Leasing License Practice Exam

If landlords do not check applicant credit, what risks do they face?

1. High turnover rates

2. Legal fees and tenant evictions

3. Increased property value

4. Reduced maintenance costs

The correct answer is: Legal fees and tenant evictions

Landlords who do not check an applicant's credit history put themselves at significant risk of incurring legal fees and dealing with tenant evictions. By skipping this crucial screening step, landlords may unknowingly rent to tenants who have a history of non-payment or evictions, leading to difficult situations where the tenant fails to pay rent or causes property damage. When a tenant does not fulfill their lease obligations, landlords often have to go through the legal process of eviction, which can be lengthy and costly. Legal fees incurred during the eviction process can significantly diminish the profitability of the rental property, and further complications may arise from having to find a new tenant in a market where demand may be low. Coveting a good tenant base through appropriate screening can help mitigate these risks, making proper credit checks an essential practice for landlords. Options that suggest high turnover rates, increased property value, or reduced maintenance costs do not directly correlate with the absence of credit checks. In fact, not vetting tenants may lead to higher turnover rates as problematic tenants are more likely to leave or be evicted, thus destabilizing rental income and increasing costs overall.