Property Management

Landlording Can Be Risky Business

Great article on the importance of tenant screening on income properties.  In my experience the single most important aspect of being a landlord is effectively screening tenants to make the right choice.  One of the tools I utilize is a credit decision matrix.  If you would like a copy of the matrix please contact me, I am happy to provide it.  The story mentions advocacy groups.   RHA, the Rental Housing Association of Puget Sound is an excellent example. 

In recent years low interest rates and an active housing market prompted many
Canadians to buy income properties and become landlords. It's estimated that at
least one-third of new condominiums purchased in Toronto in the last year have
been by bought by investors, but only about 10 to 15 per cent of condos come on
the resale market within a year. The remainder are being retained by the
investors and rented out.

Property management companies can be hired to find and deal with tenants, but
many small investors take the do-it-yourself approach and select their own
tenants. Getting the right tenant, who pays his rent on time, respects his
neighbours and doesn't trash the property can be a tricky business.

"It is a documented fact that trusting your gut feeling, when deciding on
which applicant to choose, is responsible for over 30 per cent of the
quantifiable losses of rental property assets," says the Rent Check Credit Bureau. "Some
technically knowledgeable tenants even know how to cover up their activities and
change their personal identities."

Landlord advocacy groups say that in many jurisdictions, tenancy laws are
tilted too much in favour of tenants and that some are taking advantage of the
situation. Ontario Superior Court Justice Ted Matlow recently called for changes
to the system in an Ontario Divisional Court ruling.

"My recent experience sitting as a judge of the court to hear motions has
convinced me that there is a growing practice by unscrupulous residential
tenants to manipulate the law improperly and often dishonestly, to enable them
to remain in their rented premises for long periods of time without having to
pay rent to their landlords," he wrote. "It is a practice that imposes an unfair
hardship on landlords and reflects badly on the civil justice system in Ontario.
It calls for government, the Landlord and Tenant Board and this court to
respond."

As an example, Judge Matlow used the case of landlord Melissa D'Amico, who
bought a small building with a commercial unit and an apartment. She lived in
the apartment for a few years and but then moved out "into a cheap rental
property as I wanted to use the unit to generate some income. This is the only
investment property I own," she stated in her affidavit to the court.

She rented the unit on October 11, 2011 and signed a lease with tenant Rony
Hitti and Anastassia Adani and Hitti's company, Toronto Bespoke Inc. The rent
was to be $3,600 per month.

The tenants never paid any rent. Twice in the ensuing months there were
eviction hearings, and twice the tenants delayed eviction by giving D'Amico bad
cheques. At the time of Matlow's ruling, the tenants were still in the unit and
owed about $25,000 in rent.

D'Amico's affidavit says that recently she discovered that the tenants "have
a history of initiating frivolous appeals to obtain rent-free housing," citing
court disputes about unpaid rent with Hitti's former landlord.

Judge Matlow ruled that the tenants' most recent appeal "raised no bona fide
question of law" and that "it was totally devoid of merit, vexatious and an
abuse of process." He awarded court costs of more than $13,000 to D'Amico.

Harry Fine, the lawyer representing D'Amico in the case, told The National
Post: "The law is so imbalanced in favour of the tenants the small landlord
doesn't have a chance. Every small landlord case is a nightmare. They get into
the business because their Realtor says a property has income potential but they
forget that it is a business - and a highly regulated business."

Canada Mortgage and Housing Corp. (CMHC) says that each province and
territory has different rules, but generally as a landlord, you can ask
potential tenants questions that do not infringe on their rights. You can ask
where they work and how much they make. You can ask how many people will be
living in the unit, and get their names. You can ask if they have pets and if
they smoke. You can also request written permission for you to get a credit
check and ask for references.

You may not ask about their race, ancestry, place of origin, colour, ethnic
origin, citizenship, creed, sex, age, marital status, family status, handicap or
if they are receiving public assistance, says CMHC. You may not ask them if
their family will be visiting them, or for their social insurance number.

CMHC says that in many areas, information about financial data that was
previously available in a credit bureau report is no longer available, and
suggests using the Rent Check Credit
Bureau
.

Perhaps most importantly, landlords should use the references that are
provided, especially from former landlords. You should ask if rent payments were
made on time and if there were any problems with the tenant. CMHC advises going
back two or three tenancies if possible.

Check with the tenant's employer to make sure the information you have been
given is accurate. If you can, check court records.

There are also a number of landlord advocacy organizations that can offer
help. The Ontario Landlords
Association
website includes links to provincial and local landlord groups
across the country. Another site to check out is Landlord Solutions.

By Jim Adair

 

Northstone Real Estate Inc offers full service property management solutions.  For information on any of our services please call or email.