A good tenant is a blessing to most landlords, who have spent a great deal of money to buy the property, and perhaps a certain amount of investment in renovation and furnishing. The last thing landlords want to see are rogue tenants that ruin their investments and cause them endless nightmares.
Bad tenants include (but are not limited to) those who default on rental payment, overstay, do not take good care of the properties, disrespect the neighbours and misuse the property for illegal businesses.
How to avoid nightmarish tenants? Is it even possible to identify them beforehand? In the unfortunate event of having bad tenants in the house, what can landlords do?
These are some of the topics discussed at EdgeProp.my’s virtual Fireside Chat entitled “How to avoid tenants from hell” held on December 7, 2020. Three experienced property negotiators and agents shed light on the often overlooked “red flags” of potentially bad tenants, as well as how to resolve the problems.
Hosted by EdgeProp.my editor-in-chief and managing director Au Foong Yee, the Facebook live session is supported by Nippon Paint Malaysia.
Red flags for nasty tenants
As much as we’d like to have the perfect solution to keeping bad tenants away, the unlovely reality is that there is no foolproof method to filtering out bad tenants.
Reapfield Properties (SJ) Sdn Bhd senior real estate negotiator Carmen Lee shared her own experience of coming across a seemingly wealthy family who wanted to rent a house.
“The landlord was very happy as the father had a decent job as a contractor, and the mother cared so much for cleanliness. But the family turned out to be one of the ‘bad tenants’ who delayed on rental payments and gave all kinds of excuses for the delay,” she said.
Hence diligent checks are important when screening potential tenants. In this, mindful realtors could use their years of experience to help landlords.
What are the often overlooked signs of potentially bad tenants?
1. Only pay by cash
According to his own experience, Reapfield Properties (Puchong) Sdn Bhd probationary estate agent Roslan Shapri pointed out that those who only pay cash could potentially turn into bad tenants, as their money could possibly come from illegal means.
“Pure cash payment is definitely a red flag,” warned Roslan.
He had encountered five brothers, all with Datukship titles, who wanted to rent a house in Damansara Heights. However, the deal did not go through as the tenants insisted on paying the rental and deposit by cash, which added up to quite a large amount.
“A year after that, the news reported that these people were actually money launderers,” he recounted.
2. Desperate tenants
Landlords might be delighted upon securing a tenant within a short time span, but Reapfield Properties (HQ) Sdn Bhd senior real estate negotiator Joyce Perera reminded landlords to beware of those who make decision too fast after only a brief visit to the property, or request to move in immediately.
“This is actually a warning sign, as there might be some issues on their previous tenancy,” she said, adding that it is important to know the reasons behind the hasty move.
Ways to identify bad apples
Although there is no way to guarantee a 100% avoidance of rogue tenants, thorough screening can at least help to identify some traps. The realtors emphasised the importance of careful checking, and shared various means of investigating the tenants.
Lee suggested that when possible, search for the name of the potential tenant on the internet or in social media. “While we cannot judge a book based by its cover, at least it gives us an indication of what the person is like,” she said.
She also shared an example of a landlord asking the tenant to present his CTOS (Credit Tip-off Service) report in exchange for a rental deduction.
“Although it is not a common practice in Malaysia, one of my clients had asked for the tenant’s CTOS report in exchange for lower rental. This can lead to a win-win situation, as the landlord gets an assurance on the credibility of the tenant, while the tenant gets cheaper rent,” she elaborated.
Perera, whose clients are mostly expatriates and multinational companies, said that she would check the expatriate tenants’ company letters to verify their employments, and ask when their working permits and visas will expire.
When the tenant is a company, she would request for full documentations such as the Companies Commission of Malaysia (SSM) form that shows what kind of business the tenant runs. “A realtor needs to do sufficient homework. I will pay a visit to the companies to make sure their businesses are really in operation,” she said.
She added that sometimes, a simple search could also reveal the truth. “There was a time when I searched on Google map for the home address of a ‘multinational company’ director and found that he lived in a low-cost flat. This is something we need to alert the landlord about,” she stressed.
In some countries, such as the US and the UK, there is a mechanism called tenant registry (or simply the registry) used as a risk management tool for landlords to screen potential tenants.
At present, there is no similar database available in Malaysia. Perera said having a database is a good idea, but it is not easy to establish one.
Roslan concurred that there is a need for such a system, but its purpose should be to serve as a deterrent to trouble-making tenants, instead of a blacklist to penalise anyone.
Handling rogue renters
If unfortunately a bad tenant is already in the house, what should a landlord do to halt the losses?
There are several legal actions that can be taken against tenants who default in rental payments or overstay. However, as the legal process is costly and time-consuming, it should be the last resort after all other means to recover the property are exhausted.
In tenancy agreements, the default of rents should not be more than two months, or the landlord can issue the eviction notice and have the authority to enter the premises if the tenant is uncooperative.
“However, we would first try other means to collect the rent or have the tenants move out, before taking more severe actions to evict the tenants,” said Roslan.
He stressed that it is important to find out the cause for the delay in rental payment, especially now when the Covid-19 pandemic has caused many to suffer income losses, and try to find solutions that work for both landlord and tenant.
Before taking legal actions, Perera suggested landlords should ask for help from the building’s management such as barring the tenant’s access card.
“If a tenant defaults on rental, you could send reminders and also try to ask for the management’s help to monitor his or her movements, in case the tenant moves out without you noticing,” she cautioned.
Roslan also underlined the importance of spelling out clear terms within the tenancy agreement. When disputes arise between landlords and tenants, the tenancy agreement would become an important reference.
Opting for added services
In Malaysia, most landlords and tenants would expect “after-sales services” from realtors. However, as Roslan pointed out, it is not the realtors’ obligation to stay in the picture after the deal is sealed.
In the rental market, the role of a realtor is to match landlords with tenants. Nevertheless, many realtors have taken the extra mile to assist landlords and tenants with issues that arise after signing the tenancy agreements.
Indeed, realtors play a vital role in offering a helping hand to inexperienced landlords and tenants. As there is no foolproof method in filtering out bad tenants, engaging with a realtor who is professional and willing to help would be a great relief to landlords.
All three realtors at the Fireside Chat have been helping their clients in various instances throughout the tenancy terms.
Lee usually pays closer attention in the first three months after the signing of the tenancy agreement, to check whether things go smoothly and whether or not the tenants pay rents on time.
Roslan noted that it is necessary for agents to manage the expectations of both landlords and tenants, and brief them about terms of the agreement. This is to ensure that both parties are on the same page.
“By doing this, half of the problems can be prevented,” he said.
There are landlords who engage realtors, like Perera, to help manage their tenants. “I (even) pay the contractors upfront in order to ensure speedy delivery of their services. When tenants are happy, they tend to extend the rental lease,” she said. Perera suggested that landlords and tenants could ask about after-sales services before picking a realtor.
Roslan concurred and added that realtors have to understand that their relationships with the landlords and tenants are long-term ones.
“However, whether or not to answer the call depends on each realtor. As it is not compulsory for a realtor to always be there to assist, clients should ask the realtor whether he or she is prepared to do this,” he said.
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