If you own and lease commercial property, the only thing worse than having difficult and unreliable tenants might be going through a bankruptcy–and more often that not the two circumstances are closely related. But while unreliable commercial tenants are undeniably a fact of life, they don’t need to be a fact of your life. Indeed, there a number of things you can do to decrease the chances of finding yourself stuck with a tenant who values your property–and the time and effort you put in as a landlord–less than you do.
One of the best things you can (and should) do is to hire the services of one of the many professional tenant screening companies. Tenant screening companies, as the name implies, specialize in offering the services you need to make the best possible decisions when selecting among a pool of prospective tenants. What kinds of services am I talking about? Everything from validation of the tenant’s social security number to documentation of his/her bankruptcy history, from credit score reports to criminal records. Provided at relatively affordable prices, these documents can make the difference between choosing a good tenant and a bad one, between a tenant who will pay her lease on time and one who will make you want to pay herto get out of your contract.
Even before you decide to purchase the services of a tenant screening company, however, there are a number of questions you yourself can (and should) ask potential tenants to help reduce the odds of contracting one you will later regret. These questions include:
(1) Who will the tenant be and who is guaranteeing the lease?
(2) What is the tenant’s commercial background?
(3) What is the tenant’s plan for operating the business?
(4) Who does the tenant envision the business selling to?
(5) What is the tenant’s first year operating budget?
In addition to asking these questions, landlords are advised to acquire the sorts of information provided by tenant screening companies described above, as well as some other general information:
(6) A background report on the tenant’s business history;
(7) A short mission statement that describes the tenant’s business;
(8) A report on the tenant’s recent financial success;
(9) A personal and business financial statement;
(10) Documentation of recent tax returns.
While asking these sorts of questions and uncovering this kind of information can help you significantly reduce the likelihood of a negative landlord-tenant situation, you don’t want to get carried away with your question asking. Indeed, it’s important to remember that there are certain questions which you are legally prohibited from asking when screening for potential tenants. These include questions regarding the prospective tenant’s race, national origin, religion, sexual orientation, familial and disability status. Of course, asking such questions could potentially help you avoid a negative landlord-tenant situation–but only because you might soon be out of business.
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