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Tenants renting apartment make a mess (Denis Gagarin/Photos.com)
Tenants renting apartment make a mess (Denis Gagarin/Photos.com)

Magazine excerpt

How landlords can steer clear of bad tenants Add to ...

The following article is from Canadian Real Estate Wealth Magazine.

Any landlord who has been involved in the real estate rental business for more than a few years has likely come across a tenant disaster, or at least knows somebody who has. One of the most common comments we hear from prospective, current, and former landlords relates to the headaches caused by accidentally renting to a bad tenant.

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The relationship between landlord and tenant is known to be rocky, at the very least, and disastrous or expensive in a worst-case situation. Bad tenants have left landlords with garbage to clean up after suddenly leaving a property, pet damage and repairs in suites clearly marked as not allowing pets, damage to property after massive parties, junk removal requirements after night-time move-outs, and everything in between.

Horror stories are everywhere, and news travels fast: selecting the right tenants is the most important step in the real estate rental business. Landlords who can master this skill will succeed in the business, while the opposite is also true, unfortunately. Bad tenants are the number one reason for landlords leaving the industry and selling their properties in search of greener pastures.

Landlording is a risky business. Selecting a disreputable tenant who causes major damage to a unit can leave a landlord with a significant bill for clean-up and repairs, scare off other regularly paying tenants, and even label the landlord as inattentive or with the classic slumlord designation.

Unfortunately, there is rarely any insurance that can protect landlords in this area, and a problematic tenancy resulting in a massive expense will almost never pass the strict criteria that an insurance policy will require prior to paying out on a repair claim.

Tenancy laws throughout Canada differ greatly, but they all set out specific protections for both landlords and tenants. Most landlords assert that the laws favour tenants in almost every situation. Certain provinces, such as Alberta, offer slightly more protection to landlords than other provinces, where landlords can be forced to endure a problematic tenancy for months, or even years.

How to screen your prospective tenant
The best and most sure-fire way for landlords to avoid having to deal with this problem starts at the very beginning of the landlord-tenant relationship. Landlords who screen their tenants properly will greatly reduce the risk of future loss, maintain their reputation in the greater community without blemish, and not be constantly stressed about their rental properties.

Here are three tried and true methods of selecting the best and most qualified tenants and learning ways to avoid costly disasters.

1.) Rental documents
As any real estate or courtroom lawyer will tell you, good documents are the starting point of any successful business relationship. Having a successful tenancy requires good, clear, concise definitions of everybody’s responsibilities and rights. Skipping this step means a tenancy relationship is beginning without a solid foundation, and during times of difficulty there may be nothing to refer to for clarification.

Rental application form

This document is probably the most important of any document in the entire rental process, which comes as a surprise to many new landlords.

A good rental application will require information on:
the applicant’s job
their supervisor
their income
current address
landlord reference, friends and referees
government identification
next of kin and extended family members
any additional details believed to be relevant to the approval process

This information will help landlords gain a better understanding of the tenant’s characteristics. More importantly, however, it gives the landlord some good contacts to track down the tenant if they should disappear. Visit http://hopestreet.ca/rental_resources/ for a free download of a comprehensive Rental Application Form.

Move-in inspection report
This is the second-most important document in the landlord-tenant relationship. Unfortunately, it is often overlooked.

Most provinces require a landlord and tenant to complete a move-in report upon onset of a tenancy. This quantifies and documents the condition of a property so that, when the tenant leaves, any damage caused is clear. A thorough and concise move-in report card is a sure-fire way of avoiding significant disputes over tenant-related damage. Most provinces require a landlord to produce this report prior to deducting any funds from a tenant’s security deposit.

Residential tenancy agreement
As the name suggests, this document will establish the terms of the working relationship between the tenant and landlord. In general, the more detail it provides the better, and sourcing a free online residential tenancy document is not sufficient to cover a landlord’s interests.

Most local rental associations will sell well-written and well-researched versions of residential tenancy agreement documents with several carbon copies for each party. Landlords and tenants fill in various fields relating to names, address, and rental amounts.

Addendum to residential tenancy agreement
This can be a small side document that forms part of the agreement and sets out additional rules for items such as pets, smoking in the unit, or penalties for late rental payments. These documents are harder to enforce but establish good guidelines for the day-to-day operations of a rental property.

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