Tips for first-time landlords

Nina Willis is every landlord's worst nightmare. Having earned the nickname "Tenant from Hell", the Toronto woman has made headlines for not paying thousands of dollars in rent and using legal loopholes to avoid eviction — time and time again.

Despite the horror stories, being a landlord doesn't have to be the stuff of bad dreams. For first-timers in particular, a positive experience requires groundwork in advance to get a sense of exactly what's involved.

"Being a landlord is not easy money," says Bill Blake, a Toronto landlord and member of the Ontario Landlords Association. "A lot of people think 'Oh, I'm just renting out my basement; it's easy.' Even if you're renting out your basement you're a business, and you have to know what kind of business you're in.

"When you rent out part of your home, you're treated the same as large corporate landlords," he adds. "Those large corporate landlords can hire lawyers if there's any trouble. But if you're a mom-and-pop landlord renting out your basement for 900 dollars a month and have to hire lawyer, it would totally destroy the purpose of being landlord because it would ruin your cash flow."

Douglas Gray, a Vancouver landlord, former lawyer, and author of several books, including The Canadian Landlord's Guide: Expert Advice to Become a Profitable Real Estate Investor (cowritten with Peter Mitham), says it's common for people to start out by renting a mortgage-helper suite in their home then moving on to renting out investment properties. But all too often they aren't aware of their rights and responsibilities.

"They don't have a clue what's involved," Gray says. "Every province and territory has its own residential landlord-tenant law that governs that relationship. Whether it's a one-bedroom suite in a house or a multiplex, they're all governed by same legislation. A lot of people don't realize that and therefore don't educate themselves then get themselves into real problems."

To avoid headaches, Gray and Blake share these tips for first-time landlords:

Read up on the residential tenancy act in your province.

"Every province has a user-friendly website that goes through all the basics from landlords' and tenants' perspective; sample forms; and information on how to deal with problems," Gray says. "People need to inform themselves."

Pore over the details of that provincial legislation.

"In Ontario, you can't have a no-pet clause," Blake says. "A lot of people are shocked to hear that. They'll say 'My tenant has brought in a couple of dogs and I want to evict them.' I tell them to read Ontario's Residential Tenancy Act."

In Ontario, landlords can't charge a damage deposit either; but they can get first and last month's rent. Every province is different.

"A lot of landlords think if a tenant doesn't pay they can just kick them out," Blake notes. "However, the provinces have a lot of tenant protection. You can't just kick people out; you have to follow very serious legal process. Research local laws is the most important thing for landlords to do."

Screen prospective tenants extremely carefully.

"People need to be selective about who they're going to have as a tenant," Gray says. "It's very important to have people fill out a tenant application form — a lot of provincial government websites have applications and agreements available online as well. But a lot of people are sloppy and lazy and don't do it."

"References from previous landlords are so important," he adds. "All you have to do is ask the previous landlord an open-ended question: 'If you had to do it over again would you rent to these people?' It will either open floodgate of invective or a floodgate of positive."

Checking references often isn't enough, Blake cautions, urging landlords to do credit checks either through large credit bureaus like Equifax or via Tenant Verification Services, which also helps identify delinquent tenants.

"By learning the rules and being a good landlord, it's great for tenants because they'll have a nice, safe place to live," Blake says. "I always want a win-win relationship with my tenants ... That's especially important if it's a multi-unit property because you don't want tenant versus tenant issues.

"I also have female tenants who are very concerned about who I put into suites because they're sharing the laundry [area] and common areas. With a lot of new landlords, as soon as they see the money they put anyone in their unit, and that's just not the way to go."

Advise your home-insurance company that you have a rental unit.

"Notify your company in writing saying you're going to rent out a portion of your home or a room in your house to make sure you have coverage," Gray says. "I'd say 90 per cent of people don't do that. They don't even think about it, or think it's under the radar.

"If a fire emanates from a rental suite while you're on vacation and you come back to a bunch of cinder, the insurance company will say, 'Sorry, we charged you a premium based on the risk assessment of a single-family home; you didn't advise us of a rental suite that increases risk. Because you failed to advise us, the policy is void.' In the real world, that's precisely what happens."

Ensure your rental suite is legal.

Landlords must comply with municipal bylaws, such as having properly working smoke detectors and escape routes. "A lot of people aren't able to get insured because they're not following bylaws," Blake says.

Consider joining a reputable landlords' association.

"Learn the ropes by talking to other successful landlords," Blake says. "If landlords aren't prepared, it hurts good tenants. If new landlords get a bad tenant, they usually leave industry. Or if they hear horror stories about tenants from hell, a lot of good people who would be good landlords say, 'I'm not going to touch that.' That's one less rental property on the market, one less place to live."