From pre-tenancy application forms to credit checks and personal interviews, perfecting the tenant screening process is essential for finding the right tenants for your rental property. Whether you’re an experienced landlord or just starting out, this guide will help you make informed decisions that benefit both you and your tenants.
What is Tenant Screening?
Tenant screening is the process through which landlords or property managers assess potential tenants before offering them a lease. This comprehensive evaluation typically involves reviewing the tenant’s rental application, checking their credit history, verifying income and employment, conducting a criminal background check, and contacting references from previous landlords or employers.
The goal of tenant screening is to identify potential issues before they arise, such as late rent payments, property damage, or disruptive behavior. By thoroughly screening tenants, you can ensure that you’re renting to individuals who are responsible, trustworthy, and financially stable—helping you avoid costly legal and financial problems in the future.
Why Tenant Screening is Essential
Here are the top reasons why thorough tenant screening is crucial before selecting a tenant:
1. Finding Reliable Tenants: Screening helps identify tenants who are reliable and trustworthy, reducing the likelihood of late payments, property damage, or tenant disputes.
2. Protecting Your Investment: By conducting a detailed background check, you can spot potential red flags, such as a history of property damage or eviction, thereby safeguarding your property.
3. Legal Compliance: Proper tenant screening ensures compliance with fair housing laws and other regulations, helping to prevent discrimination and legal issues.
4. Ensuring Financial Stability: Screening helps identify tenants who are financially capable of paying rent on time, reducing the risk of missed payments or evictions.
Overall, tenant screening is a vital tool that enables landlords to make informed decisions, reducing potential problems and ensuring a smoother rental experience.
Legal Considerations in Tenant Screening
When gathering personal information about tenants, it’s crucial to understand your responsibilities under the Privacy Act 2020. You must have a legitimate reason for collecting relevant information and should avoid asking for unnecessary details, such as spending habits or religious affiliation. A credit check may be necessary to assess the tenant’s creditworthiness.
Moreover, you are required to inform the tenant of the purpose of collecting their information, how it will be used, and who it will be shared with. You must not use their information for anything other than the intended purpose or share it without their consent. It is also vital to securely store their information to prevent unauthorized access.
Tenants have the right to access and correct their information if necessary. For more details on the information you can and cannot collect, refer to the Privacy Commissioner’s website.
Avoiding Discrimination
Discrimination that breaches the Human Rights Act is unlawful under tenancy law. Landlords cannot decide who to rent to or make decisions about tenancy extensions if the reasons violate the Human Rights Act.
Violations can result in legal action from the Tenancy Tribunal or the Human Rights Commission. For instance, rejecting a prospective tenant based on their religion or altering the tenancy terms upon discovering the tenant is unemployed is illegal.
The Pre-Tenancy Application Form
A pre-tenancy application form is a document used to collect information from potential tenants interested in renting your property. This form gathers essential details such as the tenant’s name, contact information, current residence, rental history, ID details, and references. It also includes permission for you to conduct a credit check, which should only be done for your preferred tenants.
Conducting Credit Checks
In New Zealand, landlords can conduct credit checks on potential tenants with their consent. Credit checks provide valuable insights into a tenant’s creditworthiness and financial history, such as outstanding debts or bankruptcies.
Landlords must follow specific guidelines when conducting credit checks, including obtaining written consent from the tenant. The tenant has the right to access the credit report and correct any inaccuracies. Additionally, landlords must comply with the Privacy Act 2020, collecting only necessary information and storing it securely.
A credit report alone should not be the sole basis for rejecting a potential tenant. Consider other factors such as rental history, employment status, and references.
How to Assess the Information Provided
Assessing a pre-tenancy application form is a crucial step in the screening process. Here’s how to approach it:
• Verify Information: Ensure that all the information provided by the tenant is accurate.
• Look for Red Flags: Identify any inconsistencies or potential issues in the application.
• Contact References: Speak with the tenant’s references to verify their rental history and behavior.
• Evaluate Compatibility: Consider whether the tenant’s lifestyle, pets, and number of occupants are a good fit for the property.
A thorough review of the application is essential to ensure that the tenant is a good fit and to minimize future risks.
Interviewing Potential Tenants
Interviews are an important part of the tenant screening process. In New Zealand, landlords can conduct interviews to gather additional information about the tenant’s rental history, employment, and lifestyle.
During the interview, adhere to the rules of the Human Rights Act 1993, avoiding discriminatory or invasive questions. Focus on topics relevant to the tenancy, such as:
• Whether the property suits their needs
• Reasons for moving from their previous residences
• Any past tenancy disputes
• Their current ability to pay rent
• Number of occupants and presence of pets
• Preference for a fixed-term or periodic tenancy
This is also the time to discuss specific terms you want to include in the tenancy agreement, such as a no-pet policy or lawn maintenance responsibilities.
Checking Tenant References
When tenants fill out the tenancy application form, they will provide contact details for two referees, who could be friends, co-workers, employers, or previous landlords. It’s good practice to inform the tenant that you will be contacting their references so they can notify them in advance.
If you’re unable to reach a reference, request another contact from the tenant.
Key Questions for Referees
When speaking with referees, aim to gain insights into the tenant’s behavior. If the referee is a past landlord, consider asking:
• Whether the tenant reported maintenance issues promptly
• How well they kept the property clean and tidy
• Whether they were ever overdue with rent payments, and how it was resolved
If you suspect a referee is not being truthful, consider seeking a second opinion. Checking references is a vital step in making an informed decision about renting to a potential tenant.
Making the Final Decision
After completing the tenant screening process, carefully review all the information and trust your instincts. Selecting the right tenant is crucial for a profitable, stress-free, and enjoyable rental experience.
Heights Property Management is committed to helping you find the right tenants and ensuring a successful tenancy.