Monday Morning Quarterback: So You Want To Be A Landlord?

Wow!

That’s all I can say.  Just, plain wow.

Did you read the article in Toronto Life that was trending last week?  About the tenant from hell?  I can’t tell you how many people emailed me that article for my two cents, or asked me to blog about it.  Then add in all my landlord-clients who emailed me in a panic, and I have to say that this article had as big an impact as any in recent memory.

Let’s look at the article, a follow-up article in the Globe & Mail, and then discuss the tenant approval process…

LandlordKeys

It’s so ironic, is it not?

Call it an ebb-and-flow, or a chicken-and-egg, but either way, you have to admit that there are just as many people crying “discrimination” in the rental market as there are complaining about problem tenants.

Folks on the one side of the argument suggest that landlords are too overbearing, and break all kinds of human rights codes when they ask inappropriate questions to prospective tenants.

Folks on the other side of the argument suggest that the Residential Tenancies Act favours the tenants, and there aren’t enough measures in place to protect landlords from problem tenants.

If I had a horse in this race, I’d probably agree with the latter.

I’m a capitalist, and I think that if a person puts their hard-earned money into an investment property, they should be able to pick whoever they want to lease the property.

The obvious retort to this, however, is asking, “David, is it fair for a landlord to advertise: ‘Property for lease; blacks, Jews, gays need not apply.’?”

Sure, where there’s no black and white, there’s a grey area, but that’s like anything else in life.  If we want to always look at the extreme, then that will get us nowhere.

But I’ve been in situations before where a prospective tenant plays the “discrimination” card, and yet I feel like I’m doing my job.

Recently I had an offer to lease on a rental listing, and I asked to meet prospective tenants in person.  Their agent told me that it was a mistake on my part, since if I ultimately decided not to rent to them, then it would be easy for them to claim I discriminated on behalf of their race, age, or any sort of appearance.

Is it really wrong to want to meet a tenant that you’ll be renting to?

Perhaps after the entire city reads this week’s expose in Toronto Life, people might change their tune.

If you haven’t seen it, pick it up:

TorontoLifeWorstNightmare

Or read it online HERE.

I’m not a huge Toronto Life fan, and I think their headline above is simply a bright, shiny object to lure in readers, but I suppose that’s all news publications these days.  Either way, the article that Kat Shermack put together is fantastic, and the cheezy headline and cover art take away from her superb investigative journalism.

Read the story in full.  Don’t skim.  Trust me.

It’s a frustrating read, but people will be frustrated for different reasons.

Most of you will be frustrated that this happened in the first place, or that this happened to the owners.

Personally, I’m frustrated by the fact that the owners actually had to go to court to legally evict a con-artist who was running an illegal rooming house with twenty beds.

I know, I know – we have to adhere to the rule of law, and we must have black or white, or everything becomes grey.

But aren’t there cases where you simply go into the house and throw everything out on the front lawn, change the locks, and have a very large/scary security guard ensure the con-artist/tenant doesn’t get back into the house?

The irony is, if the con-artist in the above story wanted to draw this thing out, he could probably have done so over several months.

And that is the problem with the Residential Tenancies Act, and the Landlord & Tenant Board.  They cater to the tenants, and they lack any ability to expedite or differentiate.  Again: it’s all black and white.

I understand that there are hundreds of poor people living in squalor right now as an evil landlord refused to fix the heating or plumbing, or repair a broken window, or leaky roof.  In fact, I’m sure there are far more “victims” of shady landlords than there are victims of con-artist, would-be tenants.  But it still takes far too long to deal with the scammers and con-artists out there, especially when you simply know what they’re doing and who they are.

Another article came out last week on this subject:

“Nightmare Rental A Cautionary Tale For Short-Term Stays”

This was in the Globe & Mail on Friday, and it’s either coincidental timing, given the landmark story in Toronto Life, or maybe it was intended to piggyback on a hot topic.

In the first article, the owners used a reputable real estate brokerage to secure tenants.

In the second article, the owners used an AirBnb-type service.

In both cases, the owners were scammed.

So what can you do to ensure you don’t get scammed?

Perhaps there are no guarantees, but I’ll tell you what I do when I’m looking for a tenant for a client who owns a property and has hired me to fill the vacancy.

