Tips And Strategies For Effective Tenant Screening

1. What is Tenant Screening, and Why is it Important?

Tenant screening, as the name might suggest, is the process where a landlord or a property manager evaluates and interviews potential tenants before renting out a property. Tenant screening involves taking a number of important steps to ensure you find a tenant you can trust. These include checking the following:

Background
References
Credit history
Employment status
Income
Criminal record
Rental history
And more

The main purpose of tenant screening is to identify any red flags indicating a potential tenant may be unreliable. For example, a history of missed payments, eviction notices, or criminal activity might suggest a tenant is at risk of causing issues in the future. Of course, this is by no means always the case, but by conducting a thorough screening and rental check, you can make an informed decision about who to rent to and avoid tenants who may cause issues or be unable to pay rent on time.

So, what are the key elements to consider when conducting a screening? And what can you do to ensure you are not discriminating against potential tenants? Read on for our top tips and strategies when screening tenants for your rental property.

2. What are Some of the Legal Requirements for Tenant Screening?

In Australia, legislation is in place to protect the rights of landlords and tenants. However, each state and territory has its own unique laws in place. And so, the legal requirements for screening tenants in ACT may differ slightly from that of WA. However, some general conditions to be aware of include:

Anti-discrimination laws: Landlords and property managers cannot discriminate against potential tenants based on their race, gender, age, disability, religion, or other protected characteristics. All of your applicants must be treated equally and fairly.
Rental history: You may request information about a potential tenant’s rental history, including rental payments and past tenancies. However, you must obtain the tenant’s consent first.
Privacy laws: You are required to comply with privacy laws when collecting and using personal information about your potential tenants. Also, the information you collect must only be necessary for the screening. Once you’ve obtained the data, you must store it securely.
Reference checks – As a landlord, you may request references from your prospective tenant’s previous landlords, employers, or other referees. Again, however, you must first obtain your tenant’s consent.
Background checks: You may conduct background checks, such as criminal checks. However, you must obtain permission and ensure your queries are relevant to the tenancy.
Financial checks: You have the right to request financial information such as income, credit history and employment status, but you must first obtain consent.

3. What are some of the key elements to consider when screening potential tenants?

As mentioned above, a host of enquiry options are available to landlords, and it is highly advisable to use them as they are vital elements that ensure a thorough screening. However, some key elements to consider include the following:

Inform your tenant that they must complete a rental application that will provide their personal details, rental history, employment information, and references. Make sure to advise tenants that you will be contacting references and carrying out background checks.
Once you have your prospective tenant’s rental history, contact their previous landlords to ensure they paid rent on time, complied with the terms of their lease, and maintained the property.
Employment and income verification – This may include contacting their employer or reviewing their pay slips or tax returns.
Request references from the tenant’s previous landlords, employers, or other referees
Check the tenant’s credit history to see if they have any financial issues or outstanding debts.
Consider conducting a criminal background check to verify if the tenant has a criminal record.
Make sure that they understand the terms and conditions of the lease.

4. What are Some Effective Screening Techniques for avoiding problematic tenants?

To be extra thorough when carrying out a tenant screening, consider doing a ‘pre-screening’ with your tenant before the rental application process begins. Asking simple questions about pets, whether they like to party regularly, or simply mentioning that you will carry out background checks can help weed out tenants unsuited to your property. It may also help you find your dream tenant and speed up the process.

Consider looking at their social media to get an idea of their character. This may help give you an idea of how they would treat your property.

In most cases, you’ll want to carry out inspections where you’ll be showing potential tenants around your property. This is an excellent opportunity to get a feel for each tenant, where you can interview in an informal, relaxed environment. Chatting and asking questions about them, such as how they enjoy their job and if they move around a lot, can give you some idea of who they are.

Also, seeing them physically interact with the property can give you some clues about how they will treat your home once they move in. If you have hired a property manager to carry out the screening, joining them for the inspections might be advisable.

5. What are Some Common Red Flags to Look Out for During the Tenant Screening Process?

When carrying out rental checks and screenings, it’s vital not to discriminate and remember you can’t always judge a book by its cover. Or its credit score. However, there are some common ‘red flags’ you can keep in mind while screening. These include:

Eviction history – If a tenant shows a history of being evicted, it may be a sign that they have had previous issues paying rent and respecting lease terms.
Poor credit score – A low credit score may indicate a tenant’s history of not paying bills on time, which could mean a risky tenant.
Refusal to provide information – If a tenant is unwilling to provide information during the screening process, such as rental history and personal references etc., you should ask and check why this is. Ultimately, you’re entrusting your property with someone you don’t know, so it’s your right to be given the appropriate information.
Poor Communication Skills – Having a good communicative relationship between you and your tenant is important. If a prospective tenant has difficulty responding to calls and messages, it might be a warning sign that they would be challenging to work with.
Criminal Background – Remember, it’s important not to discriminate, and you should only make a decision once you have all the relevant information. However, a criminal history, especially for violent crimes, might indicate that your tenant could pose a danger to neighbours, other tenants, or property.
Inconsistent Employment: A tenant’s history of frequent job changes or gaps in employment may be a sign that they do not have a reliable income source and could struggle to pay rent.

6. How do Credit and Background Checks Factor into Tenant Screening?

As mentioned above, you can run credit and rental background checks on prospective tenants during the screening process. However, hiring a property manager to carry this out is advisable as they are fully qualified and equipped to perform a thorough screening that can save you time and money.

