If
you aren't screening your tenants - your property (and livelihood)
may be at risk, and in more ways than you think...
It's
only common sense that protecting your property starts with
being selective about the people who rent it from you. The
obvious concerns usually center around avoiding anything to
do with tenants who might be involved in drug-dealing (or
drug production), criminal activities, or otherwise destructive
tendancies.
Not
to mention - the other factor here is getting paid on time
(and in full). Depositing even a small number of bouncing
checks into your bank can potentially create some serious
financial problems for you - even as the landlord -
in regards to becoming labelled as a" high risk"
client by your bank. There's been cases where even a few bad
checks have landed innocent, well-established landlords into
the "ChexSystems"
banking blacklist - meaning that they won't be able to obtain
a fully-functional checking account at any normal bank.
So
it's essential to know who you're letting into your property.
The consequences of a bad tenant can, as you can see, end
up being much worse than being inconvenienced by late payments
or property damage. Bad tenants have landed many landlords
in severe legal trouble, financial problems, criminal issues
and in some cases personal problems.
Tenant
Screening Isn't Just a "Good Idea" - It's Essential
However,
sometimes the "profile" of a nightmare-tenant is
anything but obvious. As with criminals, it's sometimes the
most "normal" individuals who have the most surprising
skeleton-collections in their closet. The only way to know
for sure is to find out more about their past.
This
is why conducting a thorough background check (within your
legal rights) is the only way to properly screen your tenants.
This should include, where legally
possible*, research into the following sources:
|
•
Public Court Records (Look for cases that relate
directly to tenant issues)
•
Previous Convictions and/or Prison Records (Look
for convictions that relate directly to crimes that
would put your property at risk)
•
Their Credit Report (Obtain from a reporting agency
such as Experian or EquiFax)
•
References (Previous landlords, employers and so
on. Verify legitimacy of the references as well - in
many cases, it's often just a friend "playing the
part")
|
*
In some states, criminal background information is not legally
considered a basis for denying property to a prospective tenant.
Check your local laws to see if this applies to your state.
However,
before you start the screening process or develop your own
screening system, it is imperative that you review and comply
with your local laws regarding landlord/tenant rights, and
tenant discrimination. You need to be able to back up your
leasing/renting decisions with relevant data that clearly
shows a quantifiable "reason" for choosing the best
applicant. An example of such would be to require applicants
to agree to a credit check prior to consideration, and then
choosing the applicant with the best credit score.
You
can't simply deny an applicant the opportunity to rent your
property based on a "gut instinct" or some other
abstract reason. And you certainly cannot discriminate against
that person based on their ethnicity, race, religion, gender,
sexual orientation, age, marital status, or their source of
income. These are nationwide laws which will always apply,
but there may be additional laws in your state - be sure to
consult a lawyer.
For
more information on the laws that affect the tenant screening
process, see the Fair
Credit Reporting Act (PDF),
the Fair
Housing Laws, and the Non-Discrimination
Laws (1964 Civil Rights Act)
So
once you know the laws concerning what you can and can't use
as a deciding factor in choosing a tenant, it's time to put
together a criteria for screening tenants.
How
to Screen Your Tenants Efficiently, Effectively & Affordably
First
and foremost, always obtain your applicant's permission
prior to pulling their credit information or running any sort
of background check. Again, check your local laws to see what
you can use as a deciding factor when screening tenants.
To
obtain credit information, you'll need to use a service like
Experian or EquiFax directly (or another accredited reporting
agency).
If
you're legally allowed to run a criminal background check
on your applicants, then you have two general options.
1)
Find out what you can on your own
2)
Hire a professional or outsource to an investigative firm
For
property management companies or other "large scale"
property owners, it would likely make more sense to outsource
this task to a local investigation agency.