There are three pieces of documentation that a person needs to get a food in the door:

1) Ontario Real Estate Association “Rental Application”
2) Credit Check from Equifax
3) Employment Letter

The OREA rental application is basically just a summary, but it asks for the last places of residence and the contact names (ie. landlords) and two personal references.

Here’s the rub, however: many Realtors don’t check references.

Sorry to say, but it’s true.

In the summer of 1998, I applied for a job as a waiter at “East Side Mario’s” on Front Street.  I lied on my resume, saying I had worked as a waiter for Casey’s Grillhouse and Jack Astor’s in Hamilton while I was attending McMaster University.

I got the job at East Side Mario’s.

The manager never checked my references, otherwise, clearly, he would have known I was lying.

But when he told me I was hired, I saw that on his clipboard, there was some sort of “hiring procedure” sheet, and under “References Checked” he had put two check-marks, and had written in the names of the two restaurants that I said I had worked at.

I knew the manager would never check my references, which is why I lied.  But I knew if I didn’t lie, I wouldn’t get the job.  So let that be a lesson to every teenager who applies for their first summer job: if you have no experience, you have to lie.

Moving on…

So back to the OREA Rental Application, and what information it gives you as a Realtor or as a landlord.  The application asks for the last two places of residence, and contact information for those landlords, and that’s as good a place to start as any.

I’ve been a landlord many times before, and I’ve only ever been called TWICE about a previous tenant.

Remember that at the very basic level here, we’re trying to weed out the con-artists.  So if the applicant doesn’t have two previous places of residence, then that’s a red flag.  Most con-artists are going to take the path of least resistance, and whether you’re the “tenant from hell” in the Toronto Life article, or the guy who blew up a meth lab at 65 East Liberty Street in the spring, you’re not going to be pushy with your application, and at the first sign of a Realtor and/or landlord checking into you, you’re probably going to bolt.

Is it easy to fake the information on the application?  Sure.  A con-artist could put down two friends or co-conspirators to act as a “previous landlord.”

There are two “personal references” at the bottom of the OREA Rental Application as well, and yes, a con-artist could fake this two.

But overall, that’s now FOUR contacts that have to be faked, and chances are, a con-artist isn’t going to go to all that trouble when he or she could find somebody on AirBnb or Craiglist who isn’t going through the same process.

After the OREA Rental Application, we have the Equifax credit check.

I’ve had a lot of people clamour about this in the past, and I’ve heard all the excuses.  I had somebody recently say, “I don’t have a credit history.  I’ve never had a credit card in my life, and I’m not in Equifax’ system.”  Whether that’s true, or not, I don’t want that person as a tenant.  They’re either lying, or they really, truly have zero credit, and that’s a red flag as well!

Once you have the Equifax credit check, you can look into the person’s debt history, but at least having that report shows you that this person is (with almost certainty…) who they say they are, since the report is based on a SIN number, among other things.

Yes, this can likely be faked too.  But in what percentage of cases?

Lastly, we have the employment letter.

This too is pretty easy to fake.

Any of us can go online and right click “save as” on a company logo, then open a new MS Word document, drop that logo in, and write a phony employment letter, then print the document, and sign it.

But as a Realtor, unless I personally speak to the person who signed that letter, then I’m not ready to move on.

If I call Royal Bank, or another major company, and I’m transferred to Human Resources, and I speak to the person who signed that letter, then we’re off to the races.

But what if it’s a company you’ve never heard of?

What if the employment letter comes from “Systems Solutions Enterprises Inc.” or “Graphic Specialists Ltd.” or some other company whose name you or I could make up as quickly as I can type this?  What if you call the name of the person on the employment letter, and it’s somebody’s cell phone?  This could be another con, absolutely.

Ultimately it’s up to the person checking these references to decide if the entire package is legitimate.

After speaking to two past landlords, two personal references, an employer or somebody from the employer’s HR department, and looking over an Equifax credit check, it’s up to the Realtor or landlord to decide to proceed.

If more documentation is required, then I suggest the following:

1) Income verification.  A bank statement showing a sufficient balance in the bank account, with the tenant’s name and address on the document.

2) Tax history.  A T1 and NOA for each of the previous two years, showing not only the amount of income the tenant declared, but also the fact that the tenant is a tax-payer.  This also verifies identity as well.

If you’ve gone through all these steps, I would suggest with almost certainty that you’ve weeded out any con-artist or potential “tenant from hell.”

