The city of Ottawa, Montreal has a problem with property leases, according to a recent report from the city’s Auditor General Ken Hughes. According to the Ottawa Citizen, Hughes’ office recently released their findings from an audit that looked at the city’s leasing section. The audit pointed out numerous issues with mismanagement and lax oversight that have plagued the department and its operations for years.
The leasing section is a city government office in Ottawa that is responsible for leasing city-owned property to individuals, businesses, and community organizations. Collectively, these leases bring in millions of dollars per year in revenue for the city. In 2017 alone, Ottawa netted $8.2 million from 260 recorded leases, most of it from commercial leasing. However, based on the audit, the office has not been operating with efficiency or due diligence.
The list of issues that Hughes and his team identified with the leasing section is lengthy. For instance, the department has no formal policy in place for leasing properties to tenants or entities, nor do its six employees—five real estate advisors and one manager—have clearly defined roles or responsibilities.
The audit staff pulled and reviewed 27 city lease files at random. Many were incomplete. Problems included limited or nonexistent documentation of lease terms, no proof of insurance from tenants, a lack of property valuations for city assets, and no sign-offs or approvals from property managers. Most of the files also offered no evidence that the city had monitored leases to make sure that the terms were being met.
The auditor general also found that the leasing section had completely skipped the background check process for new leases. For all 27 files that the audit staff pulled, there were no records of criminal background checks or credit checks for the individuals or businesses leasing the properties.
Going forward, city management in Ottawa will be devising a more formal and detailed policy.
This story identifies a few policy best practices that all property managers should be sure to follow—whether they are public entities like the Ottawa leasing section or private companies or landlords.
Most property management companies already conduct some form of background checks on their tenants. This practice helps to protect property managers and landlords from legal liability relating to a tenant’s actions. It also helps to defend a property manager’s assets from potentially dangerous or irresponsible tenants. Pre-leasing or pre-rental background checks can even identify tenants likely to pay their rental bills in full and on time. This vetting process—which may include criminal history checks, sex offender registry checks, reference checks with previous landlords, employment verifications, eviction history checks, and credit checks—is an important due diligence step for all types of landlords.
Of course, there are laws that dictate what landlords can and cannot do with tenant background checks. To learn more about these restrictions, read this article on the matter.