Chapter News

Vetting your tenants



By Suzie Reid - Laing+Simmons Double Bay

The essential guide for property managers when taking on new tenants.

A good property management office starts with the rule of vetting tenants properly. The aim of the leasing staff is not just to find a tenant – it is to find a good tenant who is right for the property.

Turning down the wrong applicant is the most important thing that you can do to create a happy and successful property management office. This can be hard to do, especially when times are quiet, but you will be rewarded with happy landlords, less visits to the CTTT and happier property managers who don’t have to deal with bad tenants.

If the application process is thorough, in most instances you are able to confidently advise a landlord that you believe the tenant will be good. If you cannot confidently present the tenant to the landlord, then there is a good chance that you are selling the tenant not only to the landlord, but also to yourself.

Challenging properties

There are some properties that are, of course, difficult to lease to the perfect tenant as they have failings of their own. In this case, it is still the property manager’s role to diligently research the prospective tenant’s application and discuss with the landlord the risks of accepting a tenant who may not be perfect. However, consider whether you want to manage a property that can only be leased to tenants who carry potential risks.

At all times you need to look for the problems and not try to hide from them. Once the tenant is in the property, believe me, the problems will find you.

There is another aspect to tenant selection and this is the potential liability that your agency has when a poorly selected tenant rents a property and this results in the landlord suffering a loss. When this loss occurs, the vetting of the tenant is the first aspect of your management that will go under the microscope.

Tenant databases

Tenant database services provide another two levels of protection. First, they can assist in identifying a previously defaulting tenant and, second, they may provide an additional layer of legal liability protection, as you can show your landlord that you checked the database that you use for any record of the tenant and there was none. Keep a record of this search. Good tenancy databases have requirements for information that can alert you to a tenant using an alias or one who has a poor tenancy record in a slightly different name, as they can cross-reference dates of birth and identity documents, such as driver’s licence and mobile telephone numbers. Today’s cyber world has brought us an additional tool – the Google search. This simple search can also help validate a prospective tenant and provide an additional level of comfort.

Competing agents

Encourage good relationships with your local agents, even those that may be your strongest competition. Be honest when you give references for tenants who are leaving your office to rent from another agent if you wouldn’t recommend them. You will more than likely be repaid in kind.

Despite the most careful searches and all the due diligence that you can utilise, it is still possible that you will end up with a bad tenant who is going to be the cause of a loss to the landlord. When this happens, advise the landlord immediately when you become aware that there is a problem or potential problem.

Flaw finding

If you have done everything possible to find flaws in the tenancy application when it was vetted and you can show that you were diligent in checking the application, then you should be able to confidently defend your performance. On the other hand, if you chose to ignore a potential problem (big or small), then it is this that will be your potential undoing. The most important thing in checking a tenancy reference is a genuine desire to find the bad news. If you try hard to find it and can’t, then there is a very good chance that it just isn’t there, and you have a tenant you would be happy to put in a property you own yourself.

This article was first published in the August 2013 edition of the REINSW Real Estate Journal.