Wow!

That’s all I can say.  Just, plain wow.

Did you read the article in Toronto Life that was trending last week?  About the tenant from hell?  I can’t tell you how many people emailed me that article for my two cents, or asked me to blog about it.  Then add in all my landlord-clients who emailed me in a panic, and I have to say that this article had as big an impact as any in recent memory.

Let’s look at the article, a follow-up article in the Globe & Mail, and then discuss the tenant approval process…

It’s so ironic, is it not?

Call it an ebb-and-flow, or a chicken-and-egg, but either way, you have to admit that there are just as many people crying “discrimination” in the rental market as there are complaining about problem tenants.

Folks on the one side of the argument suggest that landlords are too overbearing, and break all kinds of human rights codes when they ask inappropriate questions to prospective tenants.

Folks on the other side of the argument suggest that the Residential Tenancies Act favours the tenants, and there aren’t enough measures in place to protect landlords from problem tenants.

If I had a horse in this race, I’d probably agree with the latter.

I’m a capitalist, and I think that if a person puts their hard-earned money into an investment property, they should be able to pick whoever they want to lease the property.

The obvious retort to this, however, is asking, “David, is it fair for a landlord to advertise: ‘Property for lease; blacks, Jews, gays need not apply.’?”

Sure, where there’s no black and white, there’s a grey area, but that’s like anything else in life.  If we want to always look at the extreme, then that will get us nowhere.

But I’ve been in situations before where a prospective tenant plays the “discrimination” card, and yet I feel like I’m doing my job.

Recently I had an offer to lease on a rental listing, and I asked to meet prospective tenants in person.  Their agent told me that it was a mistake on my part, since if I ultimately decided not to rent to them, then it would be easy for them to claim I discriminated on behalf of their race, age, or any sort of appearance.

Is it really wrong to want to meet a tenant that you’ll be renting to?

Perhaps after the entire city reads this week’s expose in Toronto Life, people might change their tune.

If you haven’t seen it, pick it up:

Or read it online HERE.

I’m not a huge Toronto Life fan, and I think their headline above is simply a bright, shiny object to lure in readers, but I suppose that’s all news publications these days.  Either way, the article that Kat Shermack put together is fantastic, and the cheezy headline and cover art take away from her superb investigative journalism.

Read the story in full.  Don’t skim.  Trust me.

It’s a frustrating read, but people will be frustrated for different reasons.

Most of you will be frustrated that this happened in the first place, or that this happened to the owners.

Personally, I’m frustrated by the fact that the owners actually had to go to court to legally evict a con-artist who was running an illegal rooming house with twenty beds.

I know, I know – we have to adhere to the rule of law, and we must have black or white, or everything becomes grey.

But aren’t there cases where you simply go into the house and throw everything out on the front lawn, change the locks, and have a very large/scary security guard ensure the con-artist/tenant doesn’t get back into the house?

The irony is, if the con-artist in the above story wanted to draw this thing out, he could probably have done so over several months.

And that is the problem with the Residential Tenancies Act, and the Landlord & Tenant Board.  They cater to the tenants, and they lack any ability to expedite or differentiate.  Again: it’s all black and white.

I understand that there are hundreds of poor people living in squalor right now as an evil landlord refused to fix the heating or plumbing, or repair a broken window, or leaky roof.  In fact, I’m sure there are far more “victims” of shady landlords than there are victims of con-artist, would-be tenants.  But it still takes far too long to deal with the scammers and con-artists out there, especially when you simply know what they’re doing and who they are.

Another article came out last week on this subject:

“Nightmare Rental A Cautionary Tale For Short-Term Stays”

This was in the Globe & Mail on Friday, and it’s either coincidental timing, given the landmark story in Toronto Life, or maybe it was intended to piggyback on a hot topic.

In the first article, the owners used a reputable real estate brokerage to secure tenants.

In the second article, the owners used an AirBnb-type service.

In both cases, the owners were scammed.

So what can you do to ensure you don’t get scammed?

Perhaps there are no guarantees, but I’ll tell you what I do when I’m looking for a tenant for a client who owns a property and has hired me to fill the vacancy.

There are three pieces of documentation that a person needs to get a food in the door:

1) Ontario Real Estate Association “Rental Application”
2) Credit Check from Equifax
3) Employment Letter

The OREA rental application is basically just a summary, but it asks for the last places of residence and the contact names (ie. landlords) and two personal references.

Here’s the rub, however: many Realtors don’t check references.

Sorry to say, but it’s true.

In the summer of 1998, I applied for a job as a waiter at “East Side Mario’s” on Front Street.  I lied on my resume, saying I had worked as a waiter for Casey’s Grillhouse and Jack Astor’s in Hamilton while I was attending McMaster University.

I got the job at East Side Mario’s.

