Before you can start collecting rental income, you need an active tenant. And before you get an active tenant, you’ll need to collect tenant applications from potential candidates. On these applications, your tenants will provide tons of personal details, including their identifying information, rental history, employment information, and more.
So, what should you do if you find out that a tenant lied on their application? How should you handle this rare, yet critical situation?
The Importance of Due Diligence
First, we need to go over the importance of doing your due diligence. This situation is only going to arise if two conditions are met: first, you need to actually collect tenant applications, and second, you need to follow up on those applications to verify that the information is correct.
If you fail to meet either of these conditions, you’ll automatically be putting yourself in a bad spot. Not all tenants will be equally valuable when renting your property, since some of them won’t be able to make enough money to pay rent consistently and others have tendencies that could jeopardize the integrity of your property or otherwise make your life difficult.
Tenant screening is indispensable. You can’t simply assume that a tenant is going to be a valuable addition to your property, nor can you assume that everything they stated on their application is correct. It’s on you to verify all this information and make an appropriate decision on whether or not to bring this person in.
Fortunately, you don’t have to do this entirely by yourself. By working with a property management company like Green Residential, you can effectively handle tenant screening without lifting a finger yourself.
Fraud vs. Innocent Mistakes
It’s also important to acknowledge that there’s a big difference between outright application fraud and an innocent mistake. In the course of your due diligence, you may find that some of the information stated by your tenant is not accurate. This doesn’t necessarily mean that they have lied to you.
There are many potential explanations for why this discrepancy exists. For starters, this information could be accurate as far as the tenant knows; they may be honestly and accurately representing what they believe in their own mind. Additionally, people make mistakes regularly, especially if they feel rushed or if they’re stressed about something. It’s human nature to slip up from time to time. It’s trivially easy for your tenants to forget about something or make a typo when filling out the form.
That said, there are some situations that are completely indefensible.
The Most Common Tenant Application Lies
Be on the lookout for common lies in these areas, as they are some of the most popular opportunities for tenants to lie to gain some kind of advantage:
- Income. One of the most important factors for reviewing tenant applications is going to be income. Does this person have a job, how much does this job pay, and how long have they had this employment opportunity? The longer and more consistently this person has worked, the more confidently you can approve them. The more income they make, the more reliably they should be able to pay rent. Occasionally, tenants will lie, claiming to have a job that doesn’t exist or overstating how much money they make. This is dangerous since approving them could jeopardize your rental income.
- References. It’s also relatively common for tenants to lie about references, putting down fake names or falsifying the circumstances under which they knew this person. This is one of the harder lies to catch, especially if they get a friend or family member to act as if they are the legitimate reference.
- Renting history. If a tenant has a sketchy rental history, or no rental history at all, they may be inclined to lie. They might lie about how they left the last apartment, how long they rented, or other details.
- Pets. If you have a strict no pets policy, your tenant may claim to have no pets on the application but move in with a pet once they’re approved. Again, this is a difficult lie to catch before approval.
What Are Your Options?
You can often catch tenants in lies and notice erroneous information simply by attempting to validate the information on each application. So, what do you do if you notice a discrepancy?
You have several options:
- Have a conversation. If the mistake seems relatively innocent, consider having a conversation. For example, you might explain that you’re having trouble reaching one of their references or point out conflicting information about their current job. If this truly was an innocent mistake, the tenant can rectify it and explain the error.
- Weigh the pros and cons. In some cases, a small lie may be acceptable, especially if the rest of the tenant application is very strong. For example, if they have an excellent rental history and a high-paying, consistent job, you may be willing to overlook the fact that they tried to pass off their mother as a reference.
- Consult with a lawyer. If you have general legal concerns, or if you want to avoid a potential discrimination lawsuit at all costs, be sure to consult with a lawyer. This is especially important if you feel a tenant was specifically trying to defraud you.
- Reject the applicant and move on. In most cases, the best course of action is to simply reject the applicant and move on. If a tenant is willing to deliberately lie on their application to get into your property, they may be willing to make other ethical breaches while living at your property.
Using Your Best Judgment
Each tenant is unique, as is each tenant application. There’s no formula for making the right decision in all cases, so use your best judgment and consider the details carefully. Better yet, use a property management company so you don’t have to burden yourself with this decision at all. Contact Green Residential today for more information!