If you are a landlord in New York, then you have likely had to deal tenant “headaches”—non-payment of rent by your tenants or tenants who breach the terms of the Lease. As a landlord-tenant attorneys covering New York City and Long Island, we see it every day in both the residential and commercial sectors. Yes, even businesses do not pay their rent and breach their lease.
So what does one do in this situation? You can spend potentially thousands of dollars taking your tenants to court and still never see a dime. Or you can significantly reduce your risk in the first instance by remembering three words … SCREEN YOUR TENANTS! The following article will provide tips on how to do just that.
Tip One: Research your prospective tenants.
If you don’t know who you are dealing with, the attorneys at The Siegel Law Firm, P.C. would be happy to conduct a more comprehensive background investigation, where we will look for red flags such as judgments, liens, foreclosures, massive debt, bankruptcy, pending lawsuits and the like. The presence of any of these blemishes on a prospective tenant’s record points to one sad truth: they simply do not pay their bills.
Tip Two: Ask the right questions.
Are you employed? How will you pay rent? Do you have references?
This question is so basic and presumed that it is seldom asked or verified. After all, why would someone approach you if they have no income? Well, in the real world, people will lie, cheat, and scheme in the interest of self-preservation. Do not fall victim to these charades. Commercial tenants can be start-ups with little to no revenue, but who are in need of office space in order to turn a profit. These businesses may be funded by loans, personal assets, or investor assets. Be mindful not to base your decision to enter a lease on a third-party agreement to which you were not a party. Funding dries up, agreements change, and investors change their minds, despite your tenant’s obligation to pay you rent.
Are you married? Is your spouse employed? Are you divorced? Do you have children? Do you have references from your previous Landlord, your employer, or your accountant?
Why are these questions important to ask initially? First, married couples tend to have more income and thus more ability to meet financial obligations, such as rent. Second, divorce often leads to increased financial responsibilities, such as maintenance (alimony) to a former spouse and child support, both of which may impede a tenant’s ability to pay rent.
What was your reason for moving from your last residence/place of business?
Perhaps your prospective tenant was removed from their prior residence or place of business for failure to pay rent, or some other breach of the terms and conditions of their lease. It is equally possible that they skipped out on the lease to avoid paying past due or future rent. In either case, you do not want to be the one to get stuck with the bill this time. Learn from your fellow landlords’ mistakes!
Tip Three: Demand proof.
For starters, never, and I do mean never, enter a lease unless and until your attorney has reviewed and verified your prospective tenants’ proof of employment. Through an employment search, our firm can determine whether your prospective tenant has the means to pay their rent.
When making a decision to enter into a lease, do not rely on pay stubs or employer letters provided by your prospective tenant. Rather, demand to see copies of bank statements, tax returns, investment portfolios, etc. for the most recent 3 to 5 years. Your attorney can analyze these documents to paint a clearer picture of your tenant’s financial condition and ability to pay rent.
Second, check ID. No one would be foolish enough to enter into an agreement with someone without confirming that they are who they say they are, right? Wrong. It happens more often than you would think, and that can cause some expensive wrinkles in a court case against the “tenant”. So, be sure to consult your attorneys before signing a lease.
Tip Four: Act now.
Remember, a lease is a contract. Once you sign it, you are in it for the long haul, and you are unlikely to solve any problems that arise without investing some serious time and money on litigation. To make matters worse, your non-paying tenant gets to ride out the court case in your property for free. So, you want to ensure that you and your attorney have thoroughly vetted any prospective tenant before entering a lease.
These preventative measures, along with attorney consultation, can save you tens of thousands of dollars in court costs, and make it more likely that you enjoy a long and fruitful business relationship with your tenants.
For additional guidance or to get started with the tenant screening process, please contact our office at: