Why Due Diligence Matters When Renting Property

As we make our way through summer and the CDC’s eviction moratorium, which is set to expire on July 31, 2021 (as of July 20, 2021), it is important to remember that, as a landlord, to always do your due diligence when renting a property to a potential tenant. By conducting due diligence when screening potential tenants, it can help ensure that the tenant will occupy the property without any major issues and it can help reassure the landlord that the tenant will pay their rent.

There are many different ways a landlord can perform their due diligence when screening a tenant, however the most common method is by using the internet. The internet contains a massive amount of information regarding each and every one of us and can help reduce the time it takes to screen a tenant. Things that can be found that would be beneficial to a landlord could be prior evictions, judgments, criminal and civil cases against the tenant, potential assets, and so on. For example, Larry the Landlord is looking to rent out a unit in a commercial plaza and posts a listing on Facebook Marketplace. Taylor the Tenant sees the ad and decides to reach out to Larry to rent the space because she believes the space will help her business. Larry then takes her information and looks her up and saw that Taylor has three prior evictions within the past five years and she has two prior cases of fraud. By conducting his due diligence when screening Taylor, Larry was able to see that Taylor would have been a nightmare tenant because she has gone through the eviction process three times which indicates that she may know how to delay the eviction so she can remain in the property. Additionally, she had two cases of fraud against her which could indicate that she may forge a check to pay rent.

In conjunction with using the internet to look up information about a potential tenant, a landlord may also want to speak with a tenant in person. When a landlord does this, they can see how a tenant acts towards certain situations and they can get a “vibe” from the tenant. For example, after Taylor inquired about the space for rent, Larry and Taylor met at the space so she can check it out. Larry started asking Taylor questions about her and her business. However, when Larry started asking Taylor about prior evictions, her attitude changed and she was attempting to dodge the question and she was not able to look at Larry directly when answering the questions. From this action by Taylor, Larry knew something was off and he performed his due diligence and found the prior evictions and fraud cases.

Another method that a landlord may use while performing due diligence when screening a tenant is to hire an attorney who specializes in landlord tenant law or a company who can perform background checks on individuals. Generally, attorneys and companies who perform background searches are able to obtain information about a tenant that a landlord would need to make an educated decision to rent to a tenant. An attorney in addition to finding the information will be able to analyze the information to inform a landlord about potential risks from the information that is found.

Additionally, the same goes for potential tenants when looking to rent space from a landlord. Although this is not common, tenants should do their due diligence when renting a space from a landlord. This may include getting as much information from the landlord about the property, seeing if they act in a sketchy manor when asked certain questions, or even researching how many evictions the landlord has been a part of. For example, Patrick the property owner is looking to rent one of his houses. Tarra the tenant reaches out to Patrick about the house and they schedule a time to meet. Upon Tarra and Patrick going through the house, Tarra notices that the walls in the closet where the water heater sits are stained, and the surrounding floors do not feel right. After Tarra notices this, she then asks Patrick about the damages and he simply replies, “it gets like that when there is a lot of humidity” and tries to quickly change the subject. The photos on the listing do not show these damages to the property. By asking questions, Tarra was able to avoid renting a property with problems from a sketchy landlord.

At the end of the day the landlord’s objective is to make sure they are getting a return on their investment. In order to help accomplish this, a landlord should always do their due diligence when looking to rent to a new tenant, including but not limited to researching the tenant for prior evictions and judgments and taking the time to speak with potential tenants. For assistance with performing due diligence on a tenant or a landlord, click here to contact an attorney.