Dear Prospective Landlord, Please Fill Out This Credit Application . . .
by Evan Vanderwey on 22/04/10 at 11:02 am
Renters beware!
Your landlord may need you a lot more than you need them and your rent may be buying him groceries rather than paying the mortgage against the home you are living in.
Homeowners and Real Estate investors in greater numbers than ever before are struggling to make all of their payments. Like any of us would be tempted to do, landlords who own homes or apartments and collect rent from tenants are using that money for their personal living expenses and allowing the mortgage on that home to become delinquent. They prioritize their finances to keep their own home mortgage paid and keep food on their table and then they make the payments against their credit cards and rental home mortgages if there is any left.
I just hung up the phone with a client who is being forced to move from their current rental home (the second time in 12 months) because of a colorful sticker that appeared on the front door of the home a few months ago. Their landlord was unable to keep the home and the tenant is now forced by the bank who controls the real estate to vacate.
Today there are more families than ever in need of adequate housing but are with out an approvable mortgage loan so they cannot buy a home. Don’t hear me wrong on this – I am not an advocate for loosening the credit standards so that these folks can qualify to buy a home before they are ready. I am a proponent of successful home ownership which means that prospective homeowners become financially stable before making the jump in (or back in) to home ownership.
That being said, apartment buildings don’t do a good job housing Mom, Dad, three kids a Dog and what ever else comes with all of that. Sometimes homes are required to be rented form an individual rather than an independent management company.
Thankfully, many homes are being listed for RENT rather than SALE which is filling a need in the market right now and helping out folks who need more than a two bedroom apartment to meet their needs.
These individuals (landlords), however, who are supposed to play by all the same rules, are not regulated well. So what can the Tenant do to protect himself?
I suggest two simple additions to the lease contract:
1. Require that the Landlord send you a copy of their mortgage statement proving that their last months bill was paid each month – on time. This can be written into the lease as a requirement. Get a copy of it prior to signing the lease and each month or two there after. If he is struggling to pay on time, at least you will not be surprised.
2. Require that your security deposit be made into a separate account with the name of the home (address or some other appropriate name) on it and that the monthly statements are sent to you every so often to make sure that your deposit is safe. If a landlord is late on the mortgage payment, they will generally have spent your security deposit. You can make sure that you are aware of it as soon as it happens, again, rather than being surprised later.
Landlords losing homes is not as common as tenants not paying rent. However, it is becoming more common these days. If you ask for this to be made part of your lease up front, then you will be able to ask for the proof later. If you don’t, you might find out the hard way that your Landlord was never able to afford that Lexus they drove up in nine months ago when they had you sign their credit application.
This is a simple and smart thing to do – don’t sign a lease without some level of assurance that your money is going in the right direction and insuring you have a place to live next month.
