Ultimate Guide to Tenant background check & Screening Process in Canada 2023
Tenant Screening is a crucial step for a landlord or property manager in Canada to rent out your property. It helps you identify responsible and trustworthy tenants who will likely pay rent on time and take care of your property, promoting a safe and peaceful environment for everyone.
In this guide from MIPP, we’ll take a deep dive into the tenant screening process. We’ll cover everything from the legal requirements to the best practices and tools for conducting adequate tenant background checks. So, let’s dive in and explore the world of tenant screening in Canada.
Importance of Tenant Screening
A thorough screening process helps in the following:
- Reducing the risk of renting to risky tenants
- Reducing the risk of rental income loss
- Protecting your rental investment
- Promoting a secure and peaceful setting for all
Advertising and Pre-screening Potential Tenants
When trying to find tenants for your rental property, it is crucial to give them all the information they need to decide if it’s the right fit for them. Your rental listing should be detailed and accurate, with essential details like the rent amount, lease terms, and any specific requirements for potential tenants.
Once you receive inquiries from interested renters, you’ll want to conduct a pre-screening process to ensure they meet your qualifications. This could include asking about their income, rental history, employment status, and any other relevant information affecting their ability to pay rent or take care of the property.
By doing this step upfront, you can filter out any unqualified candidates and save time later in the screening process.
Contact us to learn more about how our software can efficiently Advertise your rental properties in Canada and help with Pre Screening Potential Tenants.
Things to Consider Before Renting to a Potential Tenant
When renting a property, landlords may ask for a deposit from prospective tenants. The maximum deposit a landlord can request equals one month or one week’s rent. If the tenant is accepted, the deposit is used as payment for the last month or week’s rent before the tenancy ends.
Setting the Rent
Landlords can set a new rent for the property each time it becomes vacant. When listing, the new rent is recommended to reflect the property’s market value. Once the new rent is established, it becomes subject to the rent control provisions of the Residential Tenancies Act.
Interest on Deposits & Deposit Top-up
Landlords must pay interest on the rent deposit every twelve months at a rate equal to the annual rent increase guideline. If the deposit needs to be updated, landlords can deduct the necessary amount from the interest due to the tenant before paying it out. If the landlord fails to pay interest on the deposit when due, the tenant can deduct the interest due from a future rent payment.
Upon request, landlords must provide tenants with a receipt for any payment of rent, rent deposit, arrears of rent, or any other amount paid to the landlord. It is recommended that landlords keep copies of the receipts for their records. When payments are made in cash, landlords should provide a receipt and keep a copy.
The Screening Process
The tenant screening process in Canada typically includes the following steps:
Tenant Background Check, Criminal Record Check and Rental History
This is the first step in the screening process. It involves verifying the tenant’s identity, employment history, and rental history. This check can help you determine whether the tenant has a history of evictions or other legal issues.
A criminal record check helps identify past criminal convictions or charges that may pose a risk to your property or other tenants.
Checking the tenant’s rental history can give you insights into their behaviour as a tenant, including whether they paid rent on time and caused any damages, lease compliance, and overall conduct. You can ask for references from the tenant’s previous landlords to understand their rental history.
This involves reviewing the tenant’s credit report to determine their financial responsibility and creditworthiness. A good credit score indicates that the tenant will likely pay their rent on time. Although, a credit report is more comprehensive in evaluating a tenant’s financial situation.
You can ask for pay stubs, tax returns, or bank statements to verify their income to verify the tenant’s income. This helps in determining their ability to pay rent.
Contact the tenant’s previous landlord and employer to verify the information provided by the tenant. This will show whether the tenant has a stable employment history and was a good tenant in their previous rental.
Landlords and property managers should follow these best practices to ensure a successful tenant screening process:
1. Establish Screening Criteria
Clear screening criteria to evaluate prospective tenants before initiating the tenant screening process includes:
- Move-in dates, number of people, and pets
- Minimum income requirements (typically, rent should not exceed 35% of the applicant’s gross income)
- Credit score thresholds.
- Rental history standards (such as a consistent record of on-time rent payments)
- Employment history
- References from previous landlords or employers
2. Use A Standardized Rental Application
A standardized rental application can help you collect all the necessary information from the tenant and make the screening process more efficient. The rental application should include the tenant’s personal information, rental history, and employment history.
3. Obtain Written Consent
Obtaining written consent to protect their privacy and ensure that you are complying with the latest legal requirements. The consent form should outline the information that will be collected and how it will be used.
4. Keep Accurate Records
Keeping accurate records of the screening process helps you defend against any future legal claims. Thus, keep a record of the tenant’s application, screening criteria, and screening results.
Legal Requirements and Fair Housing Laws
In Canada, landlords and property managers must adhere to the Human Rights Code, Residential Tenancies Act (RTA), and other legal requirements when screening tenants. These requirements include:
Human Rights Code
The Human Rights Code protects tenants from discrimination based on race, gender, religion, and other protected grounds. This means landlords and property managers must ensure that their screening process is fair and does not discriminate against potential tenants based on these factors.
Check out this link to learn more about the Landlords Association’s steps against Discrimination.
Personal Information Protection and Electronic Documents Act (PIPEDA)
The Personal Information Protection and Electronic Documents Act (PIPEDA) regulates private organizations’ collection, use, and disclosure of personal information, including landlords and property managers. This means that you need to obtain consent from tenants before collecting and using their personal information as part of the screening process.
Residential Tenancies Act (RTA)
The RTA sets out the rights and obligations of landlords and tenants. This includes rules around the tenant screening process. For example, landlords cannot charge tenants for a credit check or other screening costs.
Tenant Screening Software and Tools
Several tenant screening software and tools can streamline the screening process and provide valuable insights into potential tenants. The top three tenant screening tools in the Canadian market are:
- SingleKey: Offers a comprehensive tenant screening solution, including detailed credit reports, criminal record checks, income verification, and an easy-to-use rental application process.
- Naborly: Provides a user-friendly platform for tenant screening, featuring credit checks, income and employment verification, and rental history analysis.
- RentCheck: A long-standing tenant screening service offering credit checks, criminal record checks, and rental history verification, with options to upgrade for additional features.
Understanding Screening Costs and Records
When choosing a tenant screening tool, consider factors like ease of use, detailed reporting, fast credit checks, the streamlined rental application process, rent guarantee options, assistance removing bad tenants, and good customer service.
The costs of tenant screening in Canada can vary depending on the services and tools used by landlords and property managers. While some tenant screening tools offer pay-as-you-go options, others may require membership or setup fees. The estimated average costs of tenant screening 2023 can range from $20 to $50 or even $75 per tenant, which may include the cost of credit checks, criminal background checks, and employment and rental history verification.
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Tenant screening is an essential part of the rental process for landlords and property managers to find responsible and reliable tenants in Canada.
By understanding the legal requirements, following best practices, and using practical tenant screening tools, you can minimize risks and protect your rental investment. Remember to stay up-to-date on ‘s tenant screening regulations and consider using tenant screening software to streamline the process and make well-informed decisions when selecting tenants for your property.
If you’re looking for tenant screening software to streamline the screening process and provide the necessary tools, don’t hesitate to contact us for a demo.
Q: Do landlords and property managers have to conduct tenant screening in Canada?
A: Conducting tenant screening is not mandatory in Canada, but it is highly recommended for landlords and property managers to ensure they are renting to reliable tenants who can pay their rent on time and take care of the property.
Q: What information can landlords ask for during the screening process?
A: During the screening process, landlords can legally ask for information such as the tenant’s personal details, rental history, employment history, and income. However, landlords must ensure that they do not discriminate against tenants based on protected grounds such as gender, race, religion, or disability.
Q: Can landlords charge tenants for tenant screening, including credit checks?
A: No, landlords are not allowed to charge tenants for the cost of tenant screening, including credit checks, in Canada.
Q: Can landlords reject a tenant based on their credit score alone?
A: Yes, landlords can reject a tenant based on their credit score if they have established screening criteria that include a minimum credit score requirement.
Q: How long do landlords need to keep records of tenant screening?
A: Landlords should keep records of tenant screening for at least one year after the end of the tenancy. Keeping accurate records can help landlords defend against any legal claims in the future.
Q: Are landlords using tenant screening software in Canada legally?
A: It is legal for landlords to use tenant screening software in Canada. Tenant screening software can make the screening process more efficient and accurate, saving landlords time and money in the long run.
Q.: Is a new tenant’s Social Security Number (SIN) required?
A.: A prospective tenant cannot be forced to give their SIN to the landlord; while they may be asked, they are not required to do so. For more details, please refer to section 4.2.5 of the Policy on Human Rights and Rental Housing.