Experience renting Housing to a business? What screening to do?

[Shane H.]

Hi there - posting this up real quick as I have  a duplex with one unit vacant real close to the Air base here in town - LOTS of construction going on there and I was put in touch with a contractor who has a 3 year contract to do flatwork at the base.

I showed the property yesterday to the business owner and one of his guys, and since I have been the most responsive and secondly my property is located about perfectly for what he's looking for, I think he may call me within a day or two to sign a lease.

I've screened individuals/families etc for my rentals in the past, never a situation like this.

I was given this referral from a contact/acquaintance at a local Building Supplier as he knows the guy and knew he was looking for housing -- he states he has known the guy for years and can vouch for his business/character -- I definitely trust the person who gave the referral as he has been a person I've bounced construction ideas, repair advice etc off of over the years.  I can also verify the work going on at the base/contracts that are in place, just have not seen his directly.

So what sorts of screening/verification should I ask for?

Should I ask for a copy of the contract he has with the govt?  He wishes to pay through his business entity so I'm guessing he'd give me his business tax id etc on his application.

So in a nutshell the deal would be structured as follows:

Company owner pays rent through his company for the property, pays all utilities

3-4 of his employees will be living at the property during the duration of the contract -- I'd assume there'd be a lot of weekends when they go home especially with winter coming on (They do concrete work)

He would like to sign a 6mo lease and then go month to month after that potentially staying the full 3 years as long as the contracts stay in place, the rental is what I'm telling him it is etc.

Trust but verify keeps playing in the back of my mind - however my gut tells me this is a good deal and would work.  He seemed like a stand up guy and they were pouring concrete yesterday, took a break to come look at the place in the middle of the day yesterday.  They will furnish the house - I did offer to lease furniture for them naturally at a higher cost as I've looked into this before on another property and have had quotes done.

Any quick input/responses appreciated.

[Ralph Hunter]

I would follow the same process that you use for other tenant applications. He should fill out the application and agree to a quick credit check. But if the military is using them, then they must be pretty reputable. You could ask for the names and phone numbers of other landlords that he has rented from and give them a call. I feel that is 

Personally, it sounds like a good situation. Having a business paying the rent rather than the tenants seems much more likely to get your monthly payment. I doubt he would want to be hauled into small claims court for non-payment of rent. 

I would make sure that you get the highest allowable security deposit. I would also lock them into a full 12 month lease (there is more security for you). You may want to limit the number of workers/tenants allowed to live in the unit. 

[Sabrina Calnan]

Hi there - I would require that the business owner gaurantee the lease in his own name and perform a regular backgroud check on him, with verification of income, etc.  I would also verify the contract with the base, whether it be through getting a copy of the contract or some other way.  Lastly, I would also screen each employee that will live in the property the same as you would other tenants, with the exception on income since the business owner will be paying rent.  

In addtion to screen, I might suggest taking a larger deposit.  Construction workers can cause a lot of wear and tear on a home...dirty shoes, heavy tools, etc..

[Shane H.]

Thanks for the tips.  

What I was thinking about doing is getting a list of employees who would be living in the residence and since I have a space on the lease for "Names of addt'l occupants:"  I'd list them there, that way if an eviction ever needed to be performed I would have them named on the lease as well.

Was also thinking I'd need to secure a slightly higher deposit -- I already did allude to the fact that if he signed a 6 mos lease the monthly rent would be $25-50 higher per month -- honestly I'm not that worried about a 6 mos lease - if he left at the end of 6 mos - it'd take me to a good moving season anyways (March - April) of next year - typically we have nicer weather and plenty of people looking to move.

Good point about setting  a cap on occupants.  Will have to put that in there as well if this works out.  Hope I'm not counting the chickens before they're hatched.  Haven't ended up with as much activity on this as I thought I would.  Quite a few emails/leads, however I think most are tire kickers -- only 4 - 5 actual showings, with people at the end telling me they'd fill out an app online/pay the app fee, however no one has went that far yet.  Glad taking the time to prequalify over the phone is keeping me from wasting a lot of time showing the unit to time wasters and those not qualified.  

Know I'm not overpriced, maybe I'm scaring people off letting them know I had a leak in the basement (when we got 4.5" of rain in 2 hours a couple months ago) and took the time to fix it.  I operate with honesty and full disclosure, maybe I'm saying too much however it's obvious there was work done outside and I want people to know if there is any issue we do our best to fix/repair it correctly and we are not shoddy landlords.

Hoping to have someone move in 1st of October.

[Ralph Hunter]

I would agree that putting not only the contractor but the names of whom he has selected to live in the units on the lease is a really good idea.

[Steve Babiak]

I suggest you look up the municipality's limit on unrelated occupants in a single unit; don't be surprised to find that some towns have a limit of two or three maximum unrelated occupants in a single unit. Whatever the case, you definitely want to set your limit for maximum number of occupants; I still remember the owners of an Asian restaurant who inquired on one of my vacancies a few years back, and who were looking to house their entire restaurant staff!

You will want to have some sort of addendum where the names of all occupants are given. And have some stipulation that those actually in the unit at any given time are to be specifically identified, with updates as this changes. I have rentals in a town where the town has an ordinance requiring the landlord to notify the town of the names of all occupants as those occupants change (enforced partly by counting on the owner occupant neighbors snitching), and the town requires a fresh use & occupancy inspection with each turnover (at a cost of $100 per u&o inspection).

Figure out how keys will be controlled. Write something in that at the end of tenancy, the tenant agrees to pay for replacement if all locks, and for new keys in the quantity that were issued by you originally. Any additional keys the tenant needs during tenancy must be paid by the tenant. And have something compensating you for any lockouts you have to deal with. 

You might want to have some confirmation regarding criminal records, drug offenses and sexual offenses of the occupants - you might accept the employer's checking of this but reserve the right to perform your own for verification purposes. 

I doubt that your normal screening process will work in this situation. Whose credit report are you going to pull - not the occupants since that could be a changing and fluctuating thing. A business isn't likely to have a credit file with the three consumer credit reporting agencies. Eviction checks could be meaningless, since you are almost certain to be asked to allow for the occupants to change over time. And how will you confirm income of the occupants- the employer is the guarantor for payment. 

Be careful that the municipality doesn't label this sort of occupancy as a hotel or rooming arrangement, where some different local regulations might come into play; Philadelphia has a hotel tax that you would not be happy paying, for example. 

And with multiple occupants you get multiple vehicles. So be sure to have something covering parking. 

Then there is the matter of utilities. In a multi, you might not have separate utilities and hence some utilities are landlord paid - so the rent had to "include" them. You want to have something established to make sure any excessive use gets paid by that employer. 

Wear and tear will definitely be higher. Construction workers get dirty every day at work, and that's how they'll be coming home - especially when they are only occupants. 

Noise and nuisances will be assumed to be greater as well.

And this type of arrangement should have you being paid a premium rent - above market. And with escalator clause to allow for increase in rent proportionate to increases that occur locally throughout the tenancy period. You don't want to be locked in to a low rent for a long time and having all the "extra aggravation" that might go with this sort of occupancy. 

That's more long winded than I intended to write ...

[Steve Babiak]

I suggest you look up the municipality's limit on unrelated occupants in a single unit; don't be surprised to find that some towns have a limit of two or three maximum unrelated occupants in a single unit. Whatever the case, you definitely want to set your limit for maximum number of occupants; I still remember the owners of an Asian restaurant who inquired on one of my vacancies a few years back, and who were looking to house their entire restaurant staff!

You will want to have some sort of addendum where the names of all occupants are given. And have some stipulation that those actually in the unit at any given time are to be specifically identified, with updates as this changes. I have rentals in a town where the town has an ordinance requiring the landlord to notify the town of the names of all occupants as those occupants change (enforced partly by counting on the owner occupant neighbors snitching), and the town requires a fresh use & occupancy inspection with each turnover (at a cost of $100 per u&o inspection).

Figure out how keys will be controlled. Write something in that at the end of tenancy, the tenant agrees to pay for replacement if all locks, and for new keys in the quantity that were issued by you originally. Any additional keys the tenant needs during tenancy must be paid by the tenant. And have something compensating you for any lockouts you have to deal with. 

You might want to have some confirmation regarding criminal records, drug offenses and sexual offenses of the occupants - you might accept the employer's checking of this but reserve the right to perform your own for verification purposes. 

I doubt that your normal screening process will work in this situation. Whose credit report are you going to pull - not the occupants since that could be a changing and fluctuating thing. A business isn't likely to have a credit file with the three consumer credit reporting agencies. Eviction checks could be meaningless, since you are almost certain to be asked to allow for the occupants to change over time. And how will you confirm income of the occupants- the employer is the guarantor for payment. 

Be careful that the municipality doesn't label this sort of occupancy as a hotel or rooming arrangement, where some different local regulations might come into play; Philadelphia has a hotel tax that you would not be happy paying, for example. 

And with multiple occupants you get multiple vehicles. So be sure to have something covering parking. 

Then there is the matter of utilities. In a multi, you might not have separate utilities and hence some utilities are landlord paid - so the rent had to "include" them. You want to have something established to make sure any excessive use gets paid by that employer. 

Wear and tear will definitely be higher. Construction workers get dirty every day at work, and that's how they'll be coming home - especially when they are only occupants. 

Noise and nuisances will be assumed to be greater as well.

And this type of arrangement should have you being paid a premium rent - above market. And with escalator clause to allow for increase in rent proportionate to increases that occur locally throughout the tenancy period. You don't want to be locked in to a low rent for a long time and having all the "extra aggravation" that might go with this sort of occupancy. 

That's more long winded than I intended to write ...

[Robert M.]

@Steve Babiak  Great post!