Should Tenants Be “Pre-Approved” For Candidacy?

Leasing/Renting | October 19, 2022


Feel free to propose other suggestions for today’s title, because trust me when I say that I had considered a few.

Should Tenants Be “Screened” To Determine Candidacy?  That’s really what we’re doing here, right?  Screening them.

Should Prospective Tenants Be “Approved” Before Viewing Properties?  That’s what many agents and landlords are calling it.

Should Renters Be Vetted In Order To Qualify For A Viewing?  That’s my cynical take on what’s happening.

Folks, let me start today’s blog post by saying the following: I am going to take some heat for writing this.

But if “don’t shoot the messenger” still applies in 2022, then this is a perfect example.

I’ve written a lot about the rental market so far this year; more than usual.  Much of what we discuss pertains to statistics, whether it’s listings, leases, or the absorption rate, or how this impacts the resale market.

But one thing we don’t discuss all that often is the intersection between the process of leasing a condo in Toronto in 2022 and the human rights that apply.

We’ve discussed both of those items on their own in passing.  But together?  That’s where things get tricky.

Today’s blog post might also demonstrate the old fallacy, “If everybody was jumping off a bridge, would you do it too?”

Actions are being taken in today’s rental market which I think are mistaken, and yet these actions are being normalized to an extent that I feel is dangerous.

Of course, many believe that these actions are actually just.  They are right.  They are righting a different wrong, and in this case, two wrongs do make a right.

Was that confusing?

Probably, so let me explain.

A reader once argued:

I think it’s totally reasonable to ask if a landlord would rent to a particular renter, otherwise that renter is just wasting his or her time.

Reasonable or not?

Let’s say that I have a property listed for lease.

You are interested in leasing it.  But you aren’t sure if I would even consider renting to you, because of reasons A, B, C, D, or any combination therein.  So you contact me, give me your brief biography, explain reasons, A, B, C, and D, and then ask, “Should I view your property?”

Reasonable or not?

I have a feeling that most of you would say, “Reasonable.”

But that’s where this gets messy, since it opens the door to rental discrimination, and that door is wide enough for a cruise ship to float through…

So then, what are these “actions” I was speaking about earlier?  What’s the “trend” in the rental market that’s problematic?

Here’s an example:

I don’t know how any tenants can be “pre-approved” without it being discriminatory in some way.

The mere idea of a vetting, pre-approval, or screening process is discriminatory, and yet it’s being welcomed by so many in the industry right now.

I offer this comment once again:

I think it’s totally reasonable to ask if a landlord would rent to a particular renter, otherwise that renter is just wasting his or her time.

It’s not exactly untrue.

I’m sure if you were embroiled in a lengthy, tiresome, frustrating, and often demoralizing rental search, you would appreciate being told not to see a property for which you would never, ever be considered.

In effect, this “pre-approval” process is a time saver and that’s what makes it popular.

But then, as is often the case, many people are taking advantage of this in attempts to make up for their laziness.

I mentioned in Monday’s blog post that I had received five offers on a condo lease listing.   But I had also received six emails from real estate agents asking me to “approve” their clients before they showed the condo.

Again, some of you will argue that this is totally reasonable.  If my client and I wouldn’t consider a prospective tenant, then why should that tenant bother “wasting” his or her time?  And the agent representing these tenants – why should he or she waste time either?

That’s why they’re emailing me this:

Hi David:

I saw your listing on King Street today and I wanted to reach out.

Clients of mine are interested in the space but before we go ahead and book a viewing, we wanted to know if you would rent to them.

John and Ken both work in the restaurant industry and they are very well compensated, however, their tax returns don’t support this.  They are both paid $15.50 per hour, and are averaging 50 hours per week over the last three months.  But they both make $500 in tips per night on Fridays and Saturdays and several thousand dollars every month which goes right into their pockets.

As you can see from the attached screen shots of their respective TD and RBC bank accounts, John and Ken each have over $20,000 in their basic chequing accounts.  These are tips they have accumulated by working in the industry and their actual paycheques would go toward rent payments.

Their credit isn’t amazing but they have a lengthy credit history which is important.  It shows that they are responsible and make regular payments.

John and Ken are both clean, quiet, respectful guys who would make incredible tenants.  I can personally vouch for the both of them as friends, clients, and former colleagues.

If you have any questions, please don’t hesitate to contact me.

Shay

Not to sound like a broken record here, but is it reasonable to send an email like this to a listing agent?

I believe that half of you will answer with an emphatic “yes.”

But there are so many problems with this, I almost don’t know where to begin.

So let’s start with the obvious: it’s not my decision.

