Background Checks

A LEGAL PERSPECTIVE

Jeffrey J. Greenberger Attorney at Law
Katz, Greenberger & Norton LLP
105 E. Fourth Street, Suite 400
Cincinnati, Ohio 45202-4056
(513) 721-5151

When I met with ISS Editor Terri Lanza in August of last year to map out the subjects of columns I would be writing in 2002, terrorism issues were not on the list and security was a “maybe” topic. Unfortunately, since September 11th, security and protection of your investments from terrorism activities has become a focal point of your operations.

With apologizes in advance for failing to write columns this year about lease clauses and lien sales, this month I want to address several related, frequently asked questions.
1. What do I do about non-citizens who do not have a social security number if I want to run a credit check?
2. Can I require a tenant to provide some sort of photo identification?
3. How do I know if the photo identification is legitimate?
4. Should I run a credit check on all applicants?
5. Should I run criminal background checks on my prospective tenants before agreeing to lease to them?

One of the most important security improvements you can make at your facility is to require official documents (licenses, passports, or immigration cards) to verify the information on your lease/application and to verify your tenant’s identity.

Before March, 2002, any person legally in the United States, whether or not they were citizens, regardless of whether or not they worked, could obtain a Social Security number. Since March, 2002, only United States citizens and those legal immigrants in this county who have Visas permitting them to work are entitled to obtain a Social Security number. This left Self-Storage operators who were looking for some way to confirm the legitimacy of a tenant’s identity in a mess. Suddenly, operators who had always required some sort of photo identification but never knew whether the person was with foreign identification was legitimately in the country, no longer had the backup of a Social Security number to confirm the legitimacy of the identity of a prospective tenant or to run the perspective tenant’s credit. Therefore, the government introduced a new identification number available for those who are not eligible for Social Security numbers. These numbers are known as Individual Tax Identification Numbers (“ITIN”). These numbers are issued by the Internal Revenue Service not the Social Security Administration. They are 9 digit numbers similar to a social security number, but they all begin with the number “9”. In order to get an ITIN, the person who is otherwise not eligible for a social security number must present certain documentation to the IRS, including proof that they are legitimately in the country on an unexpired Visa, etc., along with certain forms of positive photo identification. The IRS will then process all of this information and issue an ITIN within 6 to 8 weeks. I have included, a part of this article, a copy of the letter that the ITIN recipient would receive from the IRS, which includes an ITIN card in the bottom right corner of the form, which they then cut out and carry with them.

There are obviously pros and cons to an ITIN, especially as it pertains to confirming your prospective tenant’s viability to rent space from you. The most obvious advantage is that in order to have received an ITIN, someone in the IRS has done a lot of the legwork for you confirming the legitimacy of the person’s photo identification and their status in the United States. On the other hand, if the prospective tenant presents you an ITIN card, it means that while they are in the country legitimately, they are not eligible to work which makes an operator wonder how or where this applicant is getting enough money to pay rent. Credit checks can be run on ITINs, but do not be surprised if there is not often any credit information in an ITIN file. In any case where credit cannot be properly verified, a security deposit or advance multiple month rent payment should be required, as long as it is done uniformly. Therefore, ITINs help replace Social Security numbers and may give you some credit information, and if not, they at least give you some comfort that your prospective tenant is legitimately in the United States.

2. Can I require a tenant to provide some sort of photo identification?

Absolutely. As long as you require all tenants to present some sort of photo identification. However, it is difficult to know, even outside of our own state, what legitimate, non-tampered photo identification looks like. Some forgeries include subtle mistakes, such as which way the person is supposed to be facing in their picture.

3. How do I know if the photo identification is legitimate?

Over the last year, there has been a boom in the publishing of books that describe and provide pictures of each state’s drivers license and state identification cards as well as many national identification forms including passports, U.S. Immigration cards, etc. Books are also published with forms of international identification. These books can be purchased for a relatively modest price, normally under $50.00. The best place to get these sorts of books is through your credit screening company, local law enforcement agencies. If these agencies do not sell these books, I have recently purchased these books through a publisher, The Driver’s License Guide Company 800-227-8827 or www.idcheckingguide.com. Also local law enforcement agencies keep these types of books in their offices. If you rarely receive foreign identification, it would seem appropriate to buy the state ID book and simply make a photocopy of the foreign identification and check it against the book at your local police department. Thus, if the prospective tenant does not have any sort of photo identification, you can refuse to rent to him/her if that is your choice, but you must enforce the rule uniformly on all applicants. There really should be no one in this country, legally, who cannot obtain a state or country issued identification card or immigration card with a photograph on it that will allow you to at least confirm the name of the person you are renting to. This is actually the most important issue that I have learned through taking various terrorism seminars; confirm the information on the application or the lease actually matches the information on the identification card. That is, if you are simply taking someone’s Social Security number or ITIN written down on the application as gospel, they can give you any Social Security number, including yours or mine, and you would not know it. It is important to verify that the name on the Social Security card or ITIN actually matches the name of the person who is renting from you and that the name of the person who is renting from you actually matches a picture on the photo you have been presented. These small steps, by making it more challenging for a potential illegal immigrant or terrorist to rent from you, will cause them to look elsewhere to rent.

