Are you a rental property owner?  Then answer this question:  Do you believe it’s reasonable to require criminal background checks of your tenants?  Now don’t forget your answer, because I’ve got some terrifying news for you today, made possible by an insane, destructive decision by the US Supreme Court last year.  I’m Bryan Ellis.  This is Episode #205.

Hello, SDI Nation!  Welcome to the podcast of record, where we help savvy investors like you find, understand and profit from exceptional investments.

On June 26 of last year – almost exactly a year ago – I told you in Episode #90 of this very show about a terrifying Supreme Court decision that I predicted would be a horrible blight on the freedom of real estate investors in America.  The case involved an issue called “disparate impact”.  In layman's terms, this refers to a policy that disproportionately affects one group of people more than another, even if there is no intent to discriminate against anyone.

I gave an extreme example, that went like this:  You’re a landlord, and you institute a policy that you won’t rent your properties to anyone ever convicted of rape.  Seems reasoanble, right?  Well, a Supreme Court decision from last year adds in a “trump card” where your policies ae concerned:  RACE.  The way it works is this:  If your anti-rapist policies have a proportionate impact on all ethnicities, then you’re ok.  But if your anti-rapist policy has a disproportionately large impact on any ethnic group – even if the disqualifier issue (like rape) happens to be a criminal matter – then you risk being targeted by a civil rights lawsuit on the basis of a legal theory known as “disparate impact”.  Basically, the Supreme Court is telling us that your rental policy is RACIST even though there’s not a single drop of racial motivation anywhere to be found.

And that’s exactly what’s happened.  There’s a civil rights lawsuit facing a landlord who is demanding proper identification so he can run criminal background checks.  This is painful, folks.  Here's the story from our friends over at The Daily Caller...

 

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Can you believe it?  What you’ve got is a landlord facing a VERY expensive lawsuit because a particular group of people who are BREAKING THE LAW by not having proper ID… well, they’re suing him because they believe that more people of their ethnicity break that particular law than people of other ethnicities, and so they should receive some protection from the repercussion of that particular criminal activity.

It’s DISGUSTING.  Folks, this isn't about Latinos or African Americans or caucasians or any ethnicity.  It's about the fact that the new Supreme Court decision basically places ETHNICITY as a trump card over the law... or, at least, that's the effect that will exist if the plaintiffs win this case.  It's absolutely disgusting.

Tell me something:  Where's the discrimination?  It doesn’t exist.  But what is being violated is this landlord’s right to manage his property in a safe and responsible manner.  This whole thing is mind-blowing and terrifying, just as I predicted back in Episode #90 of Self Directed Investor Radio.

Have you ever been involved in a lawsuit?  If not, let me give you a taste of it.  I’ve only really had to deal with one big legal conflict.  A former business associate went… well, his mental condition changed, if that’s the right word for it… and he went ballistic and sued me in federal court in his home town.  My lawyers got it dismissed because it was a silly claim.  He then sued me in federal court in my home town.  Again, my lawyers got it dismissed, because it was just ridiculous.  But at the end of the day, that experience still cost me about $80,000.

Why’s that relevant to YOU?  Well, the bottom line is that the Supreme Court’s decision last year make it MUCH more likely that the kind of lawsuit being faced by Waples Mobile Home Park will come to knock on your door someday, too.  Now at this point, this is still only a lawsuit.  It could still be withdrawn, it could be dismissed or it could go to trial, which I suspect will happen.  Nobody knows how it will turn out.  There's more to every story than meets the eye, and that's probably true here, too.  But here's what's so troubling to me as a real estate investor:

It cost me $80,000 to get a frivolous lawsuit DISMISSED.  That didn’t include the cost of going to trial, because the claim against me was so silly as to be rejected outright by the judge.  Yet it still cost me $80,000 to make that happen.

And now, lawsuits like the one against Waples are MUCH easier to bring against rental property owners … directly as a function of some incredibly twisted thinking at the Supreme Court.  And if the landlord in this case WINS… which is still entirely possible… it’s practically guaranteed that he’ll have to spend tens or hundreds of thousands of dollars – at minimum – defending himself against this claim.

At the top of the show, I asked you:  Do you think it’s reasonable to do a criminal background check against your tenants?  If you answered YES – and I bet virtually every one of you did – then you’re facing a real risk.

How do you mitigate that risk?  How do you steer clear of the legal landmines that our government LOVES to place in our paths?

I’ve got the answer for that question in TOMORROW’s show, episode #206… so DON’T MISS IT.  Actually there are 3 answers… and at least one of those answers is going to anger a large segment of the real estate industry.  But hey… the truth is the truth, and you deserve to hear it.

My friends, it was really great to be with you today, and I'm so grateful for your time.  And hey, always remember this:  Invest wisely today, and live well forever!

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