Landlord Out $40,000: How to Avoid Income Loss from Bad Tenants

by | Dec 3, 2018 | Tenant Screening

A landlord in British Columbia is living with the fallout from tenants who trashed his rental property. According to a news report, RCMP and bylaw enforcement officers stood guard as the recently-evicted tenants picked through heaps of trash to claim their belongings. In addition to seven months lost rent, the landlord must incur the cost of hauling off the trash and repairing the damage. His estimated losses are $40,000 — or higher.

His advice to other landlords: Screen your tenants!

It is true that picking the right tenants will significantly reduce the risk of income loss. Keep in mind that one bad tenant is all it takes to wreck a rental property. In one case, the tenant used the rental to manufacture meth and turned it into a toxic clean-up site in only 10 short weeks.

If one bad tenant can destroy a rental property, imagine what could happen with four or five.

The Dual Purpose of Tenant Screening

Tenant screening is the best way to choose good tenants. But screening also serves another purpose. If a tenancy takes a bad turn, a landlord’s ability to collect for unpaid rent and property damage depends on the information provided during tenant screening. Collecting and verifying the information necessary to qualify a tenant also creates a road map for collection. With fraud on the rise as well as the delays inherent to the eviction system, screening tenants may be the only way to reduce — and recoup — losses.

Leasing Policies Matter

Reducing the risk of income loss also requires strong leasing policies that keep tenants in check. For instance, in the recent B.C. case, the landlord rented to five individuals who apparently did not know one another. While leasing to roommates already is complicated, separate leases for the same property make is nearly impossible to discern which tenant is responsible for any property damage.

It pays to know who is living in the rental home. A strong guest policy prevents strangers from moving in without undergoing a tenant background check. Otherwise, the landlord will be at a significant disadvantage attempting to discover the tenant’s identity and collecting any debts owed.

Restricting the tenancy agreement to residential use only and limiting business activities such as overnight sublets can greatly reduce the risk of property damage.

The lease should provide consequences for criminal activity, which can discourage bad tenants and bolster the landlord’s rights. Likewise, warning tenants of routine inspections can ward off criminal behaviour, which often leads to property damage. Conducting those routine inspections allows a landlord to discover damage early on, which can reduce income loss.

Reporting Rent Payments through TVS not only exposes scammers, but the process also creates a paper trail that documents when rent came in — and when it didn’t. That makes it far more difficult for tenants to challenge what is owed in court.

The tenancy agreement must be clear and comprehensive. Eviction is a slow, arduous process. The last thing a landlord wants to face is dismissal of the case because the landlord can’t prove a breach of the tenancy agreement.

Self-Help and Landlord’s Right of Entry

Landlords who discover that damage is occurring at the property often cannot take immediate action. In fact, it may not be until after an eviction order is served on the tenants that the landlord discovers the full extent of the damage. Unfortunately, the situation could get worse: the landlord could enter the property or force the tenant out illegally, and wind up owing the tenant money.

When faced with this crisis, landlords should consult the rental regulations or an attorney before taking any action. Securing an abandoned property may require a police escort. At the very least, a landlord will need to regain legal possession of the property before removing tenants’ belongings and restoring the unit.

Documenting Losses

In the same way a landlord needs to provide good reason to evict a tenant, a landlord must document the losses to win a monetary award against the tenant. A move-in condition report is crucial for showing that the tenant caused the damage. However, the report must be detailed enough to convince a judge or arbitrator as to the extent of the losses. Make sure the condition report corresponds to the specific property. Don’t leave anything open to interpretation. For more on move-in condition reports, see our post, How to Improve Your Move-in Condition Report.

This post is provided by Tenant Verification Service, Inc., helping landlords reduce the risks of renting with fraud prevention tools that include Tenant Screening, Tenant Background Checks, (U.S. and Canada), as well as Criminal Background Checks, and Eviction Reports (U.S. only).

Click Here to Receive Landlord Credit Reports.

Disclaimer: The information provided in this post is not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.

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