Tenant selection: An art, or good management?

Is there a particular formula for good tenant selection, or does it simply come down to excellent management?

Tenant selection is both an art and the result of excellent management, and the ability to choose the right tenant for a property is essential. Not only does it affect a client's satisfaction level, but it sets the tone for how the tenancy will continue. An agent must do everything in their power to ensure they're screening prospective tenants and applications to the best of their ability.

In the same vein, it's important to remain as impartial and objective as possible, ensuring any preconceived biases from the decision are removed. Property managers need to be able to explain to their client exactly why they've accepted or declined a particular applicant.

An agency and/or Lessor may have differing deciding factors for an application depending on the property, but agencies should have a a minimum selection criterion in place to ensure all applications are processed to the same standard. These criteria can then be used to identify minimum expectations of each applicant, and when these are applied to each and every applicant, an agency can ensure all are assessed fairly and consistently.

Agency selection criteria are established by each individual agency, ensuring they don't breach legislation, but the process for tenant selection may include the following:

Tenancy Databases

Database laws impact how an agency use these databases. Property managers must inform applicants of which database their office uses, how they use it and how the tenant can contact the particular database provider. Agencies must also advise the prospective tenant if they find they are listed and how the tenant can have the listing amended or removed. More information on the rules around tenancy databases is available in Chapter 9 of the Residential Tenancies and Rooming Accommodation Act 2008.

Ability to Pay Rent

To verify the applicant's financial ability, the agency may contact the employer that the applicant has listed on their application. In addition to this, the agency may request the applicant to provide evidence such as payslips or an employment contract.

If the applicant is self-employed, the agency may look for alternative evidence to verify affordability such as the applicant's accountant and/or evidence such as tax returns.

Ability to Care for the Property

The application form will request previous rental history from the applicant and an agent would generally seek evidence to support this information such as a ledger (without bond details).   Verifying this information will usually begin with having the applicants complete and sign the REIQ Consent to seek reference (Form EF244) and then seeking information from the previous agent  using the REIQ Previous Lessor/Agent Reference (Form EF092). When contacting the applicants current or previous agent, you should be determining if the applicants have the ability to care for the property (as well as the ability to pay rent).

An agent is restricted to information requested “from a prospective tenant, about a prospective tenant”, meaning the agent cannot ask the applicant questions relating to information such as any legal actions they have taken, previous tenancy disputes, history of rental bond claims, breach notices given by and to the applicant, and statements of credit accounts or bank accounts detailing transactions.  This restriction is not extended to referees provided by the prospective tenant.

For applicants who have no rental history, the information requested in Item 9 “Applicants suitability” may differ to include the request for information to confirm their previous living situation.

References

The Form 22 allows for the applicant to provide two referees who can verify their ability to care for the premises. Applicants may complete this as their current or previous property manager or another party they believe will support their application. Identification

The agency via the Form 22 will require two forms of verification of identification, best practice would be to ensure at least one of those is a form of photo ID and  contains a current address .  In the event the applicant does not attach ID to their application, the property manager will need to arrange a time to sight their original ID documents.  Use the REIQ Verification of Identity Form (EF243) to record how/when/what you did when sighting their ID.

Approved Occupants

From 1 May 2025 property managers/lessors can only ask for:

• The total number of occupants; 
• The total number of occupants under the age of 18

Property managers are prohibited from requesting any information of occupants as part of the application process.  Once the application has been approved, the occupant's information can be requested using REIQ Application for Prospective Occupants (EF247)

Tenancy Agreement in a Company Name

In this instance, the agency is to ascertain the same level of verification as they would for an individual, by the same means, which would include the completion of RTA Rental Application (Form 22).  The requested supporting documentation may differ eg:  a company search, a letter from the company accountant, creditor references and evidence that verifies who is able to sign documentation on behalf of the company.

Finalising Applications

Quick Tips for Processing an Application

2. When an applicant's previous rental history has been a private Lessor, always use RP Data and to ascertain whether or not they're speaking to the actual Lessor.

3. Google the applicant's name and see what search results come up.

4. Remember, applicants can ask for their application to be returned so do not write on the application, always have a cover page for recorded information.

REIQ members with further questions on this topic or others can contact the Property Management Support Service on 1300 697 347 or at pmsupport@reiq.com.au. Not a member? Join today.

Read another property management article.