Property rental involves two parties: the tenant and the landlord. Both have different interests yet share the same objective. A tenant wants to find available property with the qualities that would best fit his needs and budget. A landlord wants to find the tenant who would best attend to the needs and preservation of his property. If a tenant does an inspection on the property before making an offer, a landlord would check the background of a tenant before accepting an offer.
Why You Need to Check the Background of a Prospective Tenant
For the owner of the property, leasing provides a stable means of generating income on his asset. If the property was acquired through a lending program, leasing would be a smart way of financing the loan without compromising your cash flow. It is important to keep repair and maintenance costs down in order to preserve the profit margin on the rental property.
The Residential Tenancies Act 1987 gives tenants a high level of security and protection. Under the Act, a tenant who pays rent in exchange for the rights to occupy residential premises has exclusive possession of the property. Exclusive possession means the right to exclude others including the landlord from entering the premises.
Thus for property owners, granting a tenant exclusive possession on their property is a big deal. You are turning over the use of your asset to someone you don’t know. Once the rental agreement is signed and the keys are turned over, you have no idea what goes on behind closed doors.
What if the tenant has a history of fraud? What if he or she deals in drugs? What if the tenant is a licensed sex offender? Looks can be deceiving. Speculation may border on paranoia but you should consider all possibilities when it comes to protecting your asset and livelihood.
How to Check the Background of a Tenant
Although the housing market for Australia has softened, demand for rental property remains high because of tight supply and a rapidly increasing population. It is a good time to be renting property. For sure, you will generate serious interest from a wide range of prospective tenants.
Chances are your property would attract interest from more than one tenant. Property managers or landlords might find their hands full and their time tied verifying each and every applicant.
But conducting a background check on the tenant is a very important part of the leasing process. It may not be as difficult as you think provided you have the necessary system in place to carry it out.
Here are a few tips on how to check the background of a tenant:
1. Require every applicant to fill out a rental application form
This should be a prerequisite in the lease process. If you don’t have your own form, you can download templates from the Internet.
The rental application form should ask the prospect to fill-out the following information:
- Full Name
- Date of Birth
- Social Security Number
- Current Address
- Previous Address
- Current Employer
2. Ask all applicants to provide additional documentation
The rental application form may not be enough to verify the identity of the prospect. You should require all applicants to submit the following supporting documents:
Copy of Valid Passport or Driver’s License
Credit Card References
Proof of Employment (Certification or Pay Slips)
3. Ask all applicants to execute a Privacy Consent Form
This document allows you to contact all the references provided by the applicants. The references should include previous landlords. If the applicant gives you references, don’t just set these names aside.
Be proactive and give them a call. It is highly possible that the applicant has advised his or her references to expect a call from you. So you should be ready with your list of questions.
4. Invite the applicant to an interview
Remember that this person could be the one you would be interacting with for the next few months. You should find out as much as you can about the candidate.
Most importantly, use the interview to assess if you will be comfortable with him or her as a tenant. Among the questions you should ask are as follows:
- “Why did you decide to move over here?”
- “What is your typical day like?”
- “Do you have pets?”
- “Will anyone else be living with you?”
- “Do you smoke?”
- “Are you the type who frequently hosts parties?”
- “Do you allow friends and family to sleep over?”
5. Use online background checking services
There are many reputable online companies that offer tenant application checking services on prospective tenants. These companies are highly experienced and are experts in conducting background checks.
The usual suite of services includes the following:
- Identity Verification
- Tenant Tica and VEDA Screening
- Bankruptcy and Court Record Check
- ASIC Company Directorship Check
Their findings are cross-checked across a large spectrum of data bases to ensure accuracy of all information. The services are easy to use. All you need to do is upload the tenant application form and they will do the rest.
Some of these companies are fast but precise. You can get a full report within 4 hours.
It may seem tedious and for sure involves a great deal of time and effort. But rest assured it will be all worth it. At the end of the day, finding the right tenant becomes a question of trust. If you don’t check the background of the tenant, you could be signing away your future.