Being a landlord isn’t easy. It’s a challenging way to make a living or earn extra money. However, investing in real estate and leasing property can be quite rewarding when done right. Avoiding these common landlord errors can keep you out of legal trouble, and make things a little easier.
Using the same old lease, or someone else’s lease: Landlords who’ve been leasing properties for a long time often use the same lease for decades. And those who are new at it, often download a lease agreement off the Internet, or borrow one from a friend. It’s true that most leases contain common language, but it’s best to have yours customized for your property, your circumstances and your preferences. It could be well worth it to sit down with a landlord-tenant lawyer and have your lease reviewed.
Forgetting that time equals money: You might not mind doing repairs, cutting the grass or performing maintenance at your rental properties. If you’re an expert at these things, it could be cost-effective to do it yourself. However, if your work is sub-par, it takes longer than it should or requires follow-up repairs, you are probably wasting your time—and losing money. Hire experts to do the things you can’t do, and focus on what you do well. Fill empty units, update your website or take classes to make yourself a better businessperson.
Breaking anti-discrimination laws: You cannot refuse to rent to a prospective tenant based on race, national origin, religion, familial status, color, gender or disability. Landlords are not allowed to ask prospective tenants questions that refer to these things, either.
Basing acceptance of a tenant on anything other than cold, hard facts: Look at an applicant’s previous rental history, current and former employment, income, and credit worthiness. Run a background check to weed out those with criminal records. But don’t make decisions based on how a tenant applicant looks or dresses, or the car he or she drives.
Failing to follow the same procedures with every applicant: You could be accused of discrimination if you don’t require each applicant to follow the same process.
Making decisions based on emotion: Every experienced landlord has regretted allowing a tenant to be late on rent “just this once,” or to letting a tenant move in without paying a security deposit up front because they promised to pay “next month.” Well, “just this once” is never once and “next month” never comes. It’s difficult to be tough, but landlording is a tough business. If you want to succeed, you’ve got to take a hard stance.
Landlords typically include language in the lease that prohibits subleasing without permission. But what exactly is subleasing, when and why would a tenant want to do it, and how should landlords proceed?
Subleasing is different from transferring a lease to another party. In the latter situation, another tenant takes over a current lease and the original tenant is absolved of any responsibility for its terms.
In subletting, the subtenant is granted the rights contained in a sublease, but the original tenant is still responsible for the terms of the original lease. In essence, the subtenant is renting from the original tenant, who is still bound by the contract with the landlord. For example, a subtenant is allowed to live in the unit but must pay rent. If they do not, the original tenant is still liable for the missed rent.
Tenants might be interested in subleasing if they are going away for an extended length of time, but wish to return to their apartment. It wouldn’t make sense to go to the trouble of subleasing for a trip of a few weeks. But if your tenant were planning on traveling through Europe or South America for three months, subleasing is a way to cover the rent without having to break the lease and start over when they return.
Tenants who are interested in subleasing may ask permission, even if the lease states you do not allow it. Remember, it’s always up to the landlord whether or not to allow the sublease. If you decide to allow a tenant to sublease your property, follow these tips for a more successful outcome:
- Write up a Consent to Sublease agreement between yourself or your company and the two parties.
- Include elements such as effective date, the tenant and subtenant’s names, the property address, and the monthly rent.
- Be sure to state that the tenant is still responsible for his or her duties under the original lease.
- If you decide to allow subleases, be sure to create a policy. Don’t let one tenant sublease, and forbid another from subleasing. This could lead to charges of discrimination.
- Be sure your tenant also has a sublease agreement with the subtenant. This is a different document from your Consent to Sublease agreement, and covers the legalities between those two parties. If expectations are not made clear, you could find yourself stuck in the middle of their disagreements.
- Keep in mind that if the subtenant damages the unit, leaves before the lease expires or breaks any other condition of the lease, you may hold the original tenant responsible. He or she can will have to get satisfaction from the subtenant.
- Just as you screen all your prospective tenants before signing a lease, you should make it clear that any subtenants will also be required to undergo tenant screening.
Subleasing can be a hassle, but if you have good tenants whom you want to keep, allowing them to sublet while they’re away can make sense. Remember, it’s completely up to you!
Start your tenant relationship off right by knowing who you’re leasing to. Protect your rental property and assets with tenant background checks. Proper tenant screening will ensure you are leasing to the best possible tenants.
landlords have faced one of these situations:
- You’re doing a routine maintenance inspection and discover an occupant in the rental whom you’ve never seen before. You ask who he is and he replies, “Oh, I live here.”
- You sign a lease with one tenant. A few months in, she mentions that the rent will be late because her roommate hasn’t paid her share yet. Roommate?
- You live upstairs, your tenant lives downstairs. You notice he hasn’t been around lately, but someone else is clearly staying in the apartment. You ask questions and find out your tenant is away for three months, but he sublet the place to a friend.
- Tenants who live next to one of your rental units call and complain about the three cars that are taking up all the available parking. You reply that only two people live in the unit, but they assure you that three people have been seen regularly coming in and out.
What’s going on? Most likely, your tenant has brought in a roommate or sublet part or all of your rental property to an additional person. If your lease agreement states that no subletting is allowed without your authorization, then the tenant is in violation of the terms of the lease.
The problem with subletting, or adding roommates without your knowledge, is that you have no idea who they are, where the work, if they’ve ever been evicted or convicted of a crime, or if their credit history meets your requirements. Without a chance to perform due diligence, including tenant screening and credit checks—the same tenant screening you do on all prospective tenants—you are at risk of liability for the actions of an unknown person. Plus, your property and business are at risk.
Why would tenants deliberately violate the terms of a lease?
- Maybe they don’t thoroughly read the lease, or forgot what the lease said.
- They may think you won’t catch them in the act, as long as they pay their rent on time.
- Perhaps they think the lease terms don’t actually apply to them.
- Or they simply cannot afford their apartment or house without a roommate.
In any of these cases, you likely have cause to send a cure or quit notice. Of course, check your local and state laws concerning eviction notices. You may want to send a reminder to all your tenants that subletting or adding roommates without your authorization is strictly prohibited. If they want roommates, they must undergo the same application and tenant screening process as everyone else. Explain that this is for the safety of all residents. Keep in mind that treating one group of people differently than others could put you at risk of discrimination charges, so make sure the same rules apply to all of your tenants. Finally, notify tenants that violations are grounds for eviction.
If you do agree to a sublease situation, be sure to put everything in writing. A sublease agreement should be signed by all parties and place in your tenant’s file.
Most experienced landlords will tell you that tenant screening is the most important aspect of renting property. Failing to screen prospective tenants causes more problems than just about anything else. After all, each tenant is a potential liability to a landlord.
Thoroughly checking up on tenants’ identification, credit history, criminal background, work history and previous rental situations can give you a clear picture of the tenant you are about to trust to live with your property and among your other tenants.
Here are some basic tenant screening tips from real landlords:
- Don’t skip the tenant screening process, no matter how nice or trustworthy a prospective tenant seems.
- Treating each applicant equally will help you stay within the law. This is another good reason to screen every tenant.
- Look at credit history, criminal history, evictions, judgments, bankruptcies and sex offender status.
- Fake IDs are easy to buy or make, so check the applicant’s Social Security Number and identity to be sure they are who they say they are.
- If the applicant is local, drive by their current address to see how they live. Is there a beater car parked in the yard? Garbage strewn about? Or is it neat and clean? How it looks is a good indicator of how they will treat your property.
- Don’t judge a prospective tenant by his or her clothing, car or jewelry. A hard working, honest tenant could be dressed in dirty work clothes, while a flashy car and fancy watch could indicate someone who has plenty of money, or is simply living above his or her means.
- Beware of tenants who want to move in fast and have plenty of cash to cover rent and the security deposit. Take your time and conduct your screening process.
- Talk to previous landlords. If a tenant specifically asks you not to contact the current landlord, find out why, and talk to former landlords. Conduct the rest of your screening process and if the tenant is approved, let him or her know, and then contact the current landlord.
- Don’t base your entire approval on the landlord’s reference. Some will be anxious to get rid of a bad tenant (and give a good reference). Others will be honest.
- Take notice if the prospective tenant is late for appointments without apology or is unhappy about paying an application or screening fee.
- Ask why they’re moving.
Using these tips, along with a professional tenant screening service, can help insure that you lease only to qualified tenants. Good luck!
No matter if you’re a long-time landlord or new to the business, you’ll likely encounter a wide mix of tenants. Some will be easier to deal with than others. They pay their rent on time, follow your rules and cause no problems. Other tenants can only be described as problem tenants. Most landlords would probably agree that if they could turn back the clock, they would not have agreed to lease to these tenants in the first place.
Trouble is, you can’t always know if a tenant will be a problem. Experienced landlords know that even those with good jobs, good credit scores and sparkling references can later turn out to be duds—or worse. But there are warning signs that every landlord should know.
Five Warning Signs of Problem Tenants
- They gripe about the application fee. Good tenants realize that running background checks and tenant credit checks, calling references and processing paperwork take time and money. They pay the application fee without complaint. A lease applicant who can’t pay the fee, or complains about it, is a red flag.
- They ask for more time to pay the first month’s rent and security deposit. Sure, it can be tough to come up with that much money at once. But remember, you’re running a business, not a charity. If a tenant cannot pay all of the rent and security deposit up front, you may want to pass on him or her and wait for someone who can. It’s a matter of choice. Let another landlord deal with it.
- They are new at their job. This isn’t always a bad thing. Plenty of people switch jobs because they’re offered better positions that pay more, and they can afford more rent. But if a prospective tenant has had several jobs in the past two or three years, the new job might not last for long. And soon, the excuses for paying rent late will begin.
- They mention relationship problems. Keep in mind that according to the Fair Housing Act, landlords may not discriminate against applicants based on marital status. It’s illegal to refuse to rent to a divorced person, a single person or a married person because of their status alone. But if an applicant mentions boyfriend or girlfriend problems, or that he or she is trying to get away from someone, consider these red flags. Trouble typically follows people around. If you don’t want an upset estranged husband or troubled ex-girlfriend on your hands, pass on this tenant.
- They ask too many questions. There’s a fine line between having a healthy interest in your rental property and showing warning signs of being a problem tenant. Be on alert if a prospective tenant asks about things like:
- The racial makeup of your building or the neighborhood.
- Exactly what the electric, sewer or gas bills will be.
- How to file complaints or repair requests.
- Where they can smoke (if you have a non-smoking property).
- How often you’ll be inspecting the property, and how much warning you’ll be giving.
- The type of questions, the number of them, or the way they are asked can tell you a great deal about the person who’s applying to live in your property.
As a landlord, you get to decide with whom you enter into a lease agreement. Keep your eyes and ears open, trust your gut instinct and always verify everything a prospective tenant tells you.
No matter how competitive your rents are, you need to protect your rental property and assets with tenant background checks. Proper tenant screening will ensure you are leasing to the best possible tenants.
Landlords, have you ever been the victim of a scam pulled off by a “professional tenant?” There are always a few lurking around in the shadows. We’ve heard a few stories lately about landlords who have suffered losses because they unknowingly fell victim to a pro.
Jeff is a new landlord who recently arranged with a couple to lease a rental unit he owns. They wrote a check for the first month’s rent and security deposit, which Jeff deposited into his account. A week later, they cancelled the lease because their employer was transferring them out of state. They asked for a refund. Jeff refunded the full amount, only to discover the original check was written on a non-existent account. It was counterfeit. The couple flew the coop and Jeff is out nearly $1300.
Banks don’t typically place holds on every check, so Jeff assumed it had cleared the bank with no problem.
One way to avoid this scam: Ask for the first month’s rent and security deposit in cash. That would have sent these two packing.
A better solution: Run a thorough tenant screening on every applicant. Check their credit history and criminal history. Call previous landlords and their current employer. Remember: scammers do their best work when no questions are asked.