As I said before, a con-artist isn’t looking at just YOUR property.  If they’re running a scam, they’re going to walk away when you ask for their past T1’s and NOA’s.

The tenant in the Toronto Life story seemed to have money in his bank account, and “he drove a Range Rover” as the article explains, but I have to wonder if ALL the steps I’ve listed above were followed.  A con-artist can fake one, two, or three of these – but can they fake ALL of them?  Would they bother trying?

If you’re a landlord, remember that you need to schedule regular inspections at your property, at least bi-monthly, for the duration of the lease.  If you don’t, then to be perfectly honest, you have only yourself to blame if you find there are twenty people living in your 3-bedroom house.

And if you were scared by reading Toronto Life’s “Tenant From Hell” and The Globe & Mail’s “Nightmare Rental,” just remember that scary sells newspapers, and these stories are not representative of a typical experience.

Well, I for one can’t wait for Toronto Life’s next article “Realtor From Hell.”  Now that is a headline that would sell magazines…

 

17 Comments

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  1. lui says:

    Realtor fault for not doing what she got paid for…

  2. Clifford says:

    This is precisely why realtors get such a bad wrap and why I rent out property on my own without the use of a realtor.

    Realtors do not make much money off of rentals and do not want to waste time with them. They would rather dedicate more time to resale (obviously). So think about being burdened with something you just have no interest of doing. Pretty sure you’d do everything possible to get it off your plate even if it meant cutting corners.

    Realtors usually just check the application, look at a pay stub and make a decision just off of that.

    I like to verify everything…I also like to give a walkthrough of the residence and take pictures prior to handing over the keys. I get the tenant to sign off on this. Realtors do not. I also like to talk to the tenant about their interests and hobbies. Does it matter? No, but it does give me a decent idea of what kind of person I’m dealing with…

    Lastly, there’s a vibe. Some people sound great over the phone or on paper, but when you meet them they appear shady as hell. I’ve denied people just from that. I’m aware that all the documentation can be faked so I check up on it. Realtors do not, then charge their client a full month’s rent for doing nothing.

    There are too many poor realtors soiling the bunch. Do as minimal work as possible for the most gain. It’s terrible.

  3. Mike says:

    David,

    Most applications require a signature right below a line that says something like, “I understand the information provided above to be true”. You knowingly signed the application knowing the information was untrue, not such a big deal at the time but then you post it on your blog. If you ever find yourself in a legal proceeding your credibility will be shot.

    I can’t believe Bosley let’s you post this stuff.

  4. amy says:

    im a landlord and i think i don’t understand how you could ever rent your place out to someone you didnt meet face to face. We do ask for letters of employment and references, but i think when you meet someone is when you get a real sense of who they are. yes a con artist will prob still trick you…but for the majority of tenants out there a good ol’ face to face usually gives you a good sense of who they are.

    Also, i thiknk there’s more good tenants than bad ones…and scammers are even less common. I don’t think ppl are inherently trying to be malicious. there will always be a risk. I’ve been a bad tenant living in a house with 4 other ppl that was owned by a total slumlord, and that’s when you don’t give a shit becuz your landlord doesnt. In my opinion, a good landlord who is responsive and involved with the property will get good tenants.

    1. amy says:

      edit: i’ve also been a really good tenant and fixed things myself and done cosmetic upgrades at my own expense (with permission)

  5. steve says:

    The laws really make it difficult to give tenants the benefit of the doubt. Once again, the law of unintended consequences applies here to make landlords more discriminating. Good luck getting a break on a decent unit if you’ve made some mistakes in the past. If the tribunal used common sense to quickly weed out “trouble tenants”, then things would be far better all round, and discrimination would be less of an issue.

  6. condodweller says:

    Can a landlord do a criminal background check on a prospective tenant? I have never done that in the past. That should certainly eliminate a lot of “bad” tenants but I imagine the cost is also high. I like the linkedin idea however I do know people who have fake linkedin profiles just to avoid having their name come up when they look at people’s profiles and they do have contacts. Probably not 500 but that’s no reason to turn someone away.

    1. Mike says:

      Not only can you not ask for about a criminal background, it’s against the law to use the information if you happen upon it.

      1. condodweller says:

        Interesting. Where can I read more about this? IIRC the second article mentions doing a background check. Also, if an employer is able to do a background check why can’t a landlord? I’d say I have a valid reason to do it.

