Renting your property can be a minefield. Your broker is there to protect you and get you as much information about your prospective tenants as possible, but what do you do if something doesn’t feel right?
From time to time you will receive offers on your property that just don’t stack up. It may be something to do with the tenant’s references; maybe a lack of employment history or a previous eviction they have on their rental history.
But how should you handle this and do you know what to look out for? In this article I aim to discuss what you can legally reject a tenant for and how your broker can assist you in getting the facts you need to make the right decision about your tenants.
Remember that renting a property is a business transaction and any decisions should be handled accordingly. Try to put aside past grievances you may have or particular views that you may hold whilst handling this part of the process.
You need to be able to distinguish between a potentially bad tenant and someone that you perhaps don’t like. Remember them not being the same as you does not make someone a bad tenant.
First of all, let’s discuss discrimination. Aside from being socially and ethically a bad thing, discrimination is also illegal. Someone’s race, religious views, sexual orientation, age or profession are not grounds to reject anyone and a good broker will feel comfortable telling you so.
You need to be open to the fact that your tenant may not comply to the views and lifestyle choices that you keep and understand that these things are not grounds for rejecting a tenant; either legally or morally.
However, there are grounds for rejection that are both legal and completely understandable. Your broker should be able to advise you of these rules in great detail and we will try to take a look at them below to give you an overview as to what the law considers viable reasons for rejection.
It is worth looking into any prospective tenant’s employment status. Ensuring that you have a keen understanding of their role within the company they work for and their earnings is important when considering their offer.
Firstly, earnings. It stands to reason that the tenant will need to earn enough to cover their rent, utilities and other living costs on a monthly basis. Look at their earnings and ensure that they have enough of a buffer in their salary to cover their rent, etc.
Aim for tenants with a monthly salary of three times the rent as a minimum. This should give the tenant a large enough surplus to cover rent, utilities and standard living costs like food, etc.
Your prospective tenant’s salary must be verifiable via referencing, bank statements or confirmed by their employer or boss. You will need to be certain that the funds they are saying are available to them each month are correct. Your broker should be able to assist you with referencing your prospective tenants and should carry out a salary verification on anyone that they are proposing offers from.
The second thing to look at in relation to employment is the length of time they have been employed in their role. Put quite simply, someone that has been with the same company for fifteen years is in a vastly more secure role than someone that started with a new company six weeks ago. This makes a difference in terms of their ability to keep their job and their likelihood of promotion, etc.
Those that have been in roles longer tend to have more secure professional lives and stand a greater chance of being promoted, thus meaning that they have a greater salary to pay your rent from.
Look for tenants that have secure careers and are well established within their positions, meaning they are less likely to lose their jobs and suffer difficulties paying rent.
Things to reject for are-
- Limited salary
- Unverifiable earnings/negative work reference
- Lack of time in the role
When conducting any reference, as well as the tenant’s employment status your broker should be looking deeper into the prospective tenant’s credit history. The credit history of your prospective tenant acts as a window into their financial status and is often a key indicator as to the likelihood of any problems with missed or late rental payments in the future.
Firstly, look for negative credit history that is not easily explained. If it looks as though your prospective tenant has a history of not paying back credit on time try to have your broker find out why this is the case.
In the post “credit crunch” era we are seeing more and more people renting properties with a negative credit history. Try to ascertain whether there was something happening in their life at the time of the missed payments. Perhaps they were going through a divorce or some other life-changing event and simply missed the payments due to stress or perhaps the tenant was just wilfully missing bills and spending their money elsewhere.
I am certainly in favour of not judging tenants too harshly and there is a huge difference between a tenant that has been through a tough time and one who is just choosing to ignore credit commitments.
Secondly, bankruptcy. This is something that is an extension of the above and is again another indicator of a tenant’s poor attitude towards paying bills or rent. As with the above, there may be a valid reason why this person has been made bankrupt, and any history of bankruptcy should be looked into further by your broker.
