Ultimate Guide to Commercial Screening

Last Updated: April 2024

Commercial Tenant Screening

Commercial tenant screening is a critical process for landlords and property managers to evaluate the suitability of businesses for their commercial properties, focusing on financial stability, business history, and creditworthiness. It involves reviewing business credit reports, the personal credit of the business owners, and conducting background checks to assess risk and ensure a reliable tenancy. The aim is to secure tenants who can meet lease obligations, maintain the property appropriately, and contribute positively to the commercial environment​.

How to Perform Commercial Tenant Screening

The commercial tenant screening process is an important process for landlords aiming to secure reliable and financially stable businesses for their properties. Below we take a look at the common steps involved:

1. Letter of Intent (LOI)

Most larger or broker-represented commercial tenants start the leasing process off by submitting an LOI. The LOI is a non-binding document that provides proposed lease terms and preliminary information about the tenant for ownership or property management to consider.

2. Application Submission

Applicant or their representative (i.e. commercial real estate broker) completes and returns completed commercial lease application, along with any business tax returns, business financial statements, and other relevant company information.

3. Review and Screening Reports

Landlord or Property Manager reviews and verifies provided information such as current landlord references, business trade lines, and may perform a credit check if personal guaranty is applicable.

4. Negotiations

In commercial real estate, there may be several rounds of negotiation back-and-forth on various deal points of the lease agreement. Throughout this process, draft lease agreements are marked up and sent back and forth, with requested language modifications from both parties until they both agree upon final language to be in the lease agreement.

5. Lease Agreement

Once both parties agree on all lease language, the final commercial lease agreement is drafted and ready for singing.

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What is Commercial Tenant Screening?

Commercial Tenant Screening

Commercial tenant screening is a systematic review process conducted by landlords or property managers to assess the suitability of a business entity for leasing commercial property.

How Does Commercial Tenant Screening Differ from Residential Tenant Screening?

Commercial tenant screening and residential tenant screening serve the same fundamental purpose of assessing potential tenants’ suitability, but they differ significantly in criteria and scope due to the nature of the tenancy. Below we take a look at the key differences:

AspectCommercial Tenant ScreeningResidential Tenant Screening
FocusEvaluates the financial health and stability of a business, its creditworthiness, and business history.Assesses an individual’s or family’s credit score, rental history, and personal background.
Credit CheckInvolves checking the credit ratings of the business through agencies like Dun & Bradstreet, as well as the personal credit scores of the business owners.Primarily checks the personal credit score of the potential tenant through consumer credit bureaus.
Background ChecksMay include detailed reviews of the business’s financial statements, legal history, and business plan.Focuses on personal history, including criminal background checks, eviction history, and employment verification.
Legal ConsiderationsOften requires understanding complex business structures and the implications of commercial law, including lease guarantees and corporate liabilities.Deals more with housing laws, tenant rights, and ensuring compliance with the Fair Housing Act.

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