Can I contract that any new tenant provides their own reference?

by Readers Question

10:10 AM, 14th November 2019
About 9 months ago

Can I contract that any new tenant provides their own reference?

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Can I contract that any new tenant provides their own reference?

Looking into the mine field of the consequences of the new tenant fees act. I have several HMO’s with 4 or 5 tenants all on a single joint contract (ie. a shared house scenario).

Generally about once a year, at a point the contract has become periodic, a tenant will want to move out and the others want to stay. At this point I say that’s fine if they want to find another sharer and require the incoming tenant to cover the charge of a reference check. I then draw up a new contract, we all sign, I re-protect the deposit and I make no further charge.

As I understand it, I can no longer charge the incoming tenant for the reference, but could I make it a condition of the contract that when this situation arises, that any new tenant the others want to have join them must provide a current reference from a recognised agent such as the RLA.

Also, is registering the new tenant line up with the deposit protection scheme a reasonable cost as well as drawing up a new contract and liasing with the new tenant.

I’m guessing it’s a big no to all these questions and the only answer is to put the rent up. Thought I’d ask anyway.

Many thanks for all and any replies.

Jamie

Editors Note: Official government guidance for tenant fees ban released

What fees can I ask a tenant to pay?

You cannot require a tenant (or anyone acting on their behalf or guaranteeing their rent) to make certain payments in connection with a tenancy. You cannot require them to enter a contract with a third party or make a loan in connection with a tenancy.

The only payments you can charge in connection with a tenancy are:

  • The rent
  • A refundable tenancy deposit capped at no more than five weeks’ rent where the annual rent is less than £50,000, or six weeks’ rent where the total annual rent is £50,000 or above
  • A refundable holding deposit (to reserve a property) capped at no more than one week’s rent
  • Payments to change the tenancy when requested by the tenant, capped at £50, or reasonable costs incurred if higher
  • Payments associated with early termination of the tenancy, when requested by the tenant
  • Payments in respect of utilities, communication services, TV licence and council tax; and
  • A default fee for late payment of rent and replacement of a lost key/security device, where required under a tenancy agreement

If the fee you are charging is not on this list, it is a prohibited payment and you should not charge it. A prohibited payment is a payment outlawed under the ban.



Comments

Ian Narbeth

16:18 PM, 15th November 2019
About 9 months ago

Reply to the comment left by The Forever Tenant at 15/11/2019 - 16:13
"Any landlord that would ask to see my bank statements is going way too far into intrusiveness in my mind."

I disagree. We have asked for bank statements over 100 times in the past 5 years and seldom had any push back. Bank statements are very useful to see if tenants run their affairs properly.

The Forever Tenant

16:46 PM, 15th November 2019
About 9 months ago

Reply to the comment left by Ian Narbeth at 15/11/2019 - 16:18
If I may ask, what is it you are looking for, both positively and negatively on a prospective tenant's bank statement.

My concern would be that you may judge someone if you see something that is harmless, but goes against your own personal feelings.

Would you think worse of someone if they were a Labour party member? Shopped at B&Q? Is there a limit in your mind as to how much someone is allowed to play the lottery each month?

These things in themselves are harmless, but you may be putting unintentional bias into your decisions by looking into someone too much.

There is also the consideration that you may not see someone's bank account which has the dodgy items on it. I myself have two bank accounts. A joint account with my wife and my own personal account. our salaries go into the joint account which is then used to pay all household bills and then amounts are moved into our personal accounts for personal spending. You wouldn't see anything on that other account and thus potentially miss out on concerning spending.