The manager never checked my references, otherwise, clearly, he would have known I was lying.

But when he told me I was hired, I saw that on his clipboard, there was some sort of “hiring procedure” sheet, and under “References Checked” he had put two check-marks, and had written in the names of the two restaurants that I said I had worked at.

I knew the manager would never check my references, which is why I lied.  But I knew if I didn’t lie, I wouldn’t get the job.  So let that be a lesson to every teenager who applies for their first summer job: if you have no experience, you have to lie.

Moving on…

So back to the OREA Rental Application, and what information it gives you as a Realtor or as a landlord.  The application asks for the last two places of residence, and contact information for those landlords, and that’s as good a place to start as any.

I’ve been a landlord many times before, and I’ve only ever been called TWICE about a previous tenant.

Remember that at the very basic level here, we’re trying to weed out the con-artists.  So if the applicant doesn’t have two previous places of residence, then that’s a red flag.  Most con-artists are going to take the path of least resistance, and whether you’re the “tenant from hell” in the Toronto Life article, or the guy who blew up a meth lab at 65 East Liberty Street in the spring, you’re not going to be pushy with your application, and at the first sign of a Realtor and/or landlord checking into you, you’re probably going to bolt.

Is it easy to fake the information on the application?  Sure.  A con-artist could put down two friends or co-conspirators to act as a “previous landlord.”

There are two “personal references” at the bottom of the OREA Rental Application as well, and yes, a con-artist could fake this two.

But overall, that’s now FOUR contacts that have to be faked, and chances are, a con-artist isn’t going to go to all that trouble when he or she could find somebody on AirBnb or Craiglist who isn’t going through the same process.

After the OREA Rental Application, we have the Equifax credit check.

I’ve had a lot of people clamour about this in the past, and I’ve heard all the excuses.  I had somebody recently say, “I don’t have a credit history.  I’ve never had a credit card in my life, and I’m not in Equifax’ system.”  Whether that’s true, or not, I don’t want that person as a tenant.  They’re either lying, or they really, truly have zero credit, and that’s a red flag as well!

Once you have the Equifax credit check, you can look into the person’s debt history, but at least having that report shows you that this person is (with almost certainty…) who they say they are, since the report is based on a SIN number, among other things.

Yes, this can likely be faked too.  But in what percentage of cases?

Lastly, we have the employment letter.

This too is pretty easy to fake.

Any of us can go online and right click “save as” on a company logo, then open a new MS Word document, drop that logo in, and write a phony employment letter, then print the document, and sign it.

But as a Realtor, unless I personally speak to the person who signed that letter, then I’m not ready to move on.

If I call Royal Bank, or another major company, and I’m transferred to Human Resources, and I speak to the person who signed that letter, then we’re off to the races.

But what if it’s a company you’ve never heard of?

What if the employment letter comes from “Systems Solutions Enterprises Inc.” or “Graphic Specialists Ltd.” or some other company whose name you or I could make up as quickly as I can type this?  What if you call the name of the person on the employment letter, and it’s somebody’s cell phone?  This could be another con, absolutely.

Ultimately it’s up to the person checking these references to decide if the entire package is legitimate.

After speaking to two past landlords, two personal references, an employer or somebody from the employer’s HR department, and looking over an Equifax credit check, it’s up to the Realtor or landlord to decide to proceed.

If more documentation is required, then I suggest the following:

1) Income verification.  A bank statement showing a sufficient balance in the bank account, with the tenant’s name and address on the document.

2) Tax history.  A T1 and NOA for each of the previous two years, showing not only the amount of income the tenant declared, but also the fact that the tenant is a tax-payer.  This also verifies identity as well.

If you’ve gone through all these steps, I would suggest with almost certainty that you’ve weeded out any con-artist or potential “tenant from hell.”

As I said before, a con-artist isn’t looking at just YOUR property.  If they’re running a scam, they’re going to walk away when you ask for their past T1′s and NOA’s.

The tenant in the Toronto Life story seemed to have money in his bank account, and “he drove a Range Rover” as the article explains, but I have to wonder if ALL the steps I’ve listed above were followed.  A con-artist can fake one, two, or three of these – but can they fake ALL of them?  Would they bother trying?

If you’re a landlord, remember that you need to schedule regular inspections at your property, at least bi-monthly, for the duration of the lease.  If you don’t, then to be perfectly honest, you have only yourself to blame if you find there are twenty people living in your 3-bedroom house.

And if you were scared by reading Toronto Life’s “Tenant From Hell” and The Globe & Mail’s “Nightmare Rental,” just remember that scary sells newspapers, and these stories are not representative of a typical experience.

Well, I for one can’t wait for Toronto Life’s next article “Realtor From Hell.”  Now that is a headline that would sell magazines…