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Becoming a Landlord? Choose Tenants Wisely

Written by on Monday, 27 August 2012 7:00 pm

In recent years low interest rates and an active housing market prompted many Canadians to buy income properties and become landlords. It's estimated that at least one-third of new condominiums purchased in Toronto in the last year have been by bought by investors, but only about 10 to 15 per cent of condos come on the resale market within a year. The remainder are being retained by the investors and rented out.

Property management companies can be hired to find and deal with tenants, but many small investors take the do-it-yourself approach and select their own tenants. Getting the right tenant, who pays his rent on time, respects his neighbours and doesn't trash the property can be a tricky business.

"It is a documented fact that trusting your gut feeling, when deciding on which applicant to choose, is responsible for over 30 per cent of the quantifiable losses of rental property assets," says the Rent Check Credit Bureau . "Some technically knowledgeable tenants even know how to cover up their activities and change their personal identities."

Landlord advocacy groups say that in many jurisdictions, tenancy laws are tilted too much in favour of tenants and that some are taking advantage of the situation. Ontario Superior Court Justice Ted Matlow recently called for changes to the system in an Ontario Divisional Court ruling.

"My recent experience sitting as a judge of the court to hear motions has convinced me that there is a growing practice by unscrupulous residential tenants to manipulate the law improperly and often dishonestly, to enable them to remain in their rented premises for long periods of time without having to pay rent to their landlords," he wrote. "It is a practice that imposes an unfair hardship on landlords and reflects badly on the civil justice system in Ontario. It calls for government, the Landlord and Tenant Board and this court to respond."

As an example, Judge Matlow used the case of landlord Melissa D'Amico, who bought a small building with a commercial unit and an apartment. She lived in the apartment for a few years and but then moved out "into a cheap rental property as I wanted to use the unit to generate some income. This is the only investment property I own," she stated in her affidavit to the court.

She rented the unit on October 11, 2011 and signed a lease with tenant Rony Hitti and Anastassia Adani and Hitti's company, Toronto Bespoke Inc. The rent was to be $3,600 per month.

The tenants never paid any rent. Twice in the ensuing months there were eviction hearings, and twice the tenants delayed eviction by giving D'Amico bad cheques. At the time of Matlow's ruling, the tenants were still in the unit and owed about $25,000 in rent.

D'Amico's affidavit says that recently she discovered that the tenants "have a history of initiating frivolous appeals to obtain rent-free housing," citing court disputes about unpaid rent with Hitti's former landlord.

Judge Matlow ruled that the tenants' most recent appeal "raised no bona fide question of law" and that "it was totally devoid of merit, vexatious and an abuse of process." He awarded court costs of more than $13,000 to D'Amico.

Harry Fine, the lawyer representing D'Amico in the case, told The National Post: "The law is so imbalanced in favour of the tenants the small landlord doesn't have a chance. Every small landlord case is a nightmare. They get into the business because their Realtor says a property has income potential but they forget that it is a business - and a highly regulated business."

Canada Mortgage and Housing Corp. (CMHC) says that each province and territory has different rules, but generally as a landlord, you can ask potential tenants questions that do not infringe on their rights. You can ask where they work and how much they make. You can ask how many people will be living in the unit, and get their names. You can ask if they have pets and if they smoke. You can also request written permission for you to get a credit check and ask for references.

You may not ask about their race, ancestry, place of origin, colour, ethnic origin, citizenship, creed, sex, age, marital status, family status, handicap or if they are receiving public assistance, says CMHC. You may not ask them if their family will be visiting them, or for their social insurance number.

CMHC says that in many areas, information about financial data that was previously available in a credit bureau report is no longer available, and suggests using the Rent Check Credit Bureau .

Perhaps most importantly, landlords should use the references that are provided, especially from former landlords. You should ask if rent payments were made on time and if there were any problems with the tenant. CMHC advises going back two or three tenancies if possible.

Check with the tenant's employer to make sure the information you have been given is accurate. If you can, check court records.

There are also a number of landlord advocacy organizations that can offer help. The Ontario Landlords Association website includes links to provincial and local landlord groups across the country. Another site to check out is Landlord Solutions .

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  About the author, Jim Adair

Individual news stories are based upon the opinions of the writer and does not reflect the opinion of Realty Times.