Properly Vetting Tenants

Most investors are all too familiar with the horror stories of what can go wrong when you have the misfortune to land a problem tenant. But the best way to avoid such nightmares – and thus maximize the returns on your investment – is to try and select a good tenant in the first place. Whether or not you decide to leave the tenant selection process in the hands of a property manager, it is sensible to have a solid set of vetting criteria in place.

When it comes to vetting potential tenants, landlords should:

1. Require them to fill out a detailed application form.
2. Get both professional and personal references and thoroughly verify them.
3. Request at least three months bank statements.
4. Use a credit referencing service.
5. Get extra information – eg: a utility bill in the tenant’s name.
6. Ask them to show evidence of assets.
7. Speak to their current real estate agency and, if possible, some previous landlords to establish their rental history.
8. Call their current employer and, if possible, a past employer to establish their employment record.
9. Ask for a copy of their passport and/or driver’s license.
10. Secure a guarantor – eg: a parent.
11. Check tenancy databases to see if they have been listed as a bad tenant.
12. Always meet them in person to assess them and get a feel of who they are.

Essentially, you should be looking for a tenant who is in stable employment and has a regular income; has a solid rental history; and who is reliable, diligent, responsible and house-proud. Finally, it is also a good idea not to rush into a decision too quickly… An extra week or two of rent might pale in significance compared to a bad tenant decision made in a hurry.

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Advice For Tenants

Without getting into anything technical, there’s just two pieces of advice I would like to share with tenants in dispute over the potential of mold in their rental.  Many tenants when suspecting mold and feeling as if their landlord is not addressing the matter quickly decide to stop paying rent.  There’s many issues with this approach, but let’s focus on two.  First and foremost, you can not stop paying rent because you speculate there is a mold issue.  Mold is suspect until tested and lab results are needed for proper documentation if a case is ever sent to court, so you have absolute concrete proof there is mold and it’s potentially causing illness or disrupting your way of life.  Next, if you do decide to stop paying rent because of this issue, or any other which is effecting your quality of living, don’t just stop paying rent and use your funds towards something else.  You need to set up a bank account and begin to escrow the rent payments while sending copies of this account and those payments to your landlord so he/she can see that you’re not trying to get out of paying your rent, but just trying to resolve the issues and intend on releasing on the funds once the problem is resolved.  Too many times, I encounter tenants thinking they have mold and ceasing to pay rent, but make no attempt to prove that there is mold, or to show that they’re allocating the money.  Instead they just stop paying rent, and think that a phone call to me will be enough proof that they had every right to still live on the premises while not paying for anything and never intending on paying back rent.  And when they get the home tested and it doesn’t show any mold, they have to stand their ground that maybe my test isn’t accurate because they know there is mold and they were getting sick.  So the two points to remember is this:

• Mold is suspect until tested and third party documentation is needed to prove that there is growth which is potentially harmful and a hazard in the dwelling.
• Escrow accounts are needed with full disclosure and email communication if rent payments are halted until an issue is resolved.

Rent Escrow

Some States impose an obligation on landlords to repair and eliminate conditions which constitute, or if not promptly corrected will constitute, a fire hazard or a serious and substantial threat to the life, health, or safety of occupants. Under this law, if a landlord fails to repair serious or dangerous defects in a rental unit, you have the right to pay your rent into an escrow account established at the local district court. But the law is very specific about the conditions under which rent may be placed in escrow. You must give the landlord proper notice and adequate time to make the repairs before you have the right to place rent in escrow. Rent escrow provides tenants with a procedure for ensuring the repair of serious and dangerous defects in their dwellings, whether the defect is within a single unit or in an area used jointly by all tenants. The defects covered by this law are those which constitute “a substantial and serious threat of danger to the life, health, and safety” of a tenant. Rent escrow is not provided for defects that just make the apartment or home less attractive or comfortable, such as small cracks in the floors, walls or ceiling. Also excluded are non-dangerous violations of a local housing code and dangerous conditions in the community at large.

The serious or dangerous conditions include, but are not limited to:

• lack of heat, light, electricity or water, unless you are responsible for the utilities and the utilities were shut off because you didn’t pay the bill;
• lack of adequate sewage disposal; rodent infestation in two or more units;
• lead paint hazards that the landlord has failed to reduce;
• the existence of any structural defect that presents a serious threat to your physical safety;
• the existence of any condition that presents a serious fire or health hazard.

It is the public policy of the state that sanctions be imposed on landlords who permit dangerous conditions to exist in their leased property, and that an effective mechanism be established to prevent and repair these conditions. This law applies to all residential dwelling units except farm tenancies. It applies equally to publicly and privately owned units and to single and multiple unit dwellings.

Please check with your local municipalities about the laws for you area.