How to Screen Potential Tenants : 10 Tips to Help Landlords
Friday Nov 27th, 2020
Many of the landlord and tenants I have dealt with over the years have been a pleasure to work with, however, I came across a situation recently that reminded me there are some bad apples out there. We have all heard the horror stories of tenants who destroy property or fail to pay rent and evicting them can be difficult. A bad tenant can be a nightmare for any landlord, as well as both emotionally and financially draining. So, as a Landlord, how to you protect yourself and properly screen potential tenants?
I recently received an offer for lease on a property I had listed. The offer was from another brokerage. I assisted my clients in verifying the legitimacy of the information the tenant provided through their rental application and supporting documents. I always require an employment letter, credit report and past references of the potential tenant to be submitted with the offer. When we tried to verify the information, all the documentation turned out to be fake. The employer did not exist, the references listed where all false numbers and the agent subsequently did not return my calls.
This is not a common situation however, it does happen and Landlords need to be aware and properly vet their tenants. I came across a helpful article iby Freedom Malhotra in Canadian Real Estate Wealth Magazine that provides 10 helpful tips on how to screen a tenant and conduct a tenant background check:
1. Ask the right questions
Asking the right questions is the first and most essential step to a great tenant background check. Before you meet tenants face-to-face, you will likely talk to them over the phone. This is your opportunity to prequalify them.
There is no point in showing your rental property to someone that is not the right candidate. For example, if a tenant is looking to move into a place immediately and your rental unit is not available for another two months, it would be a good idea to uncover that over the phone before you waste more of each other’s time.
It's also important to not assume anything about a tenant from the way they come across over the phone. Remain objective while asking your questions. It's always helpful to be genuinely curious about a prospective tenant while simultaneously looking out for any inconsistencies.
Ask about their background: When do you need a place by? Have you given notice to your existing landlord? How is your job? How is your credit report? What is your maximum budget? How many bedrooms do you need? Do you have pets? Who else will be living with you?
2. Get them talking
How one ends a relationship tells you a lot about them. That's why it's a good idea for a landlord to get a prospective tenant to talk about his current or previous landlord. If a tenant left the relationship on a bitter note, it is helpful to know what happened.
As a landlord, you cannot rely on the paperwork alone to carry out a tenant background search. You have to be creative and willing to engage with tenants on a personal level. Conversations can help you better understand the way your tenants relate to others and how they handle conflict, all of which are essential to achieve the best tenant screening.
3. Look for troubling signs
As part of due diligence, it's important to look out for any suspicious signs. A lot of landlords mistakenly think that a tenant background screening is just about checking landlord and employment references. Though that is an integral part of the process, a good landlord will also do some extra detective work. There is the old saying: “If it sounds too good to be true, it probably iss”. this applies especially for tenant background checks. If your gut is telling you somethingis not quite right, it's your job to verify the facts to your satisfaction.
4. Confirm their identity online
The internet is a helpful tool for carrying out a tenant background search. While searching online, it's important that you cross-reference everything you come across with the rental application and supporting documents provided by the tenant. Is the employer they claim to be working for online the same as the one that appears on their rental application and letter of employment? Does the online photograph match the identity of the tenant you met in person?
It is also important to check for any past criminal or fraudulent activity associated with their names. Social media platforms are helpful in getting to know the tenants as well. Check their profiles on Facebook, LinkedIn, Twitter and Google+.
5. Never use the employer contact number provided
How do you know whether the phone number listed on a rental application is legitimate? It's easy for any tenant to have a friend pretend to be their employer over the phone. To avoid being duped like this, you need to research the company’s phone number online. This should be a regular practice for any tenant background screening.. Most companies can be found on the Internet. If you can't find the company listed anywhere, you should be suspicious.
If you're able to find the number online, call the company’s operator and ask to speak to the tenant. If the operator can't find the tenant’s name listed, this may be an indication that he or she is lying about their employment status.
