Assessing Rental Applications: What To Do And What To Avoid
A key role of property management is to vet potential tenants for a property, with the objective being to separate the good eggs from the bad, so to speak. Achieving this objective however, is not as simple as one would imagine. Indeed, more comes into play than just an applicant’s ability to pay the rent on time.
Approach applications objectively
Property managers, like any other professionals, must comply with anti-discrimination laws. This requirement extends to the manner in which it assesses rental applicants.
In order to comply with these laws, property managers must set aside their own biases, including those of their clients, and consider each applicant for their merits. Of course this doesn’t mean management will completely overlook your interests and expectations as an owner; they are, after all, retained to act for you. In saying that, you also retain them because they are experienced at what they do, and you should be amenable to their suggestions.
It would be wise to note that rejecting an application without a reasonable justification can instigate an action for discrimination.
Consider your circumstances and needs
It is unsurprising to say that the greatest desire of property owners is to see their property occupied. What varies amongst owners is the desired duration. Property management must therefore tailor their applicant selection process to reflect those differences. For example, one owner may be looking particularly for a stable long-term tenancy of at least 12 months; it follows then that management would give greater consideration to applications that indicate a desire for long-term tenancy over those seeking only eight months.
But whilst a 12 or 24 month tenancy may be enticing, owners must be prepared to anticipate changes that may occur throughout. In such an instance, a tenancy may be ended by mutual agreement in line with the relevant legislation.
Consider the applicant’s circumstances
Steady source of income
Before approving an applicant for a property, management must be certain the applicant will be capable of making regular rent repayments as they fall due. There is a general rule that no more than 30 per cent of a tenant’s income should cover rent repayments. However, this is not a strict rule, and decision makers should also consider an applicant’s personal circumstances. For example, whilst a single person may have less earning capacity than a couple with young children, their expenses are likely to be significantly lower.
In assessing an applicant’s employment circumstances, property managers take care to be thorough in their inquiries. Management will always request an applicant provide evidence of employment, usually in the form of payslips, which is then confirmed by way of telephone with the employer.
Previous tenancy history
Past history is a good indicator of future behaviour. The greatest tools a property manager has to use in assessing past history are rental ledgers, the TICA database and, to a lesser degree, rental references.
Rental ledgers are a great source of information for property managers in that they can identify an applicant’s past compliance with tenancy obligations. For example, any patterns indicating the tenant had been in arrears for seven days or more may give the decision maker some cause for concern. In such a situation, it is best to discuss this with the prospective tenant; they may have a reasonable explanation for the occasional lapse into arrears.
Owners should also be aware that young applicants and those newly entering the rental market may not have such ledgers, and in those circumstances the property manager must utilise another tool for assessing the application.
The TICA database is a frequently used tool by property managers when assessing prospective tenants, particularly when there is cause for concern regarding outstanding arrears or property damage, or otherwise a lack of other supporting material to assess the application.
Whilst still relied upon, rental references are of the least value in the assessment process, largely because most property managers are reluctant to provide detailed references in the event a former tenant of good repute suddenly decides to plot mischief. Any aloofness on the part of the referee should give no cause for concern, especially if employment records, recorded rental ledgers and the TICA database search have revealed positive information about the applicant.
What impression do they make?
A decision maker should at least once meet the applicant in person before offering a tenancy for anything longer than six months. Whilst this is not always possible, a face-to-face meeting can greatly assist in assessing an applicant’s suitability for a tenancy. Humans are instinctive creatures, and the ‘vibes’ property management may get from an applicant’s demeanour can go some distance in predicting how easy or difficult the tenancy will be.
Even in the absence of a face-to-face meeting, there are plenty of subtle indicators that may bear a lot of influence on the outcome of the application.
A prospective tenant who communicates in a polite and timely manner in their emails or phone calls is more likely to present as a responsible tenant, aware of their responsibilities under the tenancy. By contrast, a prospective tenant who responds to phone calls or emails late, or not at all, is more likely to be present as someone rather blasé, who may not pay rent on time, nor report maintenance where required, which all has the risk of increasing costs for management, and ultimately the owner, down the track.
Whether or not to allow pets and stipulate other special conditions
Properties that allow pets and have less special conditions are more likely to see a greater number of prospective tenants apply for those properties. That being said, it may be preferable to having a property remain vacant for a couple of weeks than allowing a hair shedding cat or dog run wild at the premises. It all really is a question of preference, and owners should make them known to their property managers. Property managers may be in that instance be able to suggest pet references, inquiring about pet registration with council or even a pet bond in certain circumstances.
The information expressed in the article above is for general information purposes only; it is not advice nor intended to be. Any person interested in making a decision as to whether to sign a lease or not should seek proper independent advice.