Why is tenant screening a part of the tenancy application, what is included and why would you do that? Are tenants disadvantaged or would you see it as win-win situation for both parties?
Tenant Screening process
Photo ID and Credit Checks
The renting culture has changed during the last decade more than I can make you believe. The tenancy tribunal cases tell stories. Imagine the past when looking for a rental home, browsing through rental ads, calling up the landlord and just picking up the keys. Easy like that. Would you believe I found the keys for my first rental in the 90s under the doormat and met the landlord after that.
The Residential Tenancy Act has been changed several times and further new regulations are looming. In 2010 the RTA Amendment Bill made basic changes to the Residential Tenancies Act 1986, law changes followed in 2016 and enforcements for rental house insulation start in July 2019.
When looking at the tenancies court orders then it becomes obvious that the majority of disputes are related to unpaid rent, damage to the rental property and breaches of the tenancy agreement by renters. The question is - how to avoid disputes and making sure that both parties meet their obligations? The simple answer is called “reference check”. Nowadays landlords have a “screening process” in place and for renters is a landlord check recommended.
The basic idea of the reference check is that people with a “dark” past are more likely to cause problems than others who prove their right attitude during the tenancy application process.
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Tenant Screening process
Just a decade back you only needed to take your green three-folded paper driver license (you might remember, a green paper with name & registration number) and you could open a bank account. No proof of identity was required—well, not today anymore.
Today at minimum you need a photo identification like the driver license with photo or a passport and an evidence of the residential address.
Letting agents and experienced landlords have implemented a tenant screening process as protection against cheating and fraud. Based on the given information on the application form the assessment is to find answers whether the applicant is suitable for the tenancy or not. That decision is mostly supported by references and renter’s history.
Good practice is to attach the tenancy application to the tenancy agreement, because if the communication between parties breaks down, most of the given information is required when dealing with rent arrears, reimbursement for repairs, etc.
Tenants with a bad history try to lie quiet about their identity, give false personal information like name, date of birth, etc. That is why the screening process should include:
· Identity / Photo ID check
· Check if the date of birth matches
· Credit check and payment records
· Reference checks and address verifications
· Renting history
· Tenancy Tribunal orders against the applicant
· Proof of income and employment
· Reasons for the tenancy application
· Check the Personal Property Securities Register (PPSR)
Note the tenancy tribunal database has limitations. It only goes back, I think three years, and previous cases which ended through mediation are not shown.
Identity and credit check
The photo driver license has been widely accepted as proof of identity to match name and identity. People go much too effortless into all sorts of troubles with unpaid bills, fines, civil matters and with bad attitude, people try to hide under false names. Not willing to give up the benefit of living on other people’s expense is the main reason that the screening process is essential.
Credit checks—tell you a lot about spending habits. When tenants are deeply in debts because of hire purchases, credit-card spending, guess who gets paid in the event of shortfall of income? People’s spending habits tell you the likelihood for failing to pay the rent.
The Interview—signing up a new tenancy
There are contrary views about being involved selecting a preferred tenant or leaving it to an agent. Let me remind you that in property investments the line between success or failure is very slim. At the end it is your position being a passive property investor or an active landlord who may plan to become a full-time landlord. For running a landlord business you would not outsource the most important part of the business that also determines the cash-flow.
Before interviewing prospective tenants, we ask qualifying questions over the phone. That saves time and money for both parties. Pre-qualifying questions are;
· What are the reasons for applying for the property?
· How many people and pets are included?
· What date ends the applicant’s current tenancy (days for giving notice)?
What party is disadvantaged?
Tenant screening has positive effects for both parties as it increases the level of trust. Good renters (called “preferred tenant”) understand the process and take advantage over renter’s competition.
Regardless of whether tenants agree with the application process or not screening is a risk management tool. It reveals whether or not a renter has a consistent lifestyle that fits to the neighbourhood and helps to find a win-win situation for both parties. Good luck.