:

• Credit Checks: Credit checks are still important, but under SB 267, they can’t be the only factor for tenants with government subsidies. You must also accept other proof that shows they can pay rent, such as bank statements, pay stubs, or proof of government benefits.
• Income Verification: When verifying income, you now need to include options beyond just looking at credit histories. This means accepting documents like bank records or pay stubs.
• Reasonable Time: You must give prospective tenants enough time to gather and submit these documents. This may require adjusting your screening timelines.

Why SB 267 Matters for Property Owners

Complying with SB 267 is crucial for avoiding legal issues and improving your tenant screening process. Here’s why this law is important:

1. Stay Legal: Failing to follow SB 267 can lead to lawsuits and fines. You need to update your tenant screening process to include alternative documentation, especially for tenants receiving subsidies.
2. Attract More Tenants: SB 267 allows you to accept reliable tenants who may have been excluded before due to low credit scores. By considering other evidence like income verification and rental history, you can expand your tenant pool.
3. Build Better Relationships: Implementing SB 267 fairly can lead to better relationships with tenants. A fair screening process can result in happier tenants who stay longer, which is good for your property.

Clearing Up Common Misconceptions About SB 267

There are some misunderstandings about SB 267 that need to be cleared up:

• "I Can Still Focus Only on Credit Scores": Credit scores are still important, but SB 267 requires that you also consider other factors, like income verification and rental history, for tenants with subsidies.
• "The Law Only Applies to Section 8": SB 267 applies to all government rent subsidies, not just Section 8. You need to adjust your screening process for all tenants receiving government assistance.
• "Alternative Documentation Isn’t Reliable": The law requires that you fairly evaluate alternative documentation. These documents often provide a clearer picture of a tenant’s financial situation than a credit report alone.

Steps to Comply with SB 267

To stay compliant with SB 267, here are some steps you should take:

1. Update Your Screening Process: Revise your tenant screening process to include options for tenants to provide alternative documents. Make sure this is clear in your rental application and communicate it to applicants.
2. Train Your Team: Ensure your property management team understands the new requirements under SB 267. They should know how to evaluate alternative forms of income verification and other documents that show a tenant’s ability to pay rent.
3. Keep Good Records: Document all communications and paperwork from prospective tenants, especially when they provide alternative documentation. This will be important if you need to show compliance with SB 267.
4. Continue Background Checks: While SB 267 focuses on credit history, don’t forget other important parts of tenant screening, like checking criminal records and eviction history, to ensure you are choosing reliable tenants.

Opportunities for Property Owners

While SB 267 creates new responsibilities, it also provides opportunities to improve your tenant screening process and property management:

• Stand Out: Market your rental properties as being compliant with the latest tenant protection laws. This can attract tenants who appreciate fair and transparent screening processes.
• Strengthen Tenant Relationships: A fairer screening process helps build trust and loyalty among tenants. This can lead to longer leases and lower turnover rates, which benefits your rental property.
• Use Advanced Screening Tools: Consider using tenant screening services that offer detailed reports, including credit histories, criminal records, rental history, and the ability to handle alternative documentation. This will help keep your screening process consistent and efficient.

California’s SB 267 introduces important changes to the tenant screening process, especially for tenants receiving government rent subsidies like Section 8. As a property owner, it’s important to understand these changes and adjust your screening practices. By complying with SB 267, you can avoid legal risks, attract a wider range of reliable tenants, and improve your property management operations.

At Coastline Equity, we are here to help you navigate these changes. If you need assistance with implementing SB 267 or want to optimize your tenant screening services, our team is ready to support you. Let’s make sure your rental properties stay competitive and compliant in California’s housing market.

FAQ about SB 267

Q: What is SB 267?

A: SB 267 is a California law that changes how property owners and managers must handle tenant screening for applicants receiving government rent subsidies. It requires landlords to consider alternative documentation in addition to credit checks when evaluating these applicants.

Q: How does SB 267 affect credit checks?

A: Under SB 267, you can no longer rely solely on credit checks when screening tenants who receive government subsidies. You must allow these tenants to provide alternative evidence, such as bank statements or proof of income, to demonstrate their ability to pay rent.

Q: What alternative documentation is acceptable under SB 267?

A: Acceptable alternative documentation includes pay stubs, bank statements, proof of government benefits, and other verifiable evidence that shows the tenant's ability to pay the portion of the rent not covered by the subsidy.

Q: Does SB 267 apply only to Section 8 tenants?

A: No, SB 267 applies to all tenants receiving any form of government rent subsidy, not just those in the Section 8 program.

Q: How should property owners adjust their tenant screening process?

A: Property owners should update their screening process to include options for alternative documentation, train their property management team on the new requirements, and maintain thorough records of all tenant interactions and documentation.

Q: What are the legal risks of not complying with SB 267?

A: Failing to comply with SB 267 can result in legal challenges, including claims of discrimination, which could lead to fines or lawsuits.

Q: How can SB 267 help property owners attract more tenants?

A: By accepting alternative documentation, property owners can attract a wider range of reliable tenants who might otherwise have been excluded due to low credit scores or poor credit histories.

Q: Is it still important to check a tenant's criminal record and eviction history?

A: Yes, while SB 267 focuses on credit history and income verification, it’s still important to conduct comprehensive background checks, including criminal records and eviction history, to ensure you are selecting reliable tenants.