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There’s no way to guarantee a tenancy will be problem-free. But carrying out a thorough reference check of tenants should minimise the likelihood of there being issues.
Carrying out correct tenant referencing is one of the most important processes a landlord undertakes when choosing to let a private property.
Professional tenant referencing and Right to Rent checks are the only way to confirm that a tenant:
Providing a report to help landlords make a more informed decision on prospective tenants reduces the risk of problem tenancies later down the line.
There are millions of very reliable tenants out there simply looking to put a roof over their head. However, those landlords who take shortcuts or by-pass this process because they “think the tenant seems OK” could, at some stage, end up with a problem tenant who doesn’t pay rent or causes damage to the property.
At any one time, we (tenant eviction specialists Landlord Action) can be dealing with hundreds of cases where tenants have defaulted on their rent. Our clients range from inexperienced landlords right through to some of the largest property investors and lettings companies in the UK, proving how important referencing can be to saving a lot of time and money.
These are 10 key checks I always recommend landlords carry out before accepting a tenant into their property:
1. Get proof of identity – either a driving license or passport. Ideally the driving licence, as this will have an address on it which landlords can check out.
2. ‘Right to Rent’ certification – from 1 February 2016, all landlords in England are required to conduct ‘right to rent’ checks to ensure tenants have a legal right to be living in the UK. If using a letting agent, check that this service is included in the referencing process.
3. National Insurance number – this proves the tenant is legitimately working in the UK.
4. Proof of address – to check current and previous addresses, ask the tenant to provide their last three months’ utility bills; gas, electric or water (not mobile bill).
5. Bank statements – Ask for the last three months’ bank statements. These are a great source of information. They help landlords understand:
6. Employer’s reference – it’s essential to secure this via both a telephone conversation and a letter on the company’s headed paper. It’s very easy for tenants to ‘doctor’ a paper reference and simply give a landlord a friend’s mobile number to call. Check out the company and call them on their main switchboard to ask for the person who has written the reference letter.
7. Previous landlord reference – if the tenant is moving from another rented home, ask for a reference from the landlord. Check the landlord that has written the reference is the same person who owns the property by looking on the Land Registry. This costs just £4 for this information.
8. Guarantor referencing – if the tenant is using a guarantor, this individual must also be referenced in the same way.
9. Credit reference checks – these show that a tenant pays their debts on time and doesn’t have any County Court Judgements against them.
10. Gut instinct – regardless of the results of the above checks, if in any doubt as to whether this is the right person to rent your property, don’t go ahead. If phone calls to them always go to voicemail, they are late getting their deposit to you or it takes a long time to have them referenced, it’s probably best to stay away.
In order to perform a credit check, landlords require permission from the prospective tenant. The landlord or their letting agent will contact a credit agency for information and data about a tenants financial history.
If landlords use a letting agent, they should ensure they’re a fully paid-up member of NALS (www.nalscheme.co.uk) or ARLA (www.arla.co.uk).These agents have insurance, which means if they go bust landlords are compensated through an insurance scheme. They are also likely to have a robust credit check system. Most reputable letting agents will use third party companies to perform comprehensive credit checks on their tenants.
A ‘credit enquiry’ will return any debt-related County Court Judgments a tenant may have against them, but a full credit check will provide a statement of all outstanding debts as well as what payments are in place to meet these, along with any other financial arrears history. This information gives a landlord an impression of how reliable that prospective tenant is with money.
If a prospective tenant has never borrowed money, used a credit card or is new to the UK, there is unlikely to be any available information on them. Landlords should also be aware that some people may have managed to secure a false credit report, which is why landlords should always arrange credit checks themselves or through their agent.
Full referencing can be carried out within 48 hours, but it depends how quick applicants and their referees are with their part of the process. The things that can cause delays are getting employer’s and or previous landlord references.
If a tenant is keen to move in as soon as possible, landlords should be clear that it’s their responsibility to chase up the references and get them sorted. It’s not up to a landlord or letting agent to prove their worthiness as a tenant. It’s the tenant’s job to show they can provide good references.
Using a professional and reputable tenant referencing company is highly recommended as it can give landlords greater peace of mind. They’ll provide comprehensive searches which will extensively check prospective tenants and guarantors to minimise landlords’ risk as much as possible. Most referencing companies will offer different levels of service, from basic to enhanced background checks.
Basic referencing can be found for around £15 per tenant with more comprehensive searches going up to around £40 per tenant.
There will be a cost involved with most professional referencing services. However, some companies charge this back to the applicant so that it doesn’t cost the landlord.
A landlord reference letter is a very important tool for a tenant moving out of one rented property and into another. It provides prospective landlords with an indication that the tenant is a responsible person, who is timely with rent payments and has taken care of their current property.
Typically, a tenant will ask the owner of the property they are renting to write a landlord reference before moving out, in order to obtain proof of good tenancy. It’s good practise for landlords to provide this to tenants who are vacating their property. A generic template letter can be found here.
Thorough referencing is paramount in trying to protect your investment. Typically, a good reference should always include a credit history check which will highlight any CCJ’s and bankruptcies, identity checks, affordability calculations and residency checks.
However, it is just as important to obtain references from the current or previous employer and landlord as this can reveal more about the tenant’s suitability.
My top tip is also to ‘get to know the neighbours’. Landlords who know the neighbours of their rental property are often given an early warning if anything untoward is occurring at the property. Landlords should ensure neighbours have their contact details in case of a problem.
However, even with all the referencing checks available, sometimes tenants with untoward motives for securing a rental property, will target private landlords who find tenants themselves. Landlords with less experience should always consider using professional services to support their buy-to-let business. Believe me, it will be worth its weight in gold if it prevents a long, costly eviction process further down the line.
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