Tenant referencing is one of the most important aspects when letting out a house or flat. Make sure your tenants are fully referenced.
When you have a Tenant that is interested in your property and they wish to apply, it would be in your financial interest to carry out the appropriate Tenant checks.
Referencing a Tenant usually involves 5 reference types namely:
- Employment reference
- Previous Landlord reference
- 6 Year credit check
- Bank check
- Right-to-Rent check
The employment reference.
Possibly one of the most important aspects referencing a Tenant is the employment reference. The information gathered should contain:
- The Tenant's salary
- Position held within the Company
- Length of employment
- Full time / part time or contract
As a rule of thumb, if the Tenant does not earn 30 times the monthly rental (£500 x 30 = £15,000) then ideally, you should ask to have a guarantor sign a guarantee in case the Tenant forfeits on the rent payments.
Previous Landlords reference.
When referencing a Tenant, the previous Landlord should be contacted directly to ascertain the suitability of the Tenant. The questions that should be asked are as follows:
- Has the Tenant paid the rent on time and in full throughout the agreement?
- Has the Tenant caused any damage to the property?
- Have there been any disputes with regards to deposit?
- Would you re-let to the Tenant?
If the Landlord positively confirms each of the above, then you should have a satisfactory previous Landlord reference.
6 Year credit check.
The credit check will contain financial information held against the Tenants name and addresses over the previous 6 years. Any CCJ's (County Court Judgements) or outstanding / missed payments would be highlighted.
As a Landlord, you should look out for signs of unpaid bills as this is a major red flag when dealing with potential loss of rent.
The Tenant would be required to sign an authorisation form prior to any credit checks being carried out. It is illegal to carry out a credit check on a Tenant without their authority.
Tenants with bank accounts are more likely to pay the rent on time as you would insist on payment by standing order.
Without a bank account, the Tenant would make payment by cash which often leads to issues with late payments. The information you should gather is the Tenant's bank account, sort code and account name. It would be advisable to request a copy of a bank statement dated within the last 3 months.
You should never ask for a Tenant to provide their own Tenant references as it is very easy nowadays to forge employment / previous Landlord documents. Your referencing agency should always contact the Tenant's employer and previous Landlord directly.
As per new legislation surrounding the Immigration Act, from the 1st December 2014, landlords letting property in Birmingham, Walsall, Sandwell, Dudley and Wolverhampton are the first to be required to carry out right-to-rent checks and if found to be in breach, could face fines up to £3,000. The legislation will be rolled out to the rest of the Country during 2015.
Our tenant referencing service will be support the requirements to comply with the Immigration Act.
All tenants are requested to provide evidence of original right-to-rent documentation at time of viewing. We believe that this will assist in reducing any time wasted proceeding with an application where the tenant has not got a right to rent a property in the UK. Tenants will be reminded of this requirement at time of booking a viewing.