Beware landlords and property managers unwilling to do background checks on tenants. Wolves in tenants’ clothing are desperately trying to infiltrate your properties to take advantage of you and your renters! Who landlords and PMs allow into residential or commercial properties can profoundly affect the kind of services they provide, the overall satisfaction tenants will experience, and their return on investment.
Unfortunately, not everyone has your best interest at heart when conducting business with you. In fact, some may be out to cause harm to you or others you associate with. Thankfully, there are methods to thwart the advances of those your business could do without. One of these methods is conducting background checks on your potential tenants for residential or commercial properties.
Start filtering early
Most likely, every single ad you’ve placed indicates that people should give you a call to arrange a showing. At this time, you can start filtering tenants. One of the first things you should note is how they answer. If they refuse or are unwilling to answer some questions, you can politely decline the showing.
While it may seem blunt, how much potential tenants make for a living will determine the next steps. So the first thing you should determine is whether their monthly income is thrice the rent price or higher. If their income doesn’t measure up after running a credit check, the Fair Credit Reporting Act (FCRA) requires landlords and property managers to provide an adverse action notice stating the reason for the denial. The notice should also inform the applicant that they have a right to get a free copy of the credit report within 60 days from the agency and dispute the correctness of said information.
On the other hand, if the consumer report returns favorable results, you can move on to ask further questions:
- How long have you been with your current employer?
- How many people will be living in the unit?
- What pets will you bring with you, if you have them and how many?
- What is your rental history like and why?
If these answers are what you need them to be, then you can go ahead and show the property. However, to further pre-screen, always check their prior rental references. Here are a few questions you should ask previous landlords or property managers:
- Why did they move out?
- Were they on time with rent? If they weren’t, were their reasons understandable?
- Did they communicate with you to arrange things before they turned into problems?
- Did they take care of the property well?
- Were they good with their neighbors?
Note for first-time renters: You shouldn’t decline them just because they don’t have a rental history. There are a few things that you can do here, beginning with requesting a co-signer. Often, people recommend a credit check, but the issue with first-time renters is that they may also not really have much of a credit history.
Know their reasons for renting
While it’s probably tempting to rent to someone who answers the question of “Why do you want to rent here?” with “It’s a nice place” or “The rent price is great,” that’s not a great idea. Always look for someone who has a good reason to stick around. Those are the ones who will be more likely to take care of the property and also renew the lease.
If your property has a high turnover, you not only have to go through the screening process over and over but also clean up and deal with any other issues that present. So look for someone who likes the area, wants their kids to go to the school nearby, or any other factors that indicate they’ll be staying for a while.
In this day and age, that impressive credit score could mean a lot of things, but an answer like “This place is cheap” almost always means, “I’ll be moving just as soon as I find something better.” For this reason, smaller scale, locally run agencies and landlords are becoming more understanding of credit history. As they do this, they are becoming much more focused on something else. Your rental history.
Though yes, a good credit score is still the gold standard by which people gauge fiscal responsibility, rental history is more precise when it comes to determining if someone will be a good tenant. A new metric is also now being used. While in the past, rental history was not reflected on a credit report, there are a number of services that allow for that these days. This is something that can definitely benefit consumers on the whole, but more importantly provide an asset to landlords seeking an accurate picture of how someone may be as a tenant.
Do a fact check
Of course, when you are initially interviewing a potential tenant, you will ask all of the run-of-the-mill questions referring to a possible criminal past, whether they are legal citizens of the United States, and if they currently have the means to pay their bills. Even though you have personally covered those bases, the fact about dishonest people is that they lie. To ensure you get the complete picture of a potential tenant, you need an independent source to verify all the information they provide.
When red flags should be hoisted
Raise the red flag if there are discrepancies in the tenants’ statements to you and what the background check shows to be true. You can forgive minor details like a misspelling of an old address. Sometimes one-on-one questioning can be nerve-wracking, so, understandably, a small mistake might have happened.
However, glaring discrepancies such as criminal charges or open investigations that the tenant did not reveal should put you on full alert. Other red flags, reported or not, should include the following:
- Violent infractions (especially domestic violence)
- Past drug activity (especially distribution)
- Repeated offenses for illegal solicitation
- Sexual misdemeanors
- Tenant can’t prove employment or consistence income source
- Tenant refuses to provide past addresses
- Tenant shows up with a U-haul
- Tenant seems nervous about a credit check
Keeping tenants and your property safe
It is no mystery why landlords want to keep violent offenders out of their properties. These people pose an unacceptable risk to tenants who may occupy their properties. The same can be said about sex offenders. It is not just children at risk; adult women and even men can be victims of sex crimes. It should be a landlord’s top priority to ensure those types of threats do not make it into their properties for the safety and security of everyone.
