Tenant who doesn’t pay? How to protect yourself from a dishonest renter

Buying a real estate is considered one of the most beneficial and safest long-term investments. It not only effectively protects capital from losing value, as shown by the recent period of high inflation, but it can also generate regular income without the need for constant involvement in the work process. Unfortunately, renting doesn’t always go smoothly. One of the main challenges that property owners face is finding a reliable tenant. Rent arrears, damaged furnishings, or neighbours’ complaints about noisy all-night parties are just a few difficulties that landlords encounter. It’s therefore worth taking steps to minimize the risk of financial losses and avoid additional stress. So, how do you properly assess the reliability of a potential tenant?

First, have a conversation

Already during the property viewing, it’s worth having a casual conversation that allows you to get a first impression of the person. It’s clear that you can’t predict everything — certain things only come out over time. Nevertheless, you can ask about his or her job or hobbies, which will give you some insight into the person’s lifestyle and what kind of tenant he or she might be. If you don’t accept pets in the apartment, it’s good to communicate that clearly at this stage. During such a conversation, you can also learn about you potential tenant’s rental motivations, helping you better understand his or her intentions and facilitating a decision about long-term cooperation.

Before you sign the contract

It’s worth checking the financial standing of a potential tenant to minimize the risk of delays in your rent payments. Most available debtor registers on the market are primarily used to verify companies, contractors or financial institution clients, so private individuals usually don’t have direct access to them. However, there is the option to check someone in the National Register of Insolvent Debtors (KRDN), which is a public institution. Its purpose is to protect citizens from dishonest actions by people who do not fulfil their financial obligations.

If possible, it’s a good idea to ask for references from previous landlords. This should be done in a relaxed and polite manner so that the future tenant doesn’t feel suspected of anything. The goal is simply to obtain information about whether the rent was paid on time in the past.

Financial protection

Even the most thorough selection doesn’t guarantee that the tenant will pay rent on time and take care of your property, so it’s worth considering including financial protection in the contract.

A widely used and tested solution by property owners is to require a security deposit. A deposit is a sum of money, usually ranging from 1 to 3 months’ rent, which is fully refunded at the end of the lease if the tenant meets the contract’s conditions and returns the apartment in the same condition. Otherwise, the property owner has the right to withhold part or all of the deposit to cover unpaid bills or damages.

It’s worth considering the insurance of the apartment, which will not only cover financial losses in case of a problematic tenant, but will also protect you against unforeseen events such as flooding or fire. Insurance companies offer various packages, allowing you to choose the option that best suits your needs and protects the apartment from situations that cause the most concern.

A well-constructed rental agreement

The key to success in renting out property is a well-thought-out contract that fully protects your interests. To ensure that all important clauses are included, it’s worth seeking expert advice when drafting the document. Although the one-time cost of a lawyer’s consultation may seem like an expense, a well-constructed contract will serve you in the long term, forming the basis for each subsequent rental. It’s also worth considering an occasional rental agreement, which provides the owner with greater security than a traditional contract.

A well-written contract should include:

• the parties’ details,
• the address and description of the rented property,
• the duration and termination conditions of the contract,
• the amount of rent and payment deadline (it’s important to clearly specify, which party is responsible for additional payments such as utilities, Internet etc.),
• the amount of the deposit,
• the rights and obligations of both parties,
• consequences of payment delays,
• a sublease prohibition,
• a handover protocol with detailed photos of the property reflecting its condition when handed over to the tenant,
• agreed-upon penalties,
• signatures of both parties.

Quick response

When the first signs of payment delays appear, it’s crucial to act immediately. Of course, we’re not talking about a one-time incident — everyone sometimes forgets. However, the faster the response, the greater the chance of solving the problem early on. The tenant should be aware from the very beginning that delays in payments are quickly noticed. Consistently enforcing payments sends a clear signal that tardiness won’t be tolerated, reducing the risk of further problems.

Eviction as a last resort

If a tenant is late with rent payments and our reminders go unanswered, an official demand for payment should be sent, specifying a final deadline for settling the debt. If there’s no response, further legal steps may be necessary, which could ultimately lead to the tenant’s eviction. However, it’s in our interest to do everything possible to resolve the issue amicably, such as proposing a payment plan, as court proceedings are costly and lengthy. Eviction is a last resort that requires a court order, allowing the landlord to remove the unwanted tenant from the property. That’s why it’s important to have a well-prepared contract, which can facilitate and expedite the resolution of such matters.

Summary

Completely avoiding troublesome guests and related issues is not always possible, but we can significantly reduce the risk by taking appropriate actions before entering into a rental agreement. Checking the tenant, preparing a diligent contract, proper financial protection and responding quickly to payment delays are fundamental steps in protecting against dishonest tenants.

Joanna Woźniak
Specialist for Operation and Development of the AMRON