        1. Mike says:

          I’d start with the Charter of Rights and Freedoms which protect people with criminal conviction sand have completed their sentence from being prejudiced. Ontario Human Rights Code also protects against it and the Residential Tenancy Act follows the Human Rights Code. Employers can ask for it because they are under the same law.

          But it is a big grey area. An employer can ask you for a criminal background check but they are limited with what they can do with it. Let’s say you have an impaired driving conviction and apply for a job as an mortgage officer at a bank. You’ve completed your sentence and had your license returned to you. The bank manager finds out about your conviction and fires you. In this case they’ve violated your rights. However if you had been arrested 5-years ago for shoplifting the bank would be justified in firing you because you have been convicted of a trust crime. If you were fired you could go to court and sue, you’d have to prove that you were fired because of your conviction and that your conviction has no bearing on your job.

          If you were a landlord and decided you didn’t want a criminal living under your roof the prospective tenant has cause to sue you. Same if you don’t rent to them if they’re a woman, man,married, unmarried, a different colour or religion, gay or straight. The way the Residential Tenancy Act is written you pretty much have to accept the first qualified applicant (court would decide if they’re “qualified”) or else someone who is identical to them in almost every way. It doesn’t happen often but there are a lot of cases where prospective tenants sue landlords for not renting to them.

          1. condodweller says:

            Thanks for that, it’s good to know. A tactic I have seen used in rental ads is stating a minimum credit score requirement. As long as it’s within the law I think that’s a great way to filter out unwanted tenants. I think a career criminal would have difficulty keeping his/her credit score above 700.

            This is an interesting subject worth researching. I’m going to look into what would happen if someone sued me for turning them down. By the time it went to court I most likely would have found a tenant and I’m curious what the ramifications would be even if I was found guilty. I doubt the courts would throw the tenant out to allow this person to move in, and as an “amateur” landlord I wouldn’t expect a heavy penalty.

  7. Marina says:

    Facebook and Linked In are a good idea. You are right – too much trouble to fake.
    In general I think many people don’t do due diligence, and references are easy to fake. Check credit, tax receipts, job letter,pay stub, Linked In… Chances are a scam artist would move on to an easier target.

  8. JDF says:

    Not everyone is cut out to be a landlord. Period.

    Just because you are a homeowner doesn’t mean that you can earn income from your property without any real effort or diligence. You can outsource the rental to an agent or agency but AT YOUR RISK. You are the only one with a long-term vested interest in your property.

    Rental income always comes with strings attached. Sometimes, it comes with a tenant that disrupts the qualtiy of life of you or the other tenants (noise, lack of consideration and respect for others or the property).

    That being said, there are many excellent tenants out there, however, it takes effort by the landlord to find them and keep them.

  9. Soon to be Landlord says:

    If I remember correctly, the article mentioned that the Realtor the couple hired to take care of finding a tenant did NOT check the references at all. They saw the bank statements, fell for the sob story, and were satisfied with that. I think the Realtor they hired paid the couple back the leasing fee they’d originally given her, and then she waived it when she found them a NEW tenant (this time, she actually checked all of the references).
    As someone who is planning on renting out space a basement apartment in my home, I would want everything verified, as you mentioned above. I’m likely going to end up renting to a friend of friend, and even then, I am still going to insist on getting as much information as possible, and verifying it all, before I hand over the keys.

  10. Jeff says:

    That realtor should be ashamed and the family should go after them and the brokerage. They clearly dropped the ball and were not working for the family. How much research do they do?? What kind of recourse do they have on the brokerage? If I hire someone to do due diligence and they clearly don’t are they not responsible and negligent in matter?

    I have a duplex in Mississauga, beyond most (I have never asked for tax returns) of what Dave suggested and now always ask for persons Facebook, LinkedIn profile during screening process. Linkedin in with a picture and 500 contacts is a little tough to fake.

    1. NRK says:

      Every time you google the realtors name this article should come up. And “Realtor from hell” like people who chase commission and don’t care about anything else like Sarah Giacomelli from article, people get lazy and complacent. Clearly realtor did here.

    2. Mike says:

      The homeowners used Ms. Giacomelli after the incident and provided a video testimonial on the Chestnut Park website. I think the story is light on facts regarding the agent and Chestnut Park’s involvement.

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