When carrying out background and credit checks, you must always obtain consent from potential tenants and comply with the relevant privacy regulations and laws. Both credit and background checks factor separately into the tenant screening process:

Credit Checks

You can request a tenant’s credit report from a credit reporting agency. This report provides information on the tenant’s credit history, including any outstanding debts, late payments, and bankruptcies. A tenant with a poor credit score might be considered a higher risk for defaulting on rent payments or other financial obligations.

Background Checks

Background checks are used to verify a tenant’s identity and check for criminal history. This includes searching for any past convictions or charges and any outstanding warrants. Again, it is vital not to discriminate and ensure you have all the information before making a decision. However, a tenant with a history of criminal activity may pose a risk to neighbours, other tenants, and the property itself.

7. What are Some Best Practices for Communicating with Potential Tenants During the Screening Process?

You are advised to follow several best practices when communicating with potential tenants during the screening process. It’s important to carry out non-discriminatory screening, set expectations, and be transparent about the screening process. By following best practices, you’re doing your job to ensure a smooth screening process.

Being prompt and professional – Respond to questions and enquiries promptly, and maintain a professional tone in emails, phone calls and in-person meetings.
Provide clear and detailed information – Be sure to provide detailed information about the property, including rent, amenities, lease terms, and other valid information.
Say no to discrimination – Treat all applicants the same and do not make any decisions based on factors such as gender, sexual orientation, race or religion.
Conduct background checks– Once you’ve received all your applications, conduct thorough background checks to ensure the information your potential tenants have provided is factually correct.
Set expectations– Clearly explain the screening process so your prospective tenants know what is required of them regarding documentation, timeframes, etc.
Follow up with all applicants– Whether or not you plan to pursue a potential applicant; it’s always best practice to follow up promptly and explain your decision clearly and professionally.

8. How Can Landlords Ensure They are Not Discriminating Against Potential Tenants?

Ensuring you carry out a fair and non-discriminatory tenant screening process is vitally important. Each state of Australia has its position on discrimination regarding rental properties. For instance, in the Australian Capital Territory, it is “against the law for someone to discriminate against you because of a characteristic that you have, or that someone thinks you have, in an area of public life such as employment, education, provision of goods and services and accommodation”, (ACT Human Rights Commission).

When going through your screening process, taking the following steps can help to ensure you are not discriminating against any prospective tenants:

Operate in accordance with fair housing laws: Research local, state, and federal fair housing laws that prohibit discrimination against protected classes in housing and make sure your screening process does not violate these laws. For instance, The Residential Tenancies Act 1997 is the law that governs renting in the Australian Capital Territory and provides a “balanced framework” to protect both landlords and tenants (ACT Government).
Avoid discriminatory language: When writing up rental ads and communications, use inclusive language and do not imply a preference for or against particular groups of people.
Use objective criteria: Develop objective criteria based on factors such as rental history, credit history, and income to evaluate if a tenant is suited to the property. Avoid subjective factors like ethnicity, gender, religion, sexual orientation, or disability.
Apply the same criteria to all applicants consistently and ensure inclusivity in your evaluations.

9. What are Some Common Mistakes Landlords Make During Tenant Screening?

Tenant screening is vital to ensure you have someone staying on your property who is reliable and you can trust. Unfortunately, it’s not uncommon for tenants to make mistakes during the screening process, leading to issues down the line. Common mistakes include:

Not carrying out background checks – These are vital for providing tenant histories such as criminal charges, rental history and credit scores. Avoid this mistake by conducting thorough tenant screenings yourself or through your property manager.
Failing to check references: While it might be tempting to overlook checking tenant references, such as from previous landlords and employers, this can be detrimental as it is a missed opportunity to learn vital information about a tenant’s reliability, payment history or overall behaviour. Always ask for references and follow referees up with questions about the tenant’s ability to pay rent on time and how they took care of the previous property.
Not carrying out interviews – Meeting a prospective tenant in person, over the phone or via Zoom is important to determine if you are both on the same wavelength. Are they looking for short-term accommodation while you’re seeking a long-term tenant? Talking to the candidate can help you get to know them a little and allow you to ask valuable questions.
Rushing the process: While you may be eager to fill a vacancy quickly, carrying out a thorough screening will allow you to gain all the information you need to avoid problem tenants.

10. How Can Landlords use Tenant Screening to Improve the Rental Experience?

As explained, tenant screening is the process of interviewing and evaluating prospective tenants before renting out your property. Tenant screening involves carrying out various vital steps, such as requesting information on or carrying out the following:

Rental history
Background checks
Contacting references
Credit history
Employment status
Criminal records
And more

A thorough tenant screening should be in no way discriminatory but should help to identify any red flags that could indicate a candidate may be unreliable or unwilling to take care of your property.

Tenant screening helps to ensure that you find a reliable tenant, promotes a safe environment for neighbours and fellow tenants and ensures that you and your tenant want the same things.

Carrying out tenant screening can be a lengthy and time-consuming process. So, it’s highly advisable to hire a property manager to assist with screening, continued property maintenance, and communication with tenants.

If you have any questions about tenant screening or property management, please contact Jonny Warren by filling out this form, calling 0431 797 891 or emailing jonny@jonnywarren.com.au. Alternatively, you can contact us for a rental appraisal, and we’ll be more than happy to get back to you.