6. Verify the landlord’s name using proper channels
How do you know whether the current or previous landlord’s names and phone numbers listed on the rental application are valid? A tenant background check is only as reliable as the information provided. That's why it's important to verify the landlord’s identity.
A good way to do this is to get your Realtor or lawyer to conduct a land registry check on the addresses belonging to the tenant’s current and previous landlords. If the names provided match with those listed on land registry, the tenant has been honest and forthcoming about this information.
7. Confirm the current rental period
When tenants lie about their current landlord reference, they also lie about the time period in which they rented their current home. A robust tenant background screening will attempt to detect deception on multiple levels so as to lessen the probability of approving a bad tenant.
If a prospective tenant is currently living in a rental home that was leased out through the help of a real estate brokerage, a record of them leasing out this home will exist on a centralized MLS system. As such, you can request that your Realtor check all previous records related to the tenant’s current address. If the property was rented or sold in the past, your job is to cross-reference the dates to see if they match up with the date the tenant claims to have moved in. Any discrepancies with respect to dates will indicate that the tenant is lying to you.
8. Ensure affordability
Affordability is a critical element in tenant background screening. How do you know whether a tenant can afford to rent from you? You have to consider how much they earn with respect to the rent owing, their current liabilities and their spending habits as reflected by their credit report.
If the rental property exists in a city where the cost of living is high, you need to take this into account when assessing affordability. Every city will have its own rule of thumb with respect to an acceptable rent-vs-income ratio.
Since it's very easy for tenants to submit fake letters of employment, it's a good practice to ask for their three most recent paystubs. Paystubs are more difficult to duplicate. Making them a requirement helps lessen your chances of being a victim of tenant fraud.
9. Pull your own report
In my many years of being a Realtor , I have come across my share of fake credit reports. That is why I always advise landlords to pull a second credit report on any tenants they are seriously considering. It is important to note that you require the tenants permission to do this. This should be a standard protocol with respect to any tenant background check.
Before you approve a tenant, you should get a third party to pull a credit report for you. Do not rely entirely on a credit report you received from a prospective tenant. It's okay to use that as an initial reference. However, once you're about to make decision in favour of a tenant, it's important to pull their credit report to see if it matches the one provided.
10. Verify photo identity
Now that you've approved the tenant, it's time to make it all official through the signing of the lease itself. When you meet the tenant in person for this final paperwork, it's very important that you request photo identification before signing any documents.
This is the final step to the tenant background check process, as it helps validate whether the identity you used to approve the application is belonging to the person standing in front of you.
Throughout he screen process you should also be aware of some tactics that can get you in trouble.
1. Acquiring the Tenant’s Credit Information Illegally: In an attempt to save a few bucks, you ask your mortgage broker friend who has access to credit checks to run the Equifax. Unfortunately, this is a breach of the tenant’s privacy expectations. It’s also a breach of your friend’s terms and conditions with the credit agency. If the tenant gave you permission to run a credit check, they only authorized you to see the results. Pay the fee.
2. Asking Questions That Breach Human Rights Acts: Do you plan on having any more children? Where you from? Are you married or single? These are examples of questions that touch on traits protected by provincial Human Rights Acts. Be careful what questions you ask and how you phrase them.
3. Insisting On Getting the Tenant’s Social Insurance Number (SIN): According to Equifax, a SIN number isn’t required to run a credit check and can be done with the full name, date of birth and address. Insisting on getting the tenant’s SIN can be a breach of privacy.
4. Enforcing Illegal Pet Bans: In some provinces, a landlord cannot screen a tenant based on pets. That said, if your unit is in a condo that has a pet ban, you need to let your tenant know about it so they can choose to bring the pet or not.
I know that its impossible to protect yourself entirely from the possibility of assuming a bad tenant but you need to ensure you have done all you can to get the best possible tenant in your property. Again, most tenants are a pleasure to deal with but be aware ...... there are some bad apples.