Screen Tenants Even When Signing the Lease

This is the last part in a five-part series that guides you through the tenant screening process. Here, we’ll talk about the lease itself as the last and final opportunity to screen tenants before finally turning over the keys. In our previous post on this topic, accepting and rejecting applicants, we talked about putting everything together to make your final decision and notify applicants. By now, you should have accepted an applicant (or group of applicants if they’ll be roommates) and have either declined the outstanding applicants or are planning to do so shortly.

In this part of the series, we’ll talk about the applicant(s) you have accepted and how to use the lease signing process to remove any last doubt. But, I already approved the tenant, you may ask? It’s not too late to rip up the lease and move on to another applicant if needed. It’s not too late until you hand over the keys and the tenant moves in. At this point its not ideal to have to let go of this tenant, especially given how far in the process you are, but it will be far easier, quicker and less painful removing this tenant now than once they have the keys.

If you’ve followed the other four parts of our series, then you’re in good shape and it will be much less likely that you’ll find any issues at this point. Here’s a quick recap of the last four parts, if you missed them.

A Quick Recap: Five Stages to a Good Screening Process

Lease Signing

Stage 1: First Contact – The prospective tenant calls you for more information about the property and the lease. Ask some pre-screening questions to make sure this prospective tenant isn’t going to waste your time.

Stage 2: The Showing – The prospective tenant has passed stage 1. Now, you’ve scheduled to show the apartment and will meet the prospective tenant(s) face-to-face for the first time. Watch out for these red flags.

Stage 3: The Application – Your prospective tenant is still interested and so are you. Have him or her fill out a rental application that includes references from prior landlords and employers. Run a credit report and criminal check.

Stage 4: Approval Process – This tenant seems like a good candidate. Accept him or her and gently decline all other applicants. Until you have a signed lease, though, you’re not done screening.

Stage 5: Lease Signing – This last screening step serves two purposes: 1) remove any lingering doubt about the tenant, and 2) set expectations and embed the tenant with the right mindset and behaviors around the rental.

Review the Rental Lease With the Tenant

In person, or over the phone, you should review the lease with the tenant. Start with the important terms like the rental amount, when it’s due, the late fee should it be late, the security deposit that’s required, when he/she can move in and when you expect to have the tenant move out. If there are pet fees, utility fees, etc. make sure to cover those. At each term you bring up, you should look for some confirmation that the tenant understands, typically a head nod. They should be taking this seriously. As you’re going through this, there shouldn’t be any surprises to the tenant. They should already have heard these terms from you throughout the application/screening process.

Once you’ve talked about the major terms, you should continue reviewing each of the clauses in the lease, at least briefly. You should be familiar with the clauses enough to know what your rights are as the landlord, but also to be able to field questions from the tenant. Then, you should finally review the rules and regulations section of the lease, spending more time here so that the tenant knows you take these rules seriously. Let them know what the penalties are for violating these rules (fines, fees, evictions, etc.).

By doing this, you’ve given yourself the opportunity for one big red flag to pop up, and this is how serious does the tenant take this commitment. Is he/she respectful during this process, listening attentively, asking questions for clarification? Great. He’s taking it seriously. Does he otherwise have more of a “yeah, yeah” attitude? Is he trying to just sign and get the keys? Red flag. He’s not taking the process (or you) seriously. If it’s the latter here, pause and tell the tenant this is an important commitment they’re making, one with a financial obligation. Ask him point blank, “are you sure you can handle this commitment?” If that doesn’t shift the attitude and make him more serious, consider ripping up the lease.

A lot about the tenant screening process is not just doing your due diligence, but setting the stage to prevent future problems. Tenants know that if they go through all the hoops to get a rental, then they know you take it seriously and they are therefore less likely to break rules or pay rent late. This last step is the culmination of all that, and should instill the right mindset in the tenant. The fact that you are sitting down (or on the phone) with the tenant, going through the lease, explaining the rules, and all that comes with it is a clear signal to the tenant about what you expect from them.

To learn everything you need to know about rental leases, check out our Complete Guide to Rental leases.

