As a real estate investor, the importance of screening your tenants cannot be underestimated. The very last thing you want to do is to lease to a troublesome tenant who will have a negative effect on your investment. It’s for this reason that tenant checks in Canada are essential.
The process of screening a potential tenant doesn’t have to be difficult. Therefore, it’s best to adhere to the following steps when selecting an appropriate tenant for your property:
1. Request an application
To start, every prospective tenant should complete a formal application.
The applicant should be made aware and agree by signing the form that a background check, criminal history report and/or credit check will be requested, and that authorisation for such checks is being granted.
At the very least, the following information is required:
- Financial information, including bank accounts and credit cards, balances and other major monthly payments
- Current income level (basic salary plus bonus’ or other add-ons)
- Current and previous employers
- Contact information for previous landlords with addresses, details of rent paid and reasons for leaving
- Number of occupants and number and type of pets
- Personal references, including names, length of acquaintance and phone numbers
2. Arrange a tenant check
After you have pre-screened applicants and narrowed down tenants who meet your requirements, the next step is a credit check. This will reveal details about the tenant’s previous credit history, going back up to 10 years. It’s possible to obtain a credit report and credit score using the Equifax Identity Report.
When the credit report is available, key items to consider include:
- Credit history (this includes history of late payments, charged-off credit card accounts or major issues or delinquencies, such as bankruptcy)
- Current debt (including high credit card balances, major loans for a car or the need for alimony payments or other unpaid debts)
3. Perform a background check
A background check can be arranged by using the prospective tenant’s social security number and such tenant verification services will reveal details of:
- Evictions from other properties
- Any criminal record
- Public records to see if tenant is involved in a legal battle, or has been sued in the past (eg. for unpaid rent, unpaid child support or another serious financial matter)
Many Canadian landlords are subject to the Personal Information Protection and Electronic Documents Act (PIPEDA), which has recent updated guidelines to clarify landlord rights and responsibilities.
5. Ask for references
Two of the main references to seek are from the tenant’s former landlord(s) and current or past employers, with key questions being:
- Would you rent an apartment to this tenant in the future?
- Does the tenant owe you any money or have a history of late payments?
- Did the tenant cause any major damage in their last unit?
- Did you repay the security deposit with or without deductions when the tenants moved out?
- Did the tenant disrupt the neighbours or cause any major issues whilst in the unit?
For the tenant’s employer:
- Is the tenant a current employee? If so, from when and on what contractual terms?
- Does the tenant have a steady, reliable income source? If so, can this be verified?
6. Interview the tenant
The Fair Housing Act stipulates that landlords cannot discriminate based upon disability, family status, national origin, race, religion or sex. You can still ask reasonable questions either in a phone or face-to face interview with the tenant, such as:
- Do you smoke?
- Do you have any pets? If so, how many and what are they?
- What is your typical work day? Do you work night shifts or odd hours?
- Do you plan on getting a roommate in the future or have any friends or relatives who frequently spend the night in your home?
Our team can help
To mitigate your risks as a landlord, it’s integral to screen every potential tenant — as no one wants to go through the hassles and process of evicting a tenant. Sometimes, instinct counts as much as the hard facts from the tenant’s credit report and background information.
In any event, care is needed to ensure you do not break any privacy laws in the relevant Landlord and Tenant Act.
We look forward to hearing from you!