Being a new landlord or property owner comes with a lot of responsibility. There’s a multitude of tasks to manage and one small oversight could translate into a costly mistake.
While seasoned property owners may have learned to properly handle points of contention often through trial by fire, less experienced landlords may find it challenging to address common issues that occur.
You may also find that tenants can be savvy when they want to be. There are a number of protections and resources provided to tenants that are simply not available to property owners.
In matters of the law, rules and regulations are always changing and it can be hard to keep track of what is legally permissible and what isn’t when it comes to renting real estate.
There are hundreds of issues that could come up when renting a new property and Marda Management has dealt with them all.
With over a decade of experience offering full-service property management services to investors and owners of all sizes, here is a list of the most common costly mistakes we have found new owners to make.
List of Common Costly New Landlord Mistakes
It’s important to be proactive and try to identify key processes in your rental business that might leave you vulnerable to additional risk or that could cost you both time and money.
By understanding what common costly mistakes impact new landlords the most, you can develop a preemptive plan to tackle these situations before they fester and become truly damaging.
1. Not Running Credit and Background Checks
Improper tenant screening is one of the biggest oversights that new property owners and investors make when renting a property.
One of the foremost reasons to adopt prudent tenant screening procedures is because it can protect your property, along with the safety and security of your other tenants (if you own multiple units in a building).
By checking to make sure tenants don’t have a negative rental history, you can help reduce the risk of paying to repair excessive damages to your property and lower your liability against criminal acts.
You also want to rent to someone who has a reputation of paying their rent in full and on time. While some cases might offer you protection under the Residential Tenancies Act, there are times where you might not have any immediate recourse.
Don’t also be fooled if a prospective tenant works in a reputable profession, such as a lawyer or doctor. Just because they can perform heart surgery or sue a big corporation doesn’t mean they are a good tenant.
The same holds true for a close friend, acquaintance, or relative, any of which can be just as sloppy with making their rent payment as anyone else.
2. Failure to Respond to an Assignment Request
It’s not always easy working with a tenant who has indicated that they want to terminate their lease early. Working with your tenant is essential in order to come to an appropriate resolution that works for you both.
One option many tenants try to leverage is finding a replacement renter to assign their lease to. In this situation, it’s important to understand your requirements under the Residential Tenancies Act.
Under the law, your tenant can apply to have the lease passed to another party, of which you may or may not agree to. As a property owner, you must respond to the request within a period of 7 days.1 If you fail to respond to your tenant’s assignment request, they can terminate the lease immediately without any other cause.1
3. Relying on a No Pets Clause
There are many ways to structure a lease agreement. In fact, one of the best things you can do is add specific clauses pertaining to how the property can be occupied, utilized, and enjoyed by your renter.
However, sometimes adding a clause to a lease can offer you a false sense of security. For example, it is unlawful to prohibit tenants from having a pet even if you add a no pet clause to the lease agreement.2
There are only specific instances where it is permissible to evict a tenant for keeping a pet. Some situations include those where a pet causes undue damage to the rental unit or common spaces or causes an excessive nuisance where others cannot enjoy the property properly.
If the pet also poses a safety risk to others could also be grounds for eviction. An example is if anyone in the building (including you as the landlord) is allergic to the pet or if the pet acts aggressively towards others.2
There are also some breeds and species restrictions that can be enforced if the pet falls into a category that has been found to be inherently aggressive and a risk to others.2
4. Lack of Knowledge of Rental Rules and Regulations
New landlords often fall into the trap of not having sufficient knowledge about rental rules and regulations that govern their ability to effectively manage their property or handle a myriad of tenant related issues.
For example, if you enter into a tenant dispute, it may get escalated to the Tenant Board which already has a backed-up case log. If they side with the tenant because you failed to understand a certain rule or regulation, it could cost you a lot of wasted time and money.
A few mistakes that might seem simple but can be common for newer landlords to overlook include failure to provide a copy of the fully executed lease agreement to a tenant.
You are also required to provide rental payment receipts when requested and cannot charge a few for this service. The same goes for a security deposit or other charge.
Not understanding current guidelines as they pertain to your rental business could result in needless violations.
For example, you can provide your tenant with a form N1 – Notice to Increase Rent, but you can only do so once every 12-month period (unless special circumstances have been approved by your Landlord and Tenant Board).3
You also cannot round up. If you do, it could be constituted as an illegal rent increase.
5. Failure to Hire a Property Management Company
While you may be an ambitious investor or property owner, the truth is that everyone needs a little bit of help every now and then. Many new landlords make the mistake of biting off more than they can chew.
But making a simple mistake can swiftly erode the returns on your investment. If you lack the proper knowledge or just don’t have the time to actively manage your rental property business, it’s better to delegate those activities to a seasoned property management company.
Utilizing a full-service property management company like Marda Management is a smart move and can help you avoid costly mistakes by key tasks that are prone to oversight. Some high priority tasks include tenant screening, lease enforcement, and lease renewal.
Also, having a delegated process for some of the more monotonous tasks, such as rent collection and disclosing notices, can also help lower your risk and reduce unforeseen costs, thereby freeing up time and resources that can be dedicated to other important projects.
Sources
1 Surex. (2020, December 18). Guide for Tenants Breaking Lease Early in Ontario. Retrieved March 14, 2022, from https://www.surex.com/blog/guide-tenants-breaking-lease-early-ontario
2 Landlord Self Help Centre. (2019, May 15). The rental unit is a condominium which does not allow pets. My tenant moved in without a pet but has now brought in one, is there anything I can do about this? – Landlord’s Self Help Centre. Retrieved March 14, 2022, from https://landlordselfhelp.com/ufaqs/faq-705/
3 Landlord Self Help Centre. (2020, November 2). Transcript: N1 – Notice of Rent Increase (Guideline Increase) Update. Retrieved March 14, 2022, from https://landlordselfhelp.com/podcast/n1-notice-of-rent-increase/
