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Ask a lawyer – Do I need to do a credit check on lease renewal?

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Q

Hi, I have three questions:

#1 For a lease renewal, do you draw up a new lease or just an addendum?

#2 Do you credit check the tenants again?

#3 What if the owner says we don’t need to recheck the tenants – what’s our risk?

A

#1 In the event of a lease renewal, an addendum would ordinarily suffice, as long as it accurately records any material changes to the terms of the initial lease agreement that the parties intend to apply to the renewed lease period (e.g. increased rental and any other additional obligations to be imposed).

#2 On the question of further credit checks, this too is unnecessary at the stage of renewal, especially since the landlord, when considering the renewal of a current tenant’s lease, would have the benefit of considering the tenant’s payment habits over the previous lease term.

#3 It is important to bear in mind that a lease agreement is not a credit agreement, and that the only value in performing credit assessments of potential tenants is to ensure that they pose minimal risk to the landlord. Obviously, when contracting with a tenant who has an established history of payment (with a particular landlord), it obviates the need for any additional credit checks, as the landlord would already be in a position to accurately assess the risk that a tenant poses and is able to make an informed decision on that basis.


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Who is Marlon Shevelew?

Marlon Shevelew, director of Marlon Shevelew and Associates.

Marlon Shevelew, director of Marlon Shevelew and Associates.

Marlon Shevelew is the director of Marlon Shevelew and Associates Inc. a law firm specialising in rental property, contractual, consumer and company law.

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