Avoiding the criminal element
When investing in real estate, it is imperative that you jump in, eyes wide open. Among the many hazards that may await you as a landlord of rental property, some of the more hidden ones can be lumped into the category of: you, crime and your responsibility for vicarious liability. I have written in a prior article here about overzealous district attorneys who go head-hunting for investment property owners…Landlords who did nothing except install the wrong tenant in their building. And yet the landlord was held responsible for the criminal actions of his tenant. And they were prosecuted for those tenant misdoings. Crazy? You bet!
Low vacancy shouldn’t mean cutting corners
It would be easy to say, “make sure you choose the right tenant” when real estate investing. In reality, any landlord facing a vacancy wants to find a tenant fast. They don’t want investment opportunities to be squandered by not renting at as close to full capacity as possible, all the time. And in so doing, investment property owners may not be as discriminant as they should be. And yes, you can discriminate for a prospective tenant’s prior criminal record. It’s strictly business – you want to install tenants that are honest, trustworthy and pay on time every month. You want, scratch that – you need – tenants that don’t cause trouble – or can even cause the perception of trouble. So it is your right to discriminate based on an economic issue. And a criminal background can be counted as a potential economic liability. Naturally, you’ll want to select tenants by doing your proper due diligence. Make sure you run a background check on them. Now this doesn’t mean a criminal conviction automatically rules them out. You need to use common sense and weigh their past behavior with who they are now. That’s only fair. Make sure you talk to their employer, and certainly past landlords…especially their last one or two. Also, run a credit check on them as well. When you have all your tenant information in front of you, you can calmly decide if they will make for a good tenant for you.
Stay away from confrontation
So what if you did all this, signed them up with a lease, and yet you subsequently suspect criminal activity is occurring in your building? Clearly, it would be incredibly stupid to confront the bad tenants. If you have suspicions, make a log of the suspicious activities you can see. Also, make sure your tenant leases include the ability for you (or your property manager) to make regular visits to look inside their unit…weekly if possible…but definitely once a month at the least. Make notes after each visit. If you suspect drug activity, for example (or worse, the making of methamphetamine a la “Breaking Bad,”) then you need to report your suspicions, along with your written log, to your local police. Let them take care of the problem. At the very least, never singlehandedly confront a tenant. It’s much, much safer to let the police do this. In addition, keep in mind that by your simply reporting suspicious activity to the police, you remove yourself from potential vicarious liability of the criminal actions of your tenant(s). A district attorney would see you were proactive, and he could never make a case that you were somehow liable for any criminal activity that your tenant may be doing.
photos courtesy of clickpropertymanagement.co.nz, tenantscreeningblog.com, homesathomes.co.uk