Key Points:
The new law becomes August 7, 2023
The tenant can provide Portable Tenant Screening Reports to the landlord
Inability to follow correctly can result in up to $2,500 in fines, plus attorney fees
Senate Bill 23-199, recently passed legislation in Colorado, will significantly impact tenant screening in Colorado. Whether you are a landlord or a tenant, it's crucial to understand the details of this bill to ensure compliance with the law. Please note that while we are a property management company with extensive experience, we are not attorneys, and this blog post does not constitute legal advice.
Senate Bill 23-199, titled "Tenant Screening Documentation for Residential Leases," was signed into law by Governor Polis. The stated purpose of this bill is to address the problem of tenant applicants repeatedly paying application fees for rental properties, and being continually denied. Legislators heard stories of applicants spending thousands of dollars on application fees, only to be denied repeatedly. To rectify this situation and save tenants money, the bill introduces changes to the tenant screening process.
Portable Tenant Screening Reports:
Under the new legislation, tenant applicants are now allowed to provide landlords with a Portable Tenant Screening Report (PTSR). Landlords are required to accept this report and may NOT charge the applicant an application fee. This report, requested by the applicant from a credit screening bureau, contains various details about the applicant, such as name, contact information, employment and income verification, address, rental and credit history, and criminal history.
Ensuring Legitimacy:
While accepting the PTSR directly from tenants raises concerns about its authenticity, the bill includes provisions to mitigate potential fraud. Landlords must receive the report directly from the Consumer Reporting Agency (CRA) with the tenant's permission. The report provided should be at most 30 days old, ensuring up-to-date information.
Implementation Challenges:
The practical implementation of this process by credit reporting agencies is still being worked out. Since tenant applicants are responsible for obtaining their PTSR and granting permission for its release to landlords, the industry is navigating how this new system will function logistically.
Impact on Application Fees:
A significant change introduced by the bill is the prohibition of landlords charging application fees when tenants provide their PTSR. Typically, landlords charge application fees to cover the costs of obtaining credit reports and conducting internal screenings. However, with the new law, if the applicants present a valid PTSR, landlords may NOT charge any application fee.
Advertising Requirements:
Landlords must now include specific disclaimers and information in their property advertisements to show compliance with the legislation. These requirements extend to the size of the font used in the disclaimers, ensuring clear visibility.
Noncompliance Penalties:
Failure to abide by the new legislation can result in penalties. Landlords found to be noncompliant may face fines of $2,500 plus attorney fees. Furthermore, the State Attorney General has the authority to prosecute noncompliance as a criminal offense.
Denial of Applications:
If an application is denied, landlords must provide the applicant with a copy of the background report. This requirement presents a challenge as federal law prohibits the sharing of credit reports with individuals. However, Colorado State Law contradicts federal law on this matter.
Conclusion:
Senate Bill 23-199 introduces important changes to tenant screening procedures in Colorado. Landlords and property management companies must adapt to the new requirements to ensure compliance with the law. It is crucial to understand the details of the legislation, seek legal advice if necessary, and update advertising materials and screening processes accordingly. By staying informed and following the guidelines set forth in this bill, both tenants and landlords can navigate the tenant screening process more effectively.
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