The rental property industry has changed drastically over the past several years. Where a landlord could have previously relied on a gut feeling and a phone call to a previous reference, many are now turning to tenant reporting systems that report payment history and rental behavior. It’s not just large rental companies or property management groups using these systems; even those with one or two properties are getting on board.
This shift is understandable, especially given the recent rise in certain factors. During the pandemic, for instance, many landlords were left in the lurch when eviction moratoriums prevented them from removing problem tenants.
Thousands lost thousands of dollars without legal recourse to recoup their losses or alert other landlords of the problem tenants operating under their roofs. Many turned to systems with real reporting avenues to show negative or positive payment histories; after all, when faced with a payment moratorium for years, turning back isn’t so hard when it comes to paying rent.
What These Systems Actually Do
Tenant reporting systems for landlords function like credit bureaus do for consumers. When a landlord subscribes to a reporting system, they can report their tenants on a monthly basis to the reporting bureau, where their history either supports or goes against their chances of getting the next rental; good tenants with comprehensive payment records retain positive rental credit in their new applications. Tenants who skip out on payments and lease agreements receive bad marks, not financially but in rental history that follows them as they attempt to rent from other landlords.
But it gets deeper than that. When someone applies for a new tenant, landlords can run their possible new tenants through the same reporting system to see if there are any questionable claims. For example, does this person have a list of late payments? A report showing a claim of damage to a previous rental unit? An eviction for not paying rent three months into their lease? Landlords can also vet a bad renters list before accepting new applications.
What’s more, these systems do not only benefit landlords, they benefit responsible tenants, too, because those on-time payments get reported to credit bureaus, helping them build their own credit scores. For some tenants who do not have credit cards or loans under their names, this may be the only means they have of showing future potential landlords that they’re responsible renters.
The Financial Context Behind the Change
Landlords are currently under immense financial pressure. The housing market has caused interest rates on mortgages to climb while taxes increase along with maintenance. When a tenant is no longer paying rent, a landlord does not have enough room in their budget to absorb the cost. The expected buffer isn’t enough anymore.
Many people fail to realize how long it takes to legally evict someone properly. Even under the best circumstances (not involving reparations to tenants), it takes between three and six months. In that time frame, however, the landlord is still responsible for the mortgage and any utilities and taxes on that property, and they’re not receiving income for it. For those with multiple properties, one bad tenant can mean doom for an entire portfolio.
Therefore, when these systems emerge to create financial motivation to pay rent on time lest a tenant receive a bad report mark that could follow them anywhere they go, it makes sense. Reporting systems have consequences that many have not had before; why else would someone avoid paying off their credit card bill if it negatively impacts their credit score?
The Technological Element
The real estate market has lagged in technological efforts compared to other commercial industries. Until recently, most landlords were still using paper applications and manually dialing numbers for reference checks. However, as property management systems and reporting systems became more user-friendly and navigable, more systems became more helpful across the board.
Now it’s possible for a landlord to set up automated rent reporting in about fifteen minutes, this way, the system tracks payments automatically and provides information tracking so landlords no longer need to remember to file reports or keep personal spreadsheets. Instead, it happens behind the scenes without active involvement.
This is essential because consistency is critical, and sporadic reporting does not help anyone. Still, when a landlord can report every month for every tenant they’ve ever had, others can trust what they’re seeing; people who’ve experienced problems with previous tenants found more reliable resources to back up their claims.
Legal and Ethical Implications
There remains controversy over these systems, should they be implemented? Privacy advocates fear that tenants will be blacklisted based on opinions and experiences or that incorrect information will be nearly impossible to rectify. While these fears are not unfounded (any system that tracks personal information can be manipulated), legitimate processes have legitimated processes in place to safeguard against this.
Legitimate systems have dispute processes where tenants can appeal inaccurate reports. They also operate under Fair Credit Reporting laws which prevent arbitrary inclusions; there are rules about what information matters and how long it remains active.
The more well-established systems allow for verification before someone can report excessive damage, landlords cannot claim that tenants broke all their windows without photos. This protects both sides and creates more accurate data.
What It Means for Renters
Expansion of reporting systems means that the power dynamics of rental relationships have shifted. For decades, landlords had few recourses when it came to problem tenants, either try small claims court (good luck with that) or right off their losses and hope for better future candidates. Neither option was helpful.
Now there are consequences for treating rentals poorly or not paying at all, they’re recorded, and while it’s not that landlords now have all the power, it’s been leveled significantly so that there’s no advantage like there once had been.
It also makes it harder for “professional renters” (the scammers who move from place to place, staying long enough in one location until they’re unable to be evicted immediately but never paying rent) to operate; before these systems existed, so often was someone who simply had no intentions of paying anywhere they went because landlords never had the opportunity to check their histories or reach out to prior landlords (who could be fictionalized).
The Future
As word gets around how successful these systems are, many more landlords will adopt them as time goes on. Landlords who’ve successfully used these systems for a year or two boast decreased payment issues and improved tenant quality overall, and that’s data that speaks louder than any marketing approach.
The reality is this, the rental market isn’t returning to handshake agreements between trustworthy applicants and landlords. The more reliable information available to help property owners make decisions is better; the ways in which tenants can show they’re responsible with previous rent payments work in everyone’s favor. Thus, it makes sense that these reporting systems have gained so much traction in such a short time, and whether that’s good news or bad news depends on which side you’re on – but there’s no turning back now.
