What do we really need to know about our tenants and why? UK Landlords that go down the road of self-management will at some point either talk or meet potential tenants. It is at this point that landlords, knowingly or not, have begun referencing a tenant.
We will talk about the mandatory requirements later in this article but first there are questions you can ask, visible behaviour you can assess and answers tenants give you that can affect your overall decision to accept a tenant as a candidate.
Referencing a tenant starts on the phone
When you are renting out a property, as part of your advert you should be able to profile the tenant type you are looking for. They would include tenants in employment or in receipt of housing benefit, tenants with pets or not, tenants with guarantors, sharers or not, student (yes or no) are some of the first things you get to know….
Did you know that we include referencing a tenant in all of our letting packages!
When an enquiry comes through the first thing landlords should do having read the enquiry is to call the potential tenant. A quick introduction and then the referencing begins with the following 8 suggested questions…
- Can you tell me where you work and what you do?
- Who (in anyone) is moving in with you?
- Do you have any pets?
- When are you looking to move?
- How long are you looking to move for?
- Why are you moving?
- Would your landlord be willing to provide a reference?
- Do you have the right to rent in the UK?
If these are answered in a satisfactory manner and correlate with the information that has been gathered by the agent, then proceed to the next step and invite them for a viewing. You have saved so much time having spoken to them and qualified them as doing this at the viewing itself would be unnecessary. If there are answers that do not correlate with the information you have been given or just don’t qualify them to be your tenants, its best to tell them right then as not to waste your time or theirs.
Referencing a tenant at the viewing
Tenants arrive on time, introductions go well, they’re courteous throughout the viewing and their demeanour matches up to a tenant personality type you could accept then you are off to a good start.
Of course, tenants will always want to make a good first impression and there is no way of knowing how things will change but it is a good start nonetheless. Having a gut feeling about a tenant can in many ways be a big influence on how you proceed. It is by no means the entire reason you would want to proceed but it is always a factor.
Official background checks when referencing a tenant
If the viewing goes well and the tenant is interested then further mandatory tenant checks will need to be done and you can mention that they include:
- Firstly, an employment check – you would be looking to confirm that there is an annual income of 30 x the monthly rent to pass on the affordability.
- Secondly, a 6 year credit check – The credit check will contain financial information held against the tenant’s 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 the potential loss of rent.
- Then, a previous landlord check – Where applicable, if the tenant has rented before, the referencing agent would get in touch with their previous landlord to ensure rent has been paid and the property has been well maintained.
- and lastly, a right to rent check – The landlord is responsible for checking that the tenant has the right to rent a property in the UK. This includes having seen a passport, acceptable visa or similar found in the right to rent document checklist. Copies should be kept on file by the landlord.
What happens if the tenant fails referencing checks?
After explaining the above, the tenant may begin with confessions or agree to these checks. Should it be the former and your potential tenant may not be able to pass all criteria, a rent guarantor, who will also need to be referenced and pass the same criteria, will be your best option.
Should a tenant inform you at this point that he or she may not be able to pass on affordability or the Credit Check you can agree to accept that this part of his or her reference may fail however a guarantor will be required to cover this shortfall.
Referencing a tenant and a guarantor will provide you further assurances you understand the tenant and Guarantors qualification and please don’t forget that when the time comes to have the guarantor sign a Guarantor Agreement.
Consider what implication a failed reference may have on insurances you plan to purchase particularly rent guarantee and legal expense insurance as they require, in all cases, passed tenant references or guarantor references to make a claim.
Should I accept the references provided by my tenant directly?
You should never ask a tenant to provide their own tenant references as it is very easy nowadays to forge employment and or previous landlord documents. Your referencing agency should always contact the tenant’s employer and previous landlord directly and only they will be able to carry out the Credit Check.
Next steps to referencing a tenant
Congratulations… you should be 75% assured that if the tenant still wants to proceed they feel confident they will pass without incident. Now is the time to start the actual checks.
To help further assure the landlord, we (the agent) will also go through a checklist of questions with the tenant where necessary to ensure suitability. It is at this stage that 90% of references will go through and pass without incident.
The checks have failed when referencing a tenant
For those references that don’t there can be a varying number of reasons as to why the tenant may have failed and some examples include but are not limited to:
- Not knowing they had a CCJ with an unpaid utility bill in a previous property
- Their employment contract does not cover the entire term of the rental period
- They never thought the check would be comprehensive enough to find any shortcomings
- Tenants may wrongly assume that reselling goods on eBay can be counted as extra income
Decision made and the tenant starts the referencing process… what should you expect to receive?
Well, an example of a tenant reference report can be found here… which indicates you will receive knowledge of the following:
- Can the Tenant afford the Rent at this time?
- Is the Tenant Clear of any Fraud Indicators?
- Is the tenant clear of any adverse records i.e. County Court Judgements?
- Has the tenant’s previous landlord indicated they have kept up with rent payments?
- Has the tenant received a positive Employment reference and is secure within that job for the duration of the tenancy?
When a positive report does get sent to you, it will come with details about the tenant you can keep for your records and you can use these official reference reports to purchase previously mentioned insurance products you require.
Finally, it sounds and reads like a lot of work has been done to ensure that your tenants qualify live in your property. Thankfully most of the work is carried out by the referencing team that both check and re-verify the information they receive from nominated referees and ensure validity at every step of the process.
There is one last step you should take as part of the referencing process and that would be to get a photocopy of the tenants’ photo identification (either passport or driving license) and National Insurance number. There also should be no cost to the Landlord in having these checks carried out unless you are letting property in Scotland.
Tenants that show a firm interest with a property by agreeing to pay for the reference checks have an understanding that should they all pass, the property will be theirs. Landlords need that commitment to distract time wasters and although other tenants may still be viewing, the landlords will not commit to other applicants until the first checks have been completed, passed and received.
More information is available in our landlord guide packed with landlord advice and tips when renting out a property. You can also download