Retaining your existing tenants should be one of your top priorities as a landlord, especially if your tenants have been responsibly paying their rent on time and taking care of the premises like their own. If your tenants decide to renew their lease, it’s beneficial for you because you won’t need to list your property for rent and go through the entire marketing process again.
However, while you think that extending your tenants’ stay for another term or two is a good idea, you still need to take the necessary precautions to ensure that they remain as responsible as they used to be when they first signed the lease. To do this, a renewal screening process should be performed as soon as your tenants decide to renew their lease.
What is a Renewal Screening Check?
A lease renewal screening process is a comprehensive evaluation of a tenant's suitability for lease renewal. The process involves a series of steps taken by a landlord or property manager to determine if the tenant is qualified for another lease term and help them decide whether to renew a lease agreement with a tenant.
The screening process may include reviewing the tenant's payment history, employment status, credit report, rental history, and criminal background. Landlords use this process to assess the risk of renewing a lease with a tenant and to evaluate the tenant's ability to pay rent.
During the renewal screening process, the landlord may send a lease renewal offer to the tenant along with a request for updated financial and personal information. The landlord may also conduct a physical inspection of the rental unit to assess its condition and ensure that the tenant is complying with the terms of the lease agreement.
Based on the results of the screening process, the landlord may choose to offer a lease renewal with the same terms, offer a renewal with revised terms, or not offer a renewal at all. The screening process is important to ensure that the landlord selects responsible tenants and maintains the value of the rental property.
What are the Benefits of Lease Renewal Screenings?
There are several benefits of conducting a lease renewal screening process, especially when it comes to protecting your bottom line. Here are the top five reasons why you should consider re-screening your tenants before allowing them to renew their leases:
1. Reducing Tenant Turnover
By conducting a lease renewal screening process, landlords can identify if the tenants will remain responsible and reliable in complying with the terms of the lease. This, in turn, reduces tenant turnover and saves time and money on finding new tenants.
2. Ensuring Financial Stability
The renewal screening process helps landlords evaluate the financial stability of their tenants. This helps to ensure that tenants are able to pay rent on time and maintain a good payment history for another lease term.
While you can evaluate the payment history of your tenants for the past lease term, a lot of things could have happened during the tenancy which may have affected your tenants’ finances. Verifying their current financial situation can help you get rid of any potential problems in the future.
3. Reducing Property Damage
Conducting a physical inspection during the renewal process can help identify any potential maintenance or repair issues before they become major problems. You will also be able to determine which issues are due to normal wear and tear, and which are due to abusive behavior or negligence.
By including this in your renewal screening procedure, you can significantly reduce property damage, save money in the long run, and avoid tenants who do not take care of the property as they should.
4. Reducing the Risk of Eviction
By evaluating a tenant's payment history and behavior during the renewal process, landlords can identify potential issues and address them before they escalate into an eviction. This reduces the risk of eviction and the associated costs for both the landlord and the tenant.
5. Peace of Mind
Renewal screening is less stressful than initial screenings since you already know your tenants partly. By ensuring that the tenants have the same level of financial stability and sense of responsibility for the next lease term, you will have peace of mind that your investment property will be in good hands.
How to Conduct a Lease Renewal Screening?
Conducting a lease renewal screening process is an important step for landlords to ensure that they maintain reliable and responsible tenants in their rental properties.
Here are some key steps to follow when conducting a lease renewal screening process:
Step 1: Review the Tenant's Rental History
Start by reviewing the tenant's rental history with you, including their payment history, any late payments, and any complaints or issues that may have arisen during their tenancy. You may also check with the neighbors and see if they have encountered any problems with the tenants during the tenancy.
Step 2: Request Updated Financial Information
Request updated financial information from the tenant, including their current employment status, income, and credit score. This will help you evaluate the tenant's financial stability and ability to pay rent on time.
Step 3: Conduct a Physical Inspection
Conducting a physical inspection of the rental property is crucial so you can identify any damage or maintenance issues that need to be addressed.
This inspection will help you determine whether the tenant has maintained the property in good condition and has complied with the lease agreement regarding property maintenance.
Step 4: Review the Tenant's Criminal Background
Reviewing the tenant's criminal background will help you determine whether the tenant poses a risk to other tenants or neighbors. You may choose to conduct a more thorough background check depending on your preferences and local laws.
Step 5: Evaluate the Tenant's Compliance with the Lease Agreement
Review whether the tenant has followed the rules regarding noise, pets, parking, and other terms of the lease. If the tenant has not followed the rules, consider whether the issues can be addressed through a lease amendment or if it is necessary to terminate the lease agreement.
Step 6: Consider Offering a Lease Renewal
After completing the screening process, consider whether to offer the tenant a lease renewal or not. If the tenant has been a good tenant and has met the screening criteria, it may be in your best interest to renew their lease. This will help you maintain consistent rental income and reduce tenant turnover and long vacancies.
Step 7: Offer a Renewal Agreement
If you decide to offer a lease renewal, prepare a new lease agreement with updated terms, including any changes to rent, lease duration, or other provisions. Make sure the tenant understands and agrees to the new terms before signing the lease agreement.
Lease renewal screening checks are an important step for landlords to ensure that they maintain reliable and responsible renters. This will help landlords make informed decisions about renewing a lease agreement and reduce the risk of tenant turnover, property damage, and eviction.
If you are not sure how to process a renewal screening check, it’s best to work with a reliable property manager who understands the local laws in your area. Our team at Income Realty Corporation can help you with just that! Get in touch today!