How do you screen tenants and check credit for commercial leases?

1 Define your criteria

Before you advertise your property, you need to define your criteria for the ideal tenant. What kind of business are you looking for? What are your minimum requirements for income, credit score, and rental history? How long do you want the lease term to be? Having clear criteria will help you narrow down your pool of applicants and avoid wasting time on unqualified prospects.

2 Request an application

Once you have a potential tenant who is interested in your property, you need to request an application from them. An application is a form that collects information about the tenant's business, such as the name, address, contact details, nature, and size of the business. It also asks for personal information about the owner or the guarantor, such as their name, address, social security number, income, and references. You can use a standard application form or create your own, but make sure it complies with the fair housing laws and the privacy laws in your area.

3 Check credit and financials

One of the most important steps in screening tenants is checking their credit and financials. You want to verify that the tenant has a good credit history, a stable income, and enough cash flow to cover the rent and other expenses. You can use a credit reporting agency or a tenant screening service to obtain a credit report and a score for the tenant. You can also ask for financial statements, bank statements, tax returns, or profit and loss statements to assess the tenant's financial health. Look for any red flags, such as late payments, defaults, bankruptcies, or lawsuits.

4 Contact references

Another way to evaluate the tenant's suitability is to contact their references. These can be previous landlords, business partners, suppliers, or customers. You can ask them questions about the tenant's reliability, professionalism, and behavior. You can also inquire about the tenant's reasons for leaving their previous premises, their payment history, and their maintenance habits. Try to get honest and objective feedback from the references, and avoid relying on personal opinions or hearsay.

5 Negotiate the lease terms

The final step in screening tenants is to negotiate the lease terms with the tenant. The lease is a legal contract that outlines the rights and responsibilities of both parties, such as the rent amount, the security deposit, the lease duration, the maintenance obligations, the insurance requirements, and the renewal options. You want to make sure that the lease terms are fair, clear, and enforceable, and that they protect your interests as a landlord. You can use a standard lease form or hire a lawyer to draft a customized lease for your property.

Screening tenants and checking credit for commercial leases can be a challenging and time-consuming task, but it is essential for finding the best tenant for your property. By following these tips, you can increase your chances of renting your property to a tenant who will pay on time, take care of the premises, and abide by the lease terms.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?