Monday, April 7, 2014

So, you’ve had the best tenant in the world...

In almost all cases the tenant/landlord relationship is a happy one, from the landlord’s side, invoices are sent on time and the property is maintained accordingly. The tenant pays rent on time, abides by the rules, and the relationship blossoms, so to speak. However, even though a tenant may have an excellent history over perhaps a year of renting a property, when it comes to lease renewals, it is hugely important to re-credit check your tenant, even though they’ve been a good tenant.

The situation:
 
We had a case recently in which the above was true
  • The landlord had a tenant in his property for nearly a year
  • The tenant had an acceptable history of paying on time
    • Mostly on time, sometimes a little late, but generally a good tenant
Considering the tenant/landlord history over year, when it came to renew the lease the landlord was happy to renew, after all, rather the devil you know than the devil you don’t.
  • He didn’t re-credit check the tenant and
  • Subsequently the tenant started defaulting on his rental payments
  • After a few months of continued delinquent behaviour the landlord had to send letter of demands in order to get the tenant to pay his rent
This left the landlord wondering what had suddenly changed within the course of a few months, considering the tenant had in the past, been a good tenant.
 
What could’ve prevented this problem?
 
Many things can change in the course of year and in the case above, obviously something did
  • The tenant could have had some medical complications and now his medical costs have escalated
  • The tenants wife might have fallen pregnant and now, after being a two income family, they are only one as a result of the partner staying at home to care for the baby
These unexpected life events are well, part of life, but they do affect a person’s credit profile and while a tenant can seem to be the perfect find, personal circumstances do change. So what could have prevented this situation?
  • Maintaining a close, yet professional relationship with the tenant might reveal the more obvious change in circumstances, like an accident or a pregnant partner
  • A simple credit check on the tenant would also reveal the change in credit profile
What other landlords can learn from this?

An initial credit check on a potential tenant is very important, but, re-credit checking them when it comes time to renew the lease, is as important.
  • DO maintain a professional relationship with the tenant. Regular visits to the property with the tenant present will reveal a change in personal circumstances
  • DON’T presume that even though you have had a good relationship with your tenant over the past year, that the coming year will be identical
  • DO a credit check on your tenant when it comes time to renew the lease
 

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