August 2002 Owners Update

THE ART OF FINDING THE RIGHT TENANT

By Richard Magnone © 1999
WHAT MAKES A GOOD TENANT

Assuming that a landlord is reputable, the ideal tenant is one who pays rent on the first of the month and is forgotten for the next thirty days. A tenant that asks for repairs is not necessarily a bad tenant. A good landlord will gladly make repairs as repairs are a cost of doing business just are paying property taxes. A tenant that breaks personal property and
does not pay is a bad tenant. This is the tenant that must be screened out

THE SCREENING PROCESS
The tenant screening process begins with a prospective tenant. To avoid difficulties and claims of discrimination, all prospective tenants should be treated equally and an identical process should be followed when checking out the applicants. A landlord should begin by opening a manila folder for each applicant. This folder will contain all information regarding the prospective tenant's application process and should be maintained for at least two years (perhaps more). In all cases, a landlord should truthfully and carefully deal with a prospective tenant. The landlord should expect a truthful dealing back from the tenant. In most cases, a truthful tenant will opt not to rent from a dishonest landlord.

The Application
The place where the landlord most requires truthfulness from a prospective tenant is on the tenant's rental application. All landlords should require written applications which should be completed by all prospective tenants and retained by the landlord (in the case of a discrimination claim). These applications should be carefully reviewed by a landlord. If a potential tenant refuses to fill out an application, a landlord should, in no instance, consider renting to that person. This is a sure sign of trouble. The application should request, at a minimum, the following information from all prospective tenants over the age of 18 who will live in the property:

tenant name
employer name and monthly income
driver's license number and social security number (get a photocopy of the
driver's license)
credit and bank information, including monthly debt payments
credit report authorization
automobile information including license plate number
rental history (at least the past three places the tenant resided and the
name and number of the landlord)
references (at least four references)

The application should include a credit check authorization portion that informs the prospective tenant that the landlord intends to verify and check the information contained in the application. The authorization should include a sentence authorizing the landlord to obtain credit, employment and any other information, including that contained on the
application, from a credit bureau in the form of a credit report, from the creditors directly, from employers, references and prior landlords. Confirm References, Employment and Contact Prior Landlords Too often, landlords fail to check up on references, employers and prior
landlords. It is worth the effort to screen out poor tenants. When contacting these people, landlords should keep excellent written records.

Landlords should note the actual answers to questions as well as the attitude of the person giving the answer. Employers should be asked about the prospective tenant's attendance at work and income levels should be verified. Prior landlords should be questioned about noise levels, complaints from other tenants, lease violations, promptness of rent payments and evictions or other lawsuits against the prospective tenant.

References should be quizzed regarding the character of a prospective tenant. The key is to actually check with these persons to make sure that the references are valid and perhaps to learn a bit more about the applicant.

The Credit Report
Once a landlord has a completed and signed application and credit authorization which looks promising and the landlord has checked references, employment and prior landlords, the landlord should find a credit reporting bureau and order a credit report. The report should be reviewed for a history of late payments, prior bankruptcies and outstanding debts. The report most likely will not disclose prior evictions or landlord information because this information is rarely reported to these agencies. It will give a landlord a general idea of a prospective tenants creditworthiness. If the credit report turns up a valid reason to reject a
prospective tenant, the Fair Credit Reporting Act requires that the landlord notify the prospective tenant of such and inform the prospective tenant of the name and address of the credit reporting agency along with a notice that the prospective tenant can get a copy of the report if he or she files with the agency within sixty days of the landlord's notice of rejection. Remember, if the landlord collects a fee for a credit report and does not obtain one, the money must be refunded to the applicant.

AFTER ACCEPTING A TENANT
Landlords need to change their focus to be successful. Property ownership is a business and should be treated that way. Landlords provide a service to tenants. Landlords are not the tenant's business partner. A landlord must resist the urge to "give the tenant a break" or "extend some time" to a tenant because these situations lead to disaster. Once the landlord gives in to one of these situations, the tenant will be likely to take advantage again in the future. Landlords must take a fair but firm stance with tenants. Through adequate screening, a landlord can significantly cut the risk of trouble tenants and costly procedures down the road. This is the key to successful operation of a rental property.

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