Phil Querin Q&A: Accepting Application When You Suspect Applicant Does Not Qualify.

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September 10, 2013

Question: I recently received a rental application from a prospective tenant who is purchasing another tenant's home. I know the applicant to have several judgments against him. He says they have all been taken care of but I don't believe him. I really don't want to spend time processing the application. Do I have to accept and process the application?

Answer: A judgment is a lien on all real property that is owned by the judgment debtor in the county in which the debtor resides. The lien gives the judgment creditor the right to “execute” on that real property, i.e. force a sale of the property with the proceeds being applied toward payment of the judgment. It is good for ten years and can be renewed for another ten years. If the creditor doesn’t know if the debtor owns property in a particular county he can record the judgment there anyway (or some counties or every county in Oregon), and it will immediately attach if property is located there. This means that if the debtor attempts to dispose of, or mortgage, the property, the judgment lien will prevent the transaction until the creditor is paid in full. Judgments carry interest at 9% per annum. If the judgment debtor does not own any real property to which the lien can attach, he can still try to get paid, either through garnishment of wages or bank accounts, or execution upon other of the debtor’s assets. If the creditor doesn’t know what assets the debtor has, he can subpoena him into court, place him under oath, and ask questions about the existence and whereabouts of the debtor’s assets. As you can see, armed with a recorded judgment, a creditor can make a debtor’s life somewhat unpleasant. Once the judgment is satisfied, the debtor should insist that the creditor remove the lien by recording a Satisfaction of Judgment. This has the effect of nullifying the judgment and it will no longer appear as a negative comment on his credit history. In your case, you should tell the person that as long as the judgments appear on the record, it will appear on his credit report, affect his credit score, and could interfere with his ability to qualify to rent a space in your community. If, indeed, the liens have been taken care of, he needs to have the judgment creditors each record a Satisfaction of Judgment. A word of caution: ORS 90.680(6)(b) says that a landlord may not unreasonably reject a tenant’s prospective purchaser. My concern here is that if you reject the purchaser before running the background check, you face a potential claim from the existing tenant that your rejection in advance, was per se´ unreasonable. Furthermore, if the applicant is a member of a protected class, you could be setting yourself up for a fair housing claim. Please consider this: If these are old judgments or very small amounts, they may say little about his qualifications as a tenant. It may be that no collection efforts are being made. Most collection agencies do not want to spend a lot of time chasing small sums, or if they do, they will discount the amount for a cash payment. How recent are the judgments? Is he gainfully employed? How long has he been employed? What is his debt-to-income ratio? His rental history? How is he paying for the home? If you don’t know the answer to these questions, perhaps you should consider running the report just to find out. Since he is paying the cost of the credit check, completing the process may be your best and safest course of action, rather than “assuming” it’s as bad as you think because of the unsatisfied judgments. It is far easier to say “No” after the credit, criminal, and background checks, because – if you’re right – you’ll have something to base the rejection on. Rejecting him in advance gives you no such safe harbor protection.

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