Why do some perfectly good tenants fail referencing?

by Property 118

5 years ago

Why do some perfectly good tenants fail referencing?

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Why do some perfectly good tenants fail referencing?

Why do some perfectly good tenants fail referencingAre there some agents out there frustrated by the declines they get for some of their tenants, when they seem perfectly fine?

Below are just a few reasons as to why this could be.

Affordability – With rental prices on the increase, the traditional affordability ratio of 2.5x is hampering certain people and they are being declined.

Written Employment references not being returned – In my experience some employers are not always in a position to send back a written reference, number 1 reason? they didn’t get the email sent by your referencing provider and your referencing providers didn’t have the common sense to call the referee and double check the email was sent to the right address.

Landlord reference not returned – believe it or not some landlords cannot be bothered to return the reference in a speedy manor, some probably believe “what do I have to gain from it?” They may well be very busy people too with other concerns.

CCJ has been found – In this economic climate CCJ’s are more and more common, I have seen them range from as little as £15 to £50000.

So there are a few reasons as to why a tenant may fail and they are perfectly good reasons not to pass tenants through referencing. However there are perfectly good ways to overcome these issues.  Now don’t get me wrong, we have to have criteria guidelines, but we also have to use our brains in the decision making process. For example:-

A husband and wife are moving into a property, one earns £100,000 the other £10,000. The rental value for this property is £850pcm. So the income would need to be £12,750 per applicant.

So the tenant who earns £10,000 according to the computer fails so needs a guarantor or rent up front. The tenants don’t like this outcome and become frustrated (remember when all is said and done the tenant generally blames the experience of referencing on the agent when they talk to their friends). Well surely the rent is covered by the £100,000 a year tenant? Common sense tells us that they are not going to be splitting the rent 50:50.

If your referencing company does stick to the “computer says no” approach why not split the rent using a different ratio maybe 80:20 (in favour of the higher earner obviously!!)

Another example would be a landlord not returning a reference due to the hassle of printing out the email, signing it, finding a scanner and sending it back.

So how do you tackle this one?

Allow them to respond via email using a quick and easy online form and run a land registry check on the Landlord to confirm it is them that owns the property. You can also have a look at the tenants bank statements, look for regular rental payments going out each month, are they always on the same day and are they the same amount?

Now these are just a couple of examples, I could list hundreds more, but I am hoping I have made my point.

So to summarise

Your referencing company may well be governed by the insurance, not the other way around.

If your referencing company are as a good as they say they are surely their insurance side of the business will back them in the decision making and trust their judgement?

Not all tenants can meet the standard referencing criteria set by insurance companies but does this mean they won’t pay the rent? Possibly, but I would place a bet amongst the ones that do meet the criteria some of them will also not pay the rent!!

Don’t let perfectly good tenants go without a home because the “COMPUTER SAYS NO!!”

This is a guest article kindly submitted by Ross Sanders – email  – website

Comments

5 years ago

Nothing to stop a LL putting the husband only on the AST on £100000 per year and getting the RGI check.
The wife becomes the husband's lodger.
No law states that a wife must take the husband's name.
When and if eviction is carried out the lodger must vacate no later than the eviction day.
Of course a wife being a lodger might be too much temptation to the husband to give the wife 1 months notice to quit!!! as that is all a lodger is allowed.
RGI is only for a tenant on the tenancy agreement.
They are not involved with any aspect of whether a tenant has been given permission to let to a lodger by a LL.
The fact that it might be the wife is purely coincidental!!
I always give permission to LL to let to lodgers having checked on the proposed lodger!
How I achieve the rent; I am NOT concerned with, as long as I receive the rent form the tenant who is on the AST.
If there are 3 people in a 2 bed flat and I only have 1 tenant on the AST, then that tenant is wholly responsible for the full rent.
If the tenant does not pay the full rent i would submit a RGI claim against the tenant.
Lodgers are nothing to do with an AST
Eviction gets rid of tenants and lodgers.
RGI does eviction.

Rob

5 years ago

I gave a previous tenant and his wfe the worst possible reference i could (owes me 3k for damages) and the letting agent who is the largest agent in berkshire still moved him into the property he was after! I suspect the agent told the new landlord the tenants passed referecing when in fact they did not!

No need for a lodger scenario just us unauthorised/authorised occupier letters making the wife the licensee of the tenant and he her licensor.

ALWAYS ask for a copy of the referencing report the agent has on file. You (and indeed they) are not entitled to see the actual references, unless you reference yourself, but you are entitled to the summary report

5 years ago

IO;
Interesting response; would you expand on the licencee and licensor methodology.
I would just use a simple lodger agreement.
Is your way a more efficaious way!?
I am not wedded to any particular way and am therefore interested in your proposed strategy.
A little explanation of the nuts and bolts of your suggestion would be useful.
I'm sure other LL looking at this post would think the same.
Especially as I believe more LL are using RGI and will face the issues that have been highlighted here.
A suitable methodology to manage these circumstances would be something that most LL would desire.

@Paul Barrett

Certainly delighted to is your fee cheque in the post?!!

Only joking!!

Personally I would not use a licence unless I absolutely had to, such as in a Resident landlord agreement if there are any chared facilities, or especially in the Hybrid Sharer's AST where the 5 sdtudents on individual agreements on own rooms have a licence to share the common parts - hall, stairs, landing, kitchen and bathroom.

These letters are very simple to create. One goes to the tenant basically confirming the LL is aware that Jack is living there but doies so as John the tenant's licensee. It goes on about Jack not being a tenant, not having any exclusivity etc etc. Then there is a tear off part at the foot of the letter (or send two copies) which then states this as a condition of allowing Jack to remain at the property subject to the LL ongoing authority to do so.

Above all it states any money paid by Jack is paid as agent of John and on his behalf. Thereby preventing a tenancy from being created which you don't want if John abandons the property!!

The licensee version is very similar, just saying the same things to Jack and his signed copy states he accepts he is not a tenant, has no exclusivity, tenant rights etc.

Not legal docs as such, but very useful evidence if you ever need to evict the licensee and they are claiming a tenancy especially if they have made rental payments and been given receipts (ALWAYS issue any receipt for anything relating to a tenancy in the names of the tenants ecept a deposit receipt to a relevant person)

Hope that helps Paul. I always think any form of agreement etc is a bit heavy and tends to imply a more formalised status and relationship.

5 years ago

Sometimes it can be as simple as a credit blemish on your credit report that makes people fail. But the items you listed above are typical reasons for having second doubts on a potential renter, even though during your interview with them, they seem to be perfectly normal. Maybe a second interview may help? or some pointed questions may help you determine if they are a suitable renter, regardless of whether you can call references or not.

Best question to ask in writing to another Landlord or agent etc is this:-

"Has the tenant throughout their tenancy with you discharged all of their obligations under the tenancy, financial and otherwise, in full and on time"

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