Time and time again, agents will email me and ask, “Would you rent to these tenants?”

Agents say things like, “I don’t want to waste my time if my clients aren’t going to be accepted,” or they’ll ask me, “Can you please look over their supporting documents and tell me whether or not I should book a viewing?”

But it’s not my condo.  It’s not my decision.  I can’t answer for the client.

And even if I could, is it my job to make a decision for a leasing agent on whether or not he or she should book a viewing?

Some agents will ask, “Would your client rent to these tenants?” and that is a more reasonable question, but it’s still not something I think that my client should be answering.

First of all, whether it’s myself that’s being asked to review supporting documentation to tell a leasing agent whether to book a viewing, or whether it’s my client, I feel that this is putting the cart before the horse.  The supporting documentation is only part of the process; the tenant has to make a viable offer as well.

And what if there are five offers on the property, three tenants are offering above the list price, and two are offering six months of rent up front?  How would “pre-approving” a tenant help them in this case if their offer can’t compete with the others?

In the end, this is simply a lose-lose situation.

Many of the readers have commented in the past that these requests are “reasonable” but sadly, no landlord in the province should be answering these questions or pre-approving tenants.

Why?

Discrimination.

Are you familiar with the Ontario Human Rights Commission?

Click that hyperlink and have a read.

But more importantly, read the “Human Rights For Tenants Brochure”

Here’s an interesting section:

 

Choosing tenants

The Code says what landlords can ask when choosing tenants:

  • Rental history, credit references and/or credit checks may be requested.
  • A lack of rental or credit history should not count against you.
  • A landlord can ask you about your income, but they must also look at any available information on your rental history, credit references and credit rating (such as through Equifax Canada).
  • Income information can only be considered on its own when no other information is made available, and only to make sure you earn enough to pay the rent.
  • Unless you are applying for subsidized housing, it is illegal for landlords to apply a rent-to-income ratio such as a 30% cut-off rule (which means only considering people if the rent is less than 30% of their income).
  • Landlords can only ask you for a “guarantor” (someone who promises to pay your rent if you can’t) to sign the lease if they have the same requirements for all tenants.

 

See any problems here?

Apparently, income information can only be used to make sure you earn enough to pay the rent.

Who determines “enough” and how that determination is made, shouldn’t be up for debate, since a quick poll of my office shows that everybody believes “enough to pay the rent” is taken at face value.  If you’re looking to rent for $2,000 per month, or $24,000 per year, you need to have a salary of $24,000 per year.

Gross?  Net?

Who knows!

Although I do know one thing: y’all are going to want to debate this!

“Enough to pay the rent.”

Well, if you earn $24,000 per year gross, then after taxes, you don’t make enough to pay the rent.

So you’d need to earn, what, say, $30,000 per year gross to net out at “enough to pay the rent?”

Now, if we want to throw the silly theory out the window, and actually look at what is “enough to pay the rent,” then we’d have to consider life expenses.  Debts, for one thing, but just the simple cost of living in this city, buying groceries, paying cell phone bills, and being to own more than one pair of pants and one shirt.  But then what about spending habits?  What if one individual dines out at fancy restaurants six nights per week, and the next lives on peanut-butter and bread?

What is “enough to pay the rent?”

If only we had some sort of calculation that was generally accepted.

Ah, but we do!

Gross Debt Service Ratio, or GDS.

According to the CMHC website:

  • GDS is the percentage of your monthly household income that covers your housing costs. It must not exceed 39%.

That’s for buying a home, however.

When it comes to renting a home, according to the “Human Rights For Tenants Brochure”, a landlord or listing agent are not allowed to use any ratios:

  • Unless you are applying for subsidized housing, it is illegal for landlords to apply a rent-to-income ratio such as a 30% cut-off rule (which means only considering people if the rent is less than 30% of their income).

Amazing.

They say, “such as a 30% cut-off-rule,” but the such as is an example.  You can’t use 25%, 30%, 50%, or 99%.  You can’t use ANY ratio….

….even though everybody does.

So let’s review:

1) A lack of credit history can’t count against the tenant.

2) Income information can only be used to ensure the tenant “earns enough to pay the rent,” but there’s no guidance on what “enough” means.

3) No rent-to-income ratios of any kind can be used.

So let’s say I receive the following email:

 

Hi David,

I have two clients that are interested in your condo, listed for $2,000 per month.

Both were just released for prison for stealing candy from babies.

They are working odd jobs and make $1,000 per month each.

They have no credit history.

Would your clients consider renting to my clients?  Please let me know if I should go ahead and book a showing.

Thank you.

John Spartan

 

What am I supposed to do here?

I mean, other than avoiding an email like that entirely.

Feel free to offer your two cents here.  Tell me why I’m wrong.  Tell me why it’s my job to work with these folks, answer their questions, and find a solution, but make sure you also tell me how I can do this at the same time as I protect my clients’ interests.

In theory, my job is to secure a fantastic tenant for my client.  I do this by “scrutinizing” the prospective tenant’s credit history, income and employment, and overall candidacy according to factors that I, in my opinion, might feel are relevant.

But in practice, in 2022, my job is also to protect my client from any rental discrimination accusations, since the very metrics and tools we use to determine candidacy are apparently not permitted according to the Ontario Human Rights Commission.

If a landlord isn’t permitted to use income or credit as a qualification tool, then how can I answer a leasing agent when they ask “Can you please look over my clients’ supporting documentation and let me know if I should show the property?” when the very answer to that question will be based on a judgment call that is a human rights violation?

This entire system is set up to fail.

It’s lose-lose, any way you look at it.

We don’t want to “waste our time” by viewing properties that we wouldn’t qualify for, right?  So then ask the landlord in advance if we qualify!

But the landlord can’t answer a question about qualification without discriminating, according to the “Human Rights For Tenants” brochure.

So what’s the solution here?

And I’m sorry, but it can’t be, “Fuck all landlords, those greedy fucks,” although I think a large percentage of the city of Toronto would offer that up as a response.

Any ideas, folks?

Because I’m fresh out…

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17 Comments

  1. Sam

    at 9:38 am

    Can’t use income to assess candidacy??

    This is pie-in-the-sky.

    The inmates are running the asylum.

  2. Bryan

    at 12:02 pm

    To me, this seems a pretty crazy thing for a landlord to actually entertain. What possible benefit could there be to a landlord answering “no” to this question? It saves the potential tenant some time maybe, but there is no upside for the landlord at all…. in fact, it is very likely detrimental. David talks a lot about how non-competitive offers drive up prices on the purchasing side of the market, but in rental markets like the one we are in now, the same could be said of rental offers. If there are 5 offers on a place, maybe that A+ tenant offers more months up front. Maybe someone offers to pay more rent. What if there are no other offers for 3 weeks? I bet the landlord would consider “less desirable” looking tenants then and would love to circle back to that offer they rejected in week 1…

    Sacrificing that potential offer in order to save a potential tenant(‘s agent) a half an hour is bad enough…. when it also could open them up to a human rights violation, I can’t even fathom why this is happening. The only answer that makes any sense to an email like that is “My clients would be willing to consider offers from any potential tenants based on the contents of the offer and pursuant to the Ontario Human Rights Code”

    1. David

      at 1:53 pm

      A good landlord will not waver in their minimum requirements even if the unit was vacant for weeks.

      Google “professional tenant toronto star” to see what happens to landlords who don’t go through a rigorous process in vetting potential tenants.

  3. Vancouver Keith

    at 12:15 pm

    What you can do, is what the market dictates. I have a friend who rents an older house, at somewhat below market rates. He works construction and is pretty handy with tools, and you can believe he does all the repairs on that property, in his own time and at his own expense – he’s not going to upset that applecart, landlord’s legal obligation or not. He doesn’t want the landlord to have any hassles or issues, and he wants affordable rent.

    The landlord tenant act is for large corporate landlords, and the tenants who earn enough money to rent from them or are long term and rent protected. For small scale landlords, and lower income tenants it’s a jungle out there and getting worse. The law means much less when the market is skewed in favor of one side. Of course, I am leaving out the whole subsector of the professional bad tenant, that rooks small scale landlords for tens of thousands or more in unpaid rent and property damage.

  4. Libertarian

    at 1:50 pm

    For me, this is another example of everybody wanting to take short cuts and/or have someone else do their job.

    A pre-approval saves time for the tenant and agent, but isn’t David’s time just as valuable, so why should he review documents for a pre-approval?

    Everybody thinks they’re more important than everybody else. You’re not. Nobody is. Do your goddamn job.

  5. Derek

    at 2:31 pm

    My client has instructed me not to respond to any requests to pre-screen potential tenants. Good day, sir. I said, Good day!

    1. David Fleming

      at 5:20 pm

      @ Derek

      You nailed it.

      “When in doubt, blame your client.”

      I’m not being facetious. This is common in our industry.

      Although as a side note, agents often use it in defeat. “I told my client to sign back higher, but for some reason, he wanted to accept your offer as is, so here you go.” That’s a classic when an agent’s ego is bruised.

      But agents use “my client” all the time.

      Here’s a case where we have a way of getting around those pre-approval tenant emails, without sounding unhelpful.

      Bravo!

      1. Derek

        at 6:09 pm

        I hear you. But, that response can be the culmination of a previous discussion with the landlord client. You know, it’s possible I will get many calls and emails asking us to “pre-approve” tenants before they even view your place or submit an application (or offer to rent or whatever you call it). I don’t believe there are any proper grounds for us to preemptively exclude potential tenants and it could open you up to unnecessary risks to engage these requests, no matter how diligent we try to be with them. It will likely require a lot of effort on our part to review these “pre-submissions” without any tangible benefit to you. Therefore I recommend that I not entertain any of these requests and that you instruct me as such.

  6. Condodweller

    at 4:15 pm

    I don’t think I waded into this the last time around so here we go. You can put me in the column of this type of thing being “fair” as I hate anything inefficient. If I were a tenant I would absolutely want to know ahead of time if the landlord would under no circumstance rent to me based on a few pieces of information that could easily be supplied in an email.

    It’s not about anybody not wanting to do their job or saving time. I just hate spending time on anything that I know will not provide any benefit. I think as long as this practice was done in good faith, and I’d like to think that the majority of the time it would be, this would be fine. However, as usually is the case, laws are put in place to cover that edge case where the landlord is really and truly discriminating.

    If I have a number in mind for income say $50,000/yr and won’t consider anyone with less, it’s perfectly fine to pre-screen someone who has offered their salary of $40,000 in an email asking if they should book a tour. If the human rights commission wants me to come up with a random number, there you have it. I’m just applying an educated guess that no one with less income can afford it so I won’t rent to them. Therefore, I’d be fine telling that person no, don’t waste anyone’s time.

    David, I thought you were alluding to a different issue by this:

    “Of course, many believe that these actions are actually just. They are right. They are righting a different wrong, and in this case, two wrongs do make a right.”

    I thought by different wrong you would bring up the fact that landlords are screwed and handicapped from any recourse as soon as that tenant moved in. i.e. one wrong is the unfair practice of taking away all the landlords’ rights. Because you know, if you end up with a bad tenant that you could within reason evict in a timely manner as soon as they don’t pay rent, screening them up front wouldn’t be so important.

    Given however, that this is not the case, landlords screening a tenant before they move in becomes critical.

    The other issue I have is with this prepaying rent practice. I get why people may think this is a good differentiator but I also think it’s flawed logic. All it does is it guarantees the payment for the numbers of months 6-12 let’s say. After the period expires two identical candidates are equal. In fact, I’d argue that the person who has not paid in advance is a better candidate because at the end of the period they have better “credit” given they have paid rent on time for 6-12 months. If I took a tenant who prepaid 12 months, I’d be extremely nervous in month 7/13 whether I’m going to see the next month’s rent.

  7. Ace Goodheart

    at 6:29 pm

    Ask prospective tenants to give you whatever information they like.

    Let them know you have many, many applicants (I had 106 for my two bedroom at Eglinton and Weston) and you will make your choice on a specific date, at a specific time.

    If they don’t hear from you, they didn’t win the apartment.

    Give no reasons for your decision.

    Request nothing from your applicaht pool. If they did not submit it, you are not going to ask for it or consider it.

    Then rent to whomever you like.

  8. Appraiser

    at 5:48 am

    I’m the landlord nobody writes about. Over twenty years. Multiple properties.

    Worst experience so far: One late rent cheque that the tenant advised me of in advance.

  9. Nobody

    at 11:32 am

    Craziest thing I’ve seen is real estate agents asking about CITIZENSHIP/Immigration Status in order to book a showing.

    Just a hilariously bad idea to ask for. So many agents/landlords are flagrantly breaking laws.

    It’s always the least corporate brokerages/agents that are doing this and more often certain brokerages in 905 than a downtown brokerage.

    Pre-approval is also a bad idea as you never know what of offer a tenant might make. A “lesser” tenant might be making a more compelling offer after you see what the market brings.

    1. EastYorker

      at 9:35 pm

      The renters get preapproved. Go look at the property but don’t like it?

      Now what ?

  10. EastYorker

    at 9:35 pm

    The renters get preapproved. Go look at the property but don’t like it?

    Now what ?

  11. your_favourite_tenant

    at 10:57 am

    As a tenant, I wouldn’t want to be handing over all of the information most landlords require now to every place I might want to look at! The last time I rented a place (thankfully many years ago) I probably saw at least 20-30 places before I settled on one I liked. And a few who I rejected were definitely not people I want having a copy of my personal information. No way do I want to be giving bank statements to every landlord with a semi decent sounding unit for rent before I have even viewed the place.

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