Also, taking a social security number off of a driver’s license or other photo ID or having the prospective tenant present you with their ITIN card gives you some security that the person who is applying to rent is not applying under false pretenses or a fake name because you were able to confirm the name and Social Security number or ITIN against photo identification.

4. Should I run a credit check on all applicants?

This is obviously a business decision more than a terrorism decision in most cases. Credit checks are inexpensive, easily obtained by having software in your own office, and can be pulled within a minute of your request. Depending on your volume, credit reports often cost around $2.00 and can be simply added to the administrative fee or an application fee that you can charge the prospective tenant; thus you are not out of pocket any money for processing the credit report. ITINs are now also searchable in credit reporting software; however, it is not unusual to have no credit information come back on an ITIN yet because the numbers are so new and credit issuers are not used to asking for ITINs yet to submit people’s credit history to the reporting agencies. If you decide to run credit reports, you must run them on all applicants, not just ones who appear suspicious or just on those applicants with out-of-country identification. If you do run a credit report, you can subscribe to a service which is named differently by each credit reporting company which checks for fraudulent use of the social security number. That is, if a social security number by its numerical designation was issued in Arkansas in 1941, and you have put in an applicant who lists their home as Ohio and they are 22 years old, the credit reporting software is going to give you some sort of alert that this person is probably using a fraudulent social security number. The ITINs do not have that fraud protection quite yet; however, it is expected. Thus, not only does running a credit report potentially help you identify bad credit risks which may require you to consider taking an extra deposit or advance payment of rent, but may also alert you to someone who is trying to rent one of your units under false pretenses by using a fake social security number; perhaps with a fake name and doctored documents. At that point, a call to the local police department or FBI is appropriate.

5. Should I consider running criminal background checks on my prospective tenants before agreeing to lease to them?

There has been an explosion over the last year of people using services to check criminal backgrounds. There are pros and cons to running a criminal background check. The most important decisions you need to make before deciding whether or not you want to check criminal backgrounds are: 1) what are you going to do with the information once you get it? That is, are you going to refuse to rent to anyone who has a felony conviction, misdemeanor conviction, drug conviction, etc.; 2) What scope of criminal check are you going to run? If you are going to run criminal checks, you should consider using the type of criminal report that encompasses as many databases as possible including the Office of Foreign Asset Control, FBI’s Most Wanted List and Fugitive List, the other Federal Agencies who would have wanted and fugitive lists, as well as state and local law enforcement. Obviously, the closer your facility is to a government building, a military base or an icon of America, the more likely you want to consider having a criminal background check as well as an identity check. To simply get a county criminal background check from your local county sheriff really misses the mark. First of all, it is unlikely that a terrorist would be renting a space under their own name if they already had warrants out for them in the county. As normally occurs, a county line can be as close as 5 seconds to 15 minutes away. A crime committed in another county is not going to show up on a local county criminal report.

Fortunately or unfortunately, the criminal reports are more expensive and really require a lot of thought as to whether or not you wish to incur those sorts of expenses. It is my understanding that none of the September 11th terrorists had any sort of significant criminal history in the United States that would have alerted anyone in advance that these types of people were involved in terrorist activities. Terrorism, according to the various Al Quida training manuals, is often self-funded in the United States by activities such as petty theft, etc., but these manuals advise against committing the types of crimes that would give rise to lengthy jail convictions and thus, the criminal reports generally are not useful for this sort of screening purpose to avoid a potential terrorist.

Your best solution may be to require photo identification, actually check the source documents to verify that the information given on the application matches the actual identification that you have been given, that you require the prospective tenant either have a social security number or ITIN, and that you at least consider running that social security number or ITIN through a general credit report with fraud alerts activated to ensure that the people you are renting to are not trying to rent from you with stolen social security numbers of other forged documents. If you decide you are in an area where there is a greater terror threat, such as near a military base, use criminal checks that encompass as many databases as possible.

One final note. Recently, we have become aware that mortgage companies have added a requirement to their mortgages that the self-storage facility maintain terrorism insurance.
Depending on the location and nature of your facility, this may be an expensive and unnecessary burden on you as the owner. Terrorism insurance is expensive and unless you are located next to some sort of American icon or a military base, it may not be appropriate for you to maintain terrorism insurance. Therefore, if you are refinancing or newly financing a property, please make sure to check for a terrorism insurance requirement in your mortgage and if it is there, you may wish to look around for a different mortgage or at least understand the cost of what you are taking on in the cost of terrorist insurance.

Jeffrey Greenberger is a partner in the law firm of Katz Greenberger & Norton LLP in Cincinnati, Ohio and is licensed to practice in the states of Ohio and Kentucky. This column is for the purpose of providing general legal insight into the Self-Storage field and should not be substituted for the advice of your own attorney. Mr. Greenberger’s practice focuses primarily on representing the owners and operators of commercial real estate including self-storage owners and operators. Mr. Greenberger is the legal counsel for the Ohio Self-Storage Owners Society, Inc., and the Kentucky Self-Storage Association, Inc., as well as a regular presenter at Inside Self-Storage Trade Shows. You can send your questions, comments, or suggestions for future topics to Jeffrey Greenberger at JJG@kgnlaw.com or mail them to Jeffrey Greenberger c/o Katz Greenberger & Norton LLP, 105 East Fourth Street, Suite 400, Cincinnati, Ohio 45202 or you can reach Mr. Greenberger at (513) 721-5151.

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