First Month’s Rent, Security Deposit, and Move-In Fees

It’s quite typical that at the time of lease signing, the tenant is expected to pay first month’s rent. Also at this time, a security deposit and/or move-in fee might be required. If so, make sure to communicate this to the tenant before they come by to review the lease. They should bring with them the check(s) for these payments, which you’ll want to deposit immediately after the lease has been signed. Just so there’s less confusion, all this should occur about 2 weeks to 30 days before the lease would start, not on the move-in day. Why? You’re still screening the tenant here. These first payments are the first signal as to how the tenant will be paying going forward.

The tenant should have the payments with them (or within a couple days if they’re making their payments online). You can sign the lease, but then afterward, immediately deposit those payments. After about 3 days, all those payments should have cleared. Most landlords believe that a security deposit is meant to be used to help you recover any damages that a tenant may cause during the tenancy. And although this may have been true a decade ago, laws around security deposits make it so tough to actually use the security deposit that way, that it now serves a far more important purpose… screening. Does the tenant have enough income to accumulate a savings to cover a deposit? Means they can afford the property. Does the tenant’s check for the first month’s rent and deposit clear? Means they had the money and know how to manage it, and didn’t give you a check they knew would bounce.

That’s why the first month’s rent and deposit should be taken prior to handing over the keys and allowing the tenant to move in. Give yourself at least 7 days for payments to clear, but its far more typical that a lease is signed about 2 weeks to 30 days before move in.

If the checks don’t clear. Don’t let them move in. Period. 

A signed lease is considered voidable should the first month’s rent and/or deposit checks fail. They made an obligation to pay and would have failed already. Its quite easy at this point to void the lease (and not hand over any keys). If you allow them to move in, however, its no longer an issue of whether the contractual obligations were met, you now have to face tenancy laws and can’t simply kick them out.

Set a Deadline

If the tenant isn’t signing the lease while onsite with you (or will be signing a digital lease), then make sure to communicate a deadline for signing the lease. It’s not uncommon for a tenant to feel pressured and not want to sign on the spot. That’s normal. So give them a deadline to sign the lease. This should typically be 24 hours, or 48 hours if you feel generous. But, don’t take the unit off the market until you have a signed lease with cleared payments. And make your policy around that clear.

If a tenant doesn’t feel that 24-48 hours is enough time for them to review and sign the lease, that’s a red flag for you. It likely means that they are applying for multiple properties and haven’t yet decided that they actually want to rent your property. You could end up wasting a lot of time here for this tenant to ultimately rent somewhere else. If a tenant suggests that 24-48 hours is too quick, communicate back that you are organized and responsible. It’s how you run your rental business. Remind the tenant that after the deadline passes, you can no longer hold the property for them and must pursue your alternative applicants.

Which means you should have some backup applicants ready to go. Often times, emotion can take over here. If you don’t have a backup in place, you’ll feel pressured yourself to do what you can to keep this one (and only) tenant. Have some backups so that you have control and don’t feel forced into extending your time period indefinitely.

Being Compliant with Ordinances

Just a quick note about the lease, the process and staying compliant with ordinances. It’s easy to miss something small (i.e. not providing a lead paint disclosure pamphlet) that essentially allows your tenant to have the lease be void at will. This could give the tenant an option, unknown to you, to back out of the lease at anytime, even after he has moved in. This puts you in a tough spot and could leave you with an unexpected vacancy.

The following are things you should make sure to do at the time you sign the lease:

  1. Comply with local ordinances. You should actually look online and grab the ordinances for your state and city (not every city has their own ordinances, but many major cities do). Read these and be familiar with them. You should actually do this before the lease signing process.
  2. Provide all the required national, state and local disclosures documents and forms. All leases are required to include a lead-based paint disclosure and pamphlet. Most states then require a mold disclosure and pamphlet. Larger cities typically now require a bedbugs disclosure.
  3. Provide receipts for any payments, especially around the security deposit. Most states require that you provide a receipt for a deposit. You should generally do this for all payments you receive.

Need Help Finding and Screening Tenants?

It’s what we do. We help you find and screen tenants. Every step mentioned in our five-part screening process has been moved online, with clear steps and automation to make it fast and organized. If you want to learn more about how we help landlords, read about our tenant screening tools here.

Otherwise, have questions? Email us at support@rentalutions.com or leave a comment below and I’ll be happy to assist.

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