Yet another safety concern would be those in the business of distributing illegal drugs. Due to the transfer of large amounts of physical money, drug operations in a rental property usually bring violence and, even more alarming, gun violence. In addition, some forms of drug manufacturing can be physically dangerous to tenants’ health and the property’s physical structure. These activities can compromise tenants’ health and safety in many ways, so running a background check should be standard practice.
Landlords—know our rights and responsibilities
As I advocate for the performance of background checks to be standard practice, I also must caution landlords to research and know their rights and responsibilities. For example, in some states, the landlord must foot the bill for a background or credit check for a potential tenant. In others, landlords have the discretion to impose this fee on their potential tenants.
It also might be a landlord’s responsibility to ensure those individuals who have specific restrictions when living around children or other vulnerable people are abiding by the law. For example, if you fail to conduct a background check, and then a sex offender ends up living next door to children, consequences might fall heavily upon your doorstep.
Rules must not be discriminatory
You have landlord rights to make rules, whether you’re renting out a single-family home or a multi-family property. If you do so, there are two things to keep in mind. The first is that the rules should be enforced uniformly for all tenants. The other thing is the rules should not be considered discriminatory.
For example, if you have the rule that children under 8 aren’t allowed in the gym or pool, that’s discrimination. But if you phrase it as “children under 8 must be supervised by an adult ,” that’s fine. A little due diligence can get you out of harm’s way.
Value your personal safety
You just finished a picture-perfect session with a potential tenant, but you ran a background check due to your protocol. Unfortunately, not only is your seemingly perfect candidate not perfect; they are currently wanted for a string of violent crimes.
That may seem like the setup for a crime drama, but this scenario can play itself out in real life, and you need to be prepared. Once you discover a potential tenant is not who they say they are and have reasonable cause to fear for your safety, you need to contact the police immediately.
Second, you need to end communications with this person. Avoid phone calls from their number and inform your staff to be on the lookout for this individual and not engage them. Thankfully, every case will not be this extreme, but nobody with good intentions will attempt to hide who they are.
People who may have a criminal past but no longer wish to live that way will most likely be upfront about their history. Time passed, and the nature of the crime will, of course, determine how you proceed, and there is no shame in putting the safety and security of tenants first, no matter how insignificant the risk may seem.
If you’re on the receiving end of a background check
When the time comes for your tenants to move out, they will likely give your contact information as a reference to their next landlord, just the same as you had gotten their previous landlord’s information. This is a chance to assist a fellow property manager by giving an honest and professional account of your experience with the soon-to-be previous tenant. Regardless if the request for a reference comes in via phone call or letter, follow these simple tips for processing tenant references easily and quickly.
- Be specific.
The most helpful information you can give a new landlord about a previous tenant is descriptive details and facts. Keep your feelings towards the tenant out of your reference; facts are all that’s needed. Stating that the resident was a “good tenant” doesn’t help either, so be specific on whether they kept the unit in the same condition it was upon move-in, if they paid their rent and utilities on time, etc.
- Emphasize tenant responsibility.
The biggest worry and risk of accepting a new tenant is whether they will pay the rent on time, care for the unit properly, and follow the rules outlined in the lease agreement. Inform the future landlord as to how long the tenant resided in one of your properties, if rental payments were made on time, and if they maintain an acceptable level of cleanliness. Also, be sure to report any unfavorable incidents. Did they offend their neighbors? Were they partying late every weekend? Keep it to the details and avoid your personality likes or dislikes.
- Be honest.
While not always easy, stick with the facts, regardless of how you feel about the residents. You can be held accountable for everything you say or write in a reference, and providing false information could likely result in legal troubles. But besides that, it’s important to remember that you’d want the same in a reference. Do unto others – or something like that.
- Be available.
Even if you’ve already answered their questions, be sure to stay available to the new landlord as they may have further inquiries. While this may not seem as obvious, this is something you should always be doing regardless. Relationships within the industry go a long way. You never know who might pass you a lead down the road, or the reference might be reversed.
Many people fail to realize that there are state laws when it comes to giving references. They differ across states so it’s best to check yours for extra protection. One thing that you should do prior to even getting to the end of the lease where you may be giving a reference is to have a disclosure clause in your agreement. This can help to keep you free of liabilities should something problematic occur due to your reference.
One of the best ways to keep things professional, legal, and even save yourself some time is by creating a standard reference letter template. This will help you to leave personal biases or opinions out of the mix. Your references need to be short, specific, and to the point without a lot of emotion.
Tenant background and your bottom line
Tenant background checks can be costly and time-consuming, but they are worth your time and money. Compromising your tenants and property by bypassing tenant screening is not only a safety concern; it can significantly affect your return on investment if things go differently than planned.
While tenants reside on your property, their safety is your responsibility, and you best believe your most vulnerable tenants are taking notice of how you operate your business. So it is always best to ensure the right people are on the right side of the fence.