Ian Narbeth

17:07 PM, 15th November 2019
About 9 months ago

Statements provide corroboration of income. They may disclose that the tenant has a serious gambling habit, or is repaying loans to the likes of Wonga. I am not worried about a few pounds a week on the lottery but if someone earning £1500 a month was spending £300 on gaming, even if they won, I would be concerned. They may disclose payments to a partner (we can accept partners in some of our HMOs but not all). Generally, they show if the tenant is running the account in a regular fashion - are there similar payments every month for similar things?
Not bothered if they are a member of the Labour Party or a trade unionist. However, we won't take Guardian readers (only kidding).
I shop at Aldi and B&Q so that's not an issue.
We don't usually reject a tenant on the basis of bank statements alone but unexpected items lead to further questions and enable us to do due diligence. In a recent case, it meant we asked for a guarantor as income was sporadic.

As for dodgy items we do ask for the account that shows income and outgoings and if money is coming in from another account we may ask to see that if we don't get the full picture.

paul robinson

17:09 PM, 15th November 2019
About 9 months ago

Reply to the comment left by Ian Narbeth at 15/11/2019 - 16:18
On the flip side I’ve never asked for bank statements in 10+ years (think it’s intrusive and over complicated) but do undertake a full tenant assessment c/w credit check and affordability etc. Probably had a handful of issues with rental payments in this period and usually if a tenant has just disappeared and their bond has always covered any rent that is due that month with their room re-rented the same month.

Gunga Din

17:38 PM, 15th November 2019
About 9 months ago

On bank statements etc. - each of my properties is individually one of the most valuable things I own and I will be as intrusive as I think I can get away with before letting an unknown person acquire tenant's rights to occupy it. If any doubt arises, I'll dig even deeper.
I would happily submit to the same scrutiny if I were trying to rent a home. Much like a job application, I would be offering as much supporting info as I could.
I have had a number of applicants disappear when I asked for bank statements, and I'm glad they did!
As for the detailed items, as long as the number on the right stays healthy I'm not that interested.

Queen Victoria

8:22 AM, 16th November 2019
About 9 months ago

Reply to the comment left by Ian Narbeth at 15/11/2019 - 17:07
Ian Narbeth. If I, a prospective tenant of yours, wanted sight of your bank statements to show me you are running your business properly would you be comfortable to comply? If so, and there was evidence of a relationship between this account and other accounts of yours would you also disclose these on request?

Jamie Finch

8:38 AM, 16th November 2019
About 9 months ago

Dear all

Many thanks for all your time and comments - very helpful and much appreciated.

Jamie

Jim S

9:00 AM, 16th November 2019
About 9 months ago

Following on with the thread of the original question but a slightly different situation: If the tenants request a change of sharer while the tenancy is still within the fixed period and the tenancy is going to be ENDED in favour of a new tenancy being created with the new tenant added, my understanding of the tenant fees ban document is that a landlord can not even charge the £50 or reasonable costs as the tenant fees document does not SPECIFICALLY state that in this situation you can charge £50
The £50 fee is only mentioned for where you are making changes to an existing tenancy agreement. It just seems a little strange that you can make a charge of £50 for making a change to an existing contract but nothing for having to create a whole new tenancy that the tenants request and want to get out of.

paul robinson

9:08 AM, 16th November 2019
About 9 months ago

Reply to the comment left by Jim S at 16/11/2019 - 09:00The original post sounded like he changed a tenant during the periodic tenancy and didn’t understand the responsibility of the tenants and landlord at that point.
If changing a tenant during a fixed term they would be assignment to the existing tenancy and therefore the £50 or reasonable fee could be charged. This is fair as it’s a change within a fixed term tenancy.
Trying to make a charge or ask the leaving tenant to be responsible to find a replacement tenant when the tenancy is on a periodic was never correct or fair, even pre tenant fee ban.

Jamie Finch

10:55 AM, 16th November 2019
About 9 months ago

Hi Paul

Just to clarify, I never require a tenant (or set of tenants) to find someone new if someone moves out. I make it very clear that the contract is ending and that I am happy to have the house back to re rent. However, if the rest of them want to stay and find a new housemate, I am happy to work with them. It is therefore entirely their choice and there is no pressure from me. In fact I would often prefer to have the house back, to do upgrading works unhindered by a fully occupied house and to put the rent up - something I rarely do with sitting tennants.

Thanks

Jamie

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