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Tenant Screening: Critical to Your Success as a Landlord – By Cliff Hockley

Posted on 01. Jun, 2013 by in all, Magazine Articles

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A True Story

We had a friend who called us up and asked us to rent an apartment unit to his daughter. He asked us if we would make an exception and not screen her if the father guaranteed the rent, paid a security deposit and co-signed the rental agreement. We did not ponder this much and agreed to rent to the family.  Our friend furnished the apartment, making it move-in ready for their daughter but she decided not to show up for the first six months of the lease. Finally we heard that she moved in… with her cat.

Things went pretty well for a while and there was nothing to worry about. Then her boyfriend showed up and soon the drama started. I got a call from a police sergeant “Do you own the Daffodil Apartments?” “Yes” I answered. “Could you come down to the building, we are evacuating the tenants and planning a full scale assault on one of the apartment units.”

I raced my car to the building; it was 15 minutes from our office.  Sure enough there was an armored personnel carrier in front of the building.  But I was too late.  They had already lobbed tear gas into the apartment.  There was lots of damage… broken windows, broken siding and tear gas all over the place.

Did they find what they were looking for?  They were looking for the boyfriend who had taken too much meth and killed a relative. He was not there.  (He later turned himself in to the police at the request of his girlfriend).

We obviously asked the girl to move out as the unit was not habitable.  As we toured the apartment to assess the damage, we smelled cat urine and chalked it up to her cat.  Turns out, it wasn’t really the cat urine but, in fact, Methamphetamine that they were cooking in the apartment.  So we hired experts to clean the unit and the unit was cleaned up like new, safe for the next tenant (we also hired an industrial hygiene company to test and confirm the condition of the apartment). Fortunately, the father had agreed to pay all costs of his daughter’s tenancy, so we were made whole.

Rental Criteria

Could we have prevented this?  Yes. If we had screened her like all of our other tenants, with criminal, credit and reference check of all previous landlords, we would have discovered that she had a criminal record and we most likely would not have rented to her. But we were trying to do a favor for a friend.

We (typically) also call employers to insure that not only the tenant is employed but that they are making enough income to qualify for the rental of the apartment.  This helps us confirm that, in fact, they have enough income and are a good enough credit risk to become one of our tenants.

Our rental criteria (required by the state of Oregon Landlord Tenant Act) is consistent for tenants at each property and are similar to the one noted below:

We require:

  • A completed application for each adult 18 or older. Unfavorable information for any individual applicant may result in denial of all applications for that group.
  • A three year residency history; have the name, address and phone number of previous landlords ready.
  • A three year employment history; have the name, address and phone number of previous employers ready.
  • Verifiable gross monthly income that is three (3) times the amount of rent. Verifiable income may mean, but is not limited to, alimony/child support, trust accounts, social security, grants or student loans.

Self Employed applicants must provide a copy of their most recent tax return, current bank statement and business license

Section 8 applicants must demonstrate income that is three times their portion of the rent

Social Security recipients must provide copy of their check or annual benefits letter

Roommatescombined income from all applicants must equal three times the rent

Full Time Students must provide current bank statement with balance of five times the rent or financial aid award letter

Out of State Applicants with no local employer, must provide current bank statement with balance of five times the rent 

  • Two pieces of identification. Chose one from each group below:

Group A:

Passport (foreign or US)

US Drivers License

US State issued ID card

Group B:

Social security card

USBirth certificate

Resident Alien, work visa or student visa 

  • Proof of income (pay stub, bank statement, etc.)
  • Maximum occupancy of no more than two (2) people per bedroom

You may be asked to pay a higher deposit (up to two times the rent) for the following:

  • No credit or poor credit (incl. slow pay or discharged bankruptcy more than one year ago).
  • No landlord references (must be from an unbiased source; no roommate or family references).
  • Less than one year of rental history
  • The total security deposit required will be that of the least qualified applicant.
  • You will be denied tenancy and will forfeit your application fee for the following:
  • Incomplete or misrepresentation of any information on your application
  • Insufficient income
  • Eviction judgments (ever)
  • Felony charges and/or convictions (ever) or three or more misdemeanor charges
  • Judgment and/or multiple collections or charge offs in the last seven (7) years
  • Discharged bankruptcy within the last twelve (12) months or any open bankruptcy
  • Negative landlord reference including: money owned to a prior landlord, three violation notices issued in a one year period (i.e. 72 hour notice, NSF, noise/disturbance, unauthorized pets or occupants), excessive damage upon move out or if a landlord refuses to give a reference. 

If you are applying for a residence without resident management staff, your application can be taken weekdays between 8:00 AM and 5:00 PM. Applications completed after hours or weekends will be processed the next business day. We accept the first qualified applicant.

Fair Housing

As important as the screening of the tenants for credit, employment, criminal and rental history is our compliance with Federal, State and Local Fair Housing Laws and ordinances. There are many protected classes that may not be discriminated against. Should you be found to discriminate you could potentially be fined. We train all of our staff on an annual basis to comply with the housing requirements. There requirements’ are noted below:

Bluestone & Hockley Real Estate Services will not discriminate against anyone in the following protected classes if they have good credit, no criminal record, have the income to pay the rent and have good references from previous landlords.

Federally Protected Classes

Race, color, national origin, religion, gender, familial status, and disability.

Oregon state protected classes include: Marital status, source of income, sexual orientation including gender identity, honorably discharged veterans / military status, and domestic violence victims.

The Good News

The good news is that we learned our lesson.  We screen every tenant that rents from us before they can be approved to move in.  It was a painful and costly lesson, given that it took two months to get the unit rent ready again. We believe in tenant screening and in creating safe communities for our tenants to live in. We turn down about 30% of the applicants that apply for tenancy. Most of them get turned down for misrepresenting information on their rental applications.

In summary, this last week we had a tenant apply for an apartment, who claimed that his credit was slightly tarnished. We ran the credit check on him and his roommate and both of them had bad credit.  The key applicant had five collections and the co-applicant had three collections, including rent not paid to a previous landlord. The risk is too great for us to accept these tenants even with extra deposits.

Where will these tenants go to rent?  They will find a landlord that is desperate to rent their property and that will bend the rules to make it work for them.  Hopefully, you are not that landlord.

[Editor’s Note:  Be sure to check all of your applicants thoroughly with AOA’s low-cost tenant screening services! For more information visit: http://www.aoausa.com/tenant_screen/]

Clifford A. Hockley is President of Bluestone & Hockley Real Estate Services, greater Portland’s full service real estate brokerage and property management company..  He is a Certified Property Manager and has achieved his Certified Commercial Investment Member designation (CCIM).  Bluestone & Hockley Real Estate Services is an Accredited Management Organization (AMO) by the Institute of Real Estate Management (IREM).