Many people become landlords whether they rent their basement for extra income, rent their investment condominium or rent their property because they can’t sell it for the price they want, etc. But not everyone who attempts this endeavour understands the implications of getting into bed with the Residential Tenancies Act, which provides protection for residential tenants.
Case study: A landlord received a phone call from a prospective tenant about renting one of her units asking $2,500 a month. The landlord asked the prospective tenant what her monthly income was. The prospective tenant replied $3,100. The landlord said “you cannot possibly afford this rent” so she discouraged the prospective tenant from submitting an application. The prospective tenant complained to the Human Rights Commissioner and received an award of $1,000 for “hurt feelings”.
The law stipulates that you cannot discourage anyone from making an application to rent. The landlord is obligated to consider other factors besides income such as credit references, rental history information and credit checks in order to assess the prospective tenant and only then can the landlord select or refuse the prospective tenant accordingly. Therefore, to be safe, a landlord should allow everyone to apply and choose a tenant based on all the information. When you arrive at your decision simply say to all applicants that you selected the best tenant after you did your due diligence.
2. The rules related to giving notice for rent increases are very specific. A Landlord and Tenant Board approved N1 form is mandatory, the notice must be given ninety days prior to raising the rent, an increase can only be given every twelve month period and it has to be an amount set by Provincial guidelines. Any rent increase that does not follow these rules is not legal and leaves landlords vulnerable.
Case study: A landlord increased the rent every twelve month period for four years according to the Provincial guideline and notified the tenant via a letter. At some point, the rent was in arrears and the landlord took the tenant to court. Since the law stipulates that the tenants can raise any issues they deem necessary in a rent arrears hearing without notice, the tenant did just that. The tenant raised that the landlord notified him of rent increases via a letter and not via the mandated N1 form. As a result the court awarded the tenant an abatement of all the monthly rental increases he had paid for the last four years amounting to a few thousand dollars.
3. As soon as a tenant gives you notice they are moving out you have to mitigate your damages by trying to rent it to someone else. First and foremost make sure the tenant has signed an N9 (Tenant’s Notice to Terminate a Tenancy) in case they change their mind and you have already rented the unit to someone else. If you have made every effort to rent it for the same amount and have been unsuccessful, you can go to court to get back the shortfall. Be very careful about suing the tenant for under renting it though because the tenant can turn around and raise issues that will come back to bite you. The best thing you can do as a landlord is to rent it to someone else and move on.
If your tenant stops paying rent altogether, the shortest an eviction procedure will take is about eighty days. The length of the process itself and the fact that the tenant can ask for an adjournment or raise maintenance issues during this time can easily extend the eviction process six to eight months from the time the first month’s payment is missed. The cost of the eviction process and the loss of rental income will amount to a great deal of money. Remember that tenants have one year after moving out to sue you for damages such as bad faith notice, improper notice of rent increases etc.
These are just a few due diligence procedures you can follow to try select the right tenant:
1. Speak with the prospect personally and determine if they are consistent with their story about work, debt or current address.
2. Use a professional and thorough employment application form and be on the lookout for any gaps in rental history.
3. Ask for the name and contact number of their work supervisor. Call the employer and ask them to confirm income and how long the prospect has worked there.
4. Ask to meet everyone who will be living in the rental unit. You cannot refuse the tenancy to someone on the grounds that they have children. The only defensible ground for not offering a unit to a prospective tenant is their lack of creditworthiness, previous tenancy history or a bad credit report.
5. Call their current landlord but remember to use your creativity to screen against a tenant using their friends as a surrogate landlord.
6. Remember the former landlord may just be providing a positive reference to get rid of the tenant. Certainly I have heard of this happening many times.
7. Ask the former landlord if the tenant paid rent on time, if they ever took the landlord to the Board, disturbed other tenants or ever contacted municipal inspectors with unreasonable complaints.
8. Speak to the building superintendent if there is one. Just like your hairdresser, they seem to know everything that’s really going on.
9. Always use a professional screening service. Rent Check provides services such as tenant checks, consumer checks, employment checks, credit history, debts, judgments etc. It also has access to Landlord and Tenant Board decisions (with limitation) and reports from other landlords to provide you with indications that you may be headed for trouble.
I have touched on just a few of the myriad of things that can go wrong. Therefore it’s critical you educate yourself about the law or consult an expert in this area before undertaking the important role of becoming a landlord. Mistakes or lack of knowledge can cost you a great deal of money.
The source for this information was taken from Landlord Solutions.