Another story is about a famous scam where the tenant moves into an apartment and proceeds to trash the place. Or he just stops paying rent. He then waits for the eviction notice or sues the landlord for unsafe housing. He’s an expert at stretching out the judicial process though filing complaints, asking for judge recusals and causing postponements. In the meantime, landlords are racking up massive attorney’s fees, he’s living rent-free for months or years, and usually the court decides in his favor.
The only way to avoid this type of tenant scam is through tenant screening. One of the victims of this scammer admitted she didn’t check with any of his previous landlords before renting him an apartment.
Protect yourself, your business and your wallet by keeping your guard up, trusting no one you don’t know, and running a tenant background check on every prospective tenant.
If methamphetamine-manufacturing tenants in Cuyahoga Falls, Ohio get busted, they are expected to pay the costs of cleaning up their labs and disposing of the hazardous waste. If they cannot pay for cleanup after their labs are discovered, their landlords are now responsible, thanks to a new amendment to an existing law.
Until recently, state and federal funds paid for dismantling and removing labs, but that money has come to an end. The local police chief estimated cleanup costs of $1,000 to $5,000 for each meth lab. From removing traces of chemical residue, to dismantling and moving meth-related paraphernalia, landlords are on the hook for everything.
While recognizing that the majority of landlords don’t knowingly lease to drug manufacturers or dealers, the city council that passed the new law stated that it’s simply a cost of doing business.
Some landlords have attended training sessions about meth labs, including lessons on how to identify a lab and what to do if they find one. Meth labs are quick to set up, and the process of manufacturing meth uses easily acquired chemicals.
The real problem for landlords with meth lab cleanup costs is that insurance generally will not reimburse the expense. Not dealing with the problem is not an option. The chemicals used to make meth are extremely dangerous, and even traces of residue pose numerous health hazards, including liver, kidney and neurological damage, and increased risk of cancer.
What Is Involved in Cleaning Up a Meth Lab?
- The entire rental unit must be cleaned
- All traces of chemicals must be removed.
- Walls and ceilings painted
- Carpeting removed,
- All air filters replaced
- Ventilation systems cleaned
- Sinks and plumbing should be replaced
As the landlords of Cuyahoga Falls are discovering, meth labs are not a big-city problem. They are everywhere. The best way to avoid renting to drug manufacturers is to conduct thorough background checks and tenant screening on every applicant. If there is a history of drug convictions or other criminal records, you have the right to turn down the applicant.
Smart landlords always run tenant credit checks and prescreen tenants. They talk to applicants’ former landlords and check for criminal activity. But when the economy is so tough, many landlords find that screening tenants and making decisions on signing leases is based partly on data and partly on circumstance.
For example, Wendy has been a landlord for many years, and has “seen it all.” She says that tenant credit scores are as volatile now as she can remember. “Some people with six-figure incomes have been forced to short sell their homes, and have lower credit scores as a result,” she said recently. “I’ve had to look more closely at their credit card and car payment history, and not just their credit score.” For Wendy, renting to people who recently owned and lost a home is less risky than renting to those who are continually late with rent payments or have history of evictions.
Mike, on the other hand, looks at credit scores and collection reports closely; he considers student loans collection activity to be a deal-breaker, but thinks medically-related collections reports are acceptable. “People can’t help what happens to their health,” he said. “Medical costs are outrageous and so many people don’t have insurance. I try to work with people who have had medical concerns.”
For most landlords we know, any eviction or rent collections activity on a prospective tenant’s credit report is not okay—even in these tough times. Bob is a fairly new and cautious landlord, who has been seeing more rent issues on credit reports. He always checks work references and tries to talk to as many landlords as he can. “Landlords usually tell me the real deal on their tenants. At first, I thought they’d give only good references, just to be done with a poor tenant, but I’m finding that they don’t want me to inherit their problems.”
Bob shared that he also talks to tenant applicants about any issues he finds on their credit reports. “I ask them why they didn’t pay their student loans, or what happened with the late car payments. Some will make excuses. Some will blame others. And a few own their credit problems and explain how they’re making them right.”
While credit scores are an important indicator of whether or not a tenant will qualify for a lease, many landlords indicate say that it’s not the only factor they consider. “A good rental and work history means more to me than a number,” says Brian. “I’m careful, but I prescreen and talk to work and landlord references before I make my decisions.”
The rental market is going strong in most areas of the country, as more folks are renting instead of buying. While many landlords are enjoying high vacancy rates, they still need to be cautious; the economy has really hurt the credit scores and bill-paying ability of millions of Americans.
Every landlord has a different standard for accepting new tenants, but the importance of conducting thorough credit checks and tenant background checks is clear. This is the one area that experienced landlords will tell you not to skimp on, because if you do, you will more than likely regret it!
Tenant credit checks and background screening doesn’t take long, and can be inexpensive. Most landlords pass the fee on to the prospective tenant, and most tenants are accustomed to paying the fee. If you have an applicant who has a problem with paying the fee or signing the authorization to conduct a background screening, then you probably don’t want them as a tenant, do you?
The screening process begins with the lease application, where you may ask questions about the applicant’s address history, work history and credit history, and obtain contact information for previous landlords and personal references. You may ask if the applicant has ever broken a lease, if they paid rent on time, why they are moving now, and about their income.
You may not ask a potential tenant about race, religion, family status, disability, or any other information that might indicate a breach of the Fair Housing Act.
Be sure to obtain the applicant’s signature on a separate notice that informs him or her that you will be running a credit check and background screening, based on their name, date of birth and Social Security Number.
Most experienced landlords will also phone references and previous landlords. Be careful how you phrase your conversation, because too many tenant applicants will provide the phone numbers of friends who have agreed to pose as a landlord or employer. Simply identify yourself and ask the person on the other line, “How do you know Joe?” The correct answer may be “I’m his landlord,” or “He used to work for me.” If Joe gave you Tom’s name as a previous landlord, and Tom answers, “Joe and I are on a bowling team together,” you may have spotted an inconsistency in Joe’s story. Be on the lookout for more of them!
Finally, you should run a thorough tenant screening credit check to find out how the applicant pays bills, if they’ve filed for bankruptcy, and what their credit score is. A criminal background screening will reveal whether or not you have a convicted felon or sex offender applying to live in your rental property.
Don’t forget to trust your gut when screening tenants. You don’t have to give a reason for rejecting a tenant in most areas (check your state and local laws)—but do be careful and apply the same criteria to every applicant, or you could be accused of discrimination. You can’t reject an applicant solely for the color of their skin, but you can reject one because their credit score did not meet your minimum requirements—along with the bad feeling they gave you when you met them!
We’ve often advocated that screening tenants begins with placing your For Rent ad. It should continue with the phone conversation you have with prospective tenants when they call in response to your ad.
But what exactly should a landlord ask each prospective lease applicant to avoid the tire-kickers and those whose credit and rental history make them ineligible to lease the property? Here are a few suggestions for questions to ask before showing your vacant rental units:
- Where do you live now?
- Are you currently renting?
- Why are you moving?
- How many people will be living with you?
- What kind of reference will your current landlord give you?
- What kind of reference will your previous landlords give you?
- What kind of work do you do?
- What types of pets do you have?*
- How many people who will be living in this unit are smokers?*
- We run credit and criminal background checks on every lease applicant over the age of 18. Will there be any issues there?
- We require a lease application and a fee to cover the background and credit check for each tenant over 18. Is there any problem with that?
- When do you want to move in?
- Will you have the first month’s rent and security deposit ready if we sign a lease?
- Do you have any questions about the process or the rental unit?
- Do you have a problem with any of these requirements?
*Asking “how many” rather than “do you have pets?” or “does anyone smoke?” often elicits an honest answer. If you do not allow pets or smokers, you’ve just eliminated the applicant.
Depending on the answers you get, the interested party may decide you are not the landlord for him or her. And you may decide they are not the tenant for you. Either way, you’ve saved your valuable time by avoiding showing the rental unit and going through the lease application process.