Problem tenants can be a dreadful situation. When tenants refuse to abide by the lease rules, they present a unique challenge for any landlord. Fortunately there are strategies you can employ to address or avoid such tenants. But first, let’s look at a case study, courtesy of MTV.
A Landlord’s Worst Nightmare:
In MTV’s show, Buck Wild, a group of adventurous twenty-somethings in West Virginia run wild and inadvertently destroy almost everything they touch. In the premier episode, the police show up, the girls get evicted from their rental property, and many of the guys get into fist fights. The temporarily homeless girls eventually find another home (and a desperate landlord) that would nurture their wounded egos.
As a “house-warming” present, the guys arrive in a dump truck – filled with water – which they call a “redneck swimming pool”. They park the truck next to the house, and proceed to jump from the roof into the pool. To a kid, it looks like incredible fun! To a landlord, it’s a perfect storm for property damage and liability lawsuits.
Not only did the truck destroy the lawn, but the tenants damaged the roof while using it as a spring-board for their back-flips Obviously, the landlord did not do his/her due diligence when screening these tenants. Or perhaps the MTV producers just gave the landlord a suitcase of cash – which is highly probable.
Tip: Learn about your tenants before they move-in.
Unless you are approached by MTV, bad tenants are often the result of an insufficient screening process. Tenants with bad credit or a checkered past will often take advantage of landlords that do not run credit or background checks.
You should learn as much as you can about your potential tenants before they move in. Lucas provides one easy, but unconventional technique for learning more about an applicant, in the article: Tenant Screening – What’s in Their Backseat?
You Need a Plan.
Unfortunately, avoiding unqualified tenants is only half the battle and a thorough screening process does not guaranteeing perfect tenants. Other problems can arise from unforeseen circumstances, such as sudden loss of employment. Having and plan and predetermined procedures in place will enable you to easily address any problem that occurs with agility and grace.
Step 1: Have a consistent and ironclad screening process.
It is extremely important to have a thorough screening process to ensure that your prospective tenants are qualified for your units. It is much easier to screen out a bad applicant than to evict a bad tenant, so landlords who cut corners when screening tenants often pay a higher price over the long haul.
It is much easier to screen out a bad applicant than to evict a bad tenant (tweetable?)
I recommend running background, criminal, eviction and credit screening through one of the three major credit bureaus. Many online property management softwares allow you to automatically screen a tenant’s credit when they submit an online rental application.
Be Fair and Do Not Discriminate
It is equally important that you follow fair and equal housing laws and use ethical judgement during this process.
Have Income Requirements
Establish your credit and income criteria ahead of time so that you can evaluate all potential tenants equally. In most cases, the prospective tenant’s gross income should be at minimum around two-to-three times the monthly rent payment. Credit scores should be above 650 unless there is a really good reason as to why the applicant has had trouble in the past.
Verify employment and rental history (with the previous landlord) and check references. Find out if they missed any payments, or submitted too many (or too few) maintenance requests.
Ask questions such as:
- Did they pay rent on-time?
- Did they damage your property?
- Did they have a lot of parties?
- Did you ever get any complaints from neighbors?
- and my favorite “Would you rent to them again?“
Step 2: Explain the terms before signing a lease.
One way to avoid problems is to address them in the beginning – when signing the lease. I suggest meeting, face-to-face, with your applicants to sign the lease. Signing the lease in person presents a great opportunity to review the lease clauses and answer any questions before you ratify the contract.
If you don’t provide a grace period for late payments, make this clear. Lucas suggest not having a grace period, but rather having the option to forgive a late fee at your discretion. If there is a fee associated with certain infractions (noise, late rent, excessive damage, smoking, etc.) then these fees need to be outlined clearly in your lease agreement.
If a tenant is made aware of the exact consequences of breaking a rule, they will be less likely to break them. Clearly communicating policies will also help protect you if the situation gets out of hand and legal action is taken on either side.
Step 3: Quickly provide written notice of any issues.
For most property management agencies, it is standard practice to take this extra step. Professionals will usually communicate solely through written notices because it provides the best evidence in court. However, many individual owners (particularly ones that have a smaller number of units in their portfolio) will take a more informal communication route.
Some landlords prefer to knock on the tenant’s door and communicate verbally regarding a noise complaint. Others think that a phone call is a more polite alternative to a nasty letter.
Verbal communication is perfectly acceptable, as long as you keep a paper record of any and all instances. The reasons for this are obvious; you can protect yourself in court as well as adhere to a uniform system of dealing with violations of your lease agreement. Many tenant-initiated lawsuits focus on a claim of “unfair” practices, so complete documentation and communication consistency is your best defense.
Step 4: Make repairs quickly.
If you are quick to repair damage to your property, your tenants will see that you are responsible and have pride in the unit. If the damage was the tenant’s fault, you can charge the cost of the repairs to the responsible party.
Fining a Tenant for the cost of a repair is a great disciplinary method. If a tenant’s bad behavior is immediately followed by a $300 repair cost for a broken window, they will probably be more careful next time.
Further, once you find a great contractor, keep their contact information close at hand, preferably online or in your phone/wallet. You never know when you will need to ask them to repair a broken sink.
Lucas suggests using Google Docs to build a “Little Black Book of Contractors” so that you can access it from your smart phone.
Step 5: Stay professional and in control.
When dealing with any tenant issue, your conduct and interaction with them must remain professional. This even includes the heavy task of moving forward with an eviction. If you are forced to evict a tenant, you must abide by the procedures mandated by your local authorities and legal code.
Local eviction procedures are meant to protect both the tenant from wrongful eviction and the landlord from excess damage. If an eviction turns into a court battle, you will be in a better position if you can provide written documentation relevant to the case. In other words, the more professional you are, the greater chance you have of winning, and the smoother the process will be for all parties involved.
Summary – Just Do Your Best.
One thing to remember about being a landlord is that even if you do everything right, some things can and will go wrong. This, of course, can include having a low-quality tenant. However, if you stick to some of the principles outlined above, you will be able to avoid most “Buck Wild” tenants, and correct any problems, while sustaining minimal damage to your business.