Tenant Screening: Processing Your First Application as a Landlord in New York

By: Ariel S. Holzer, Esq. with contributions from Brice Wilkerson and Elysse Anderson

Being a landlord is not as simple as collecting tenants’ rent every month. If you are a landlord,[1] you know running a property is like running a small business. Taxes need to be paid, assets need to be maintained, and you need satisfied customers – tenants – buying your products – leasing your units. Good customers make for good business, and this is doubly true for good tenants[2] making for a good rental portfolio, which starts with a robust and compliant applicant (“Applicant”)[3] screening process (“Screening”)[4]. Unfortunately, New York does not make this easy with its extensive compliance requirements and accompanying costs.

Should I Be Concerned an Applicant Will Accuse Me of Discrimination If I Decline Their Application Because of Their Screening Results?

If you want to avoid accusations of discrimination in your Applicant Screening, be sure to utilize the same Screening for every single Applicant. By requiring all Applicants to undergo a uniform application process and using the results to inform your results consistently, it is much more difficult for an Applicant to claim you are discriminating. Beyond treating Applicants consistently, you can further mitigate the risk by using Screening products and vendors compliant with all state and federal Screening regulations.

I Don’t Deal with Many Applicants, and I Have a Good Feeling About Those I do Deal with, so why Should I Go Through the Hassle of Screening?

The Screening process takes both time and money to complete, so it may seem easier to forego it altogether, especially when Applicants appear to be good and honest people. But this perspective will change quickly when things go wrong: Suppose you’re considering an Applicant who seems promising - they have provided paystubs, solid references, and a deposit. Now fast forward a few months and a couple of missing payments, that same promising Applicant is nowhere to be found and the police have come knocking on a regular basis. As it happens, that promising Applicant has been taken into custody, again, for gang-related activities. You are then faced with three choices: (1) do nothing and hope for the best; (2) start eviction proceedings; or (3) or try to buy them out.

If you had taken the time and expended the resources to formally screen this seemingly promising Applicant, the Screening reports may have alerted you to critical information, like gang-related convictions and missed payments. Screening won’t catch everything. But for every Applicant rightfully declined, the cost of unnecessarily Screening the good Applicants is more than offset.

Screening Every Single Applicant Sounds Like It Could Get Expensive, Can I Pass Through the Costs to the Applicant?

While other states are more lenient in allowing landlords to pass through all Screening costs, charge fees, and demand hefty deposits,[5] New York, by contrast, with a $20 maximum fee for Screening, an outright ban on application fees, and deposit restrictions, is one of the least affordable environments for landlords to screen in.[6] New York leaves you with one option: seeking reimbursement from Applicants up to the maximum fee.

For more details regarding the fee, see our article.

For assistance in navigating these circumstances and other landlord-tenant and commercial real estate matters, contact our Real Estate Practice Group or submit the form below for a free consultation.

[1] Hereinafter, all references to “landlord” or “landlords” shall also include references to agents thereof.

[2] Hereinafter, all references to “tenant”, “tenants”, “Applicant”, or “Applicants” shall only refer to those of residential properties unless otherwise specified.

[3] An applicant is a potential tenant you are screening to consider for renting one of your units.

[4] Screening an applicant is conducting background and credit checks.

[5] And pre-payments.

[6] N.Y. Real Prop. Law § 238-a (2021).

DISCLAIMER: This summary is not legal advice and does not create any attorney-client relationship. This summary does not provide a definitive legal opinion for any factual situation. Before the firm can provide legal advice or opinion to any person or entity, the specific facts at issue must be reviewed by the firm. Before an attorney-client relationship is formed, the firm must have a signed engagement letter with a client setting forth the Firm’s scope and terms of representation. The information contained herein is based upon the law at the time of publication.