Masses of credit. Whilst not a valid reason on it’s own, having lots of active credit does act as a bit of a red flag and is something you should be looking into further with your prospective tenant and broker.
If the tenant has masses of credit it is understandable to think that their salary may be being used to facilitate this credit and that any changes in their earnings may affect their ability to pay rent due to the high amount of credit they will also be having to pay off.
Things to reject for are-
- History of defaults/poor credit score
- Masses of active credit
It is important to be able to get an understanding of your tenants and their behaviour or conduct from your broker. Are they unwilling to give information about themselves or unhelpful when asked questions? Do they smoke or have they had issues with the law previously. All of these things are worth looking out for when considering prospective tenants.
Unwilling. Do they seem particularly unhelpful of dismissive of your questions? Have they been pleasant and cordial to deal with and what is your broker’s general view of them? The likelihood is that you will not meet your prospective tenants prior to them taking up occupancy, so using your broker to “feel them out” for you is a useful tool when it comes to deciding whether or not to accept their offer.
Are they a smoker? For some people this may not be an issue, but for the majority of landlords this will be viewed negatively. It is important at this stage to remember that your property must be viewed as an ongoing business concern and by having a smoking tenant living in the property now may affect your ability to rent the property to non-smokers in the future who may be sensitive to any lingering smoke smells, etc. in the property’s furnishings, walls and carpets.
Pets. Similar to smoking, a pet may not seem like a huge issue at first glance, but may cause you issues in the long run. A poorly house-trained dog can cause masses of damage and as with smoking the financial burden will be on you when the tenant has left. It pays to be aware that the cost of fixing any damage may exceed the amount of the security deposit you are holding from the tenants. Consider carefully before accepting a tenant that has a pet.
Previous convictions. It is important to find out a little about the tenant’s history and run-ins with the law are certainly a good indicator as to your tenant’s future conduct with you. As with credit history it is worth doing a little digging to try and find out the full story behind any previous convictions and these should not be taken at face value and rejected immediately. Get your broker to find out about the conviction, what happened and how long ago it was. Using this information you can take a view on whether or not to move forward with this tenant.
Things to reject for are-
- Unwilling/dismissive behaviour from the tenants
- Previous criminal convictions
Finally, the reference undertaken by your broker should include a few mandatory questions and the answers to these questions, plus the tenant’s general conduct when completing the reference are good indicators when considering someone’s suitability as a tenant.
Has the tenant been honest or have they lied or given incorrect information on their reference form? This should be a huge alarm bell for you. Any tenant that has tried to deceive you should and can be discounted immediately. There needs to be a level of trust between you and the tenant and if this is broken at such an early stage it is a clear sign that this is not a relationship you should be getting into.
Previous evictions or bad landlord references. All references that your broker completes should have a section discussing their previous rental history. At this point you can get the views of their previous landlords and find out about them as tenants. You can also find out about any previous evictions, be it for bad behaviour or for missed rental payments.
Both cases point to potentially unsuitable tenants and should be rejected. The previous landlord reference should be viewed as the most important tool when considering tenants for the rental of your property. The part of the reference is the key to understanding their past behaviour as tenants, which in turn gives you an understanding as to the type of tenants they may be in the future.
Ensure your broker is carrying out the references fully. You should be aiming to get as much information about your tenants as possible.
Things to reject for are-
- Lying or incorrect information on reference
- Bad landlord reference
- Previous evictions
Hopefully you should now feel comfortable dealing with prospective tenants and have a better understanding of what you can legally reject an application for. Remember your broker is the key to ensuring that you get the relevant information you need to make an informed decision about any offer and should be there to get you the best, safest deal possible rather than just any deal possible.
Don’t be afraid to ask questions and if all else fails, go with your gut. If it doesn’t feel right it probably isn’t. Ensure that you are obtaining and using the information on your prospective tenants to the fullest and think logically and rationally about their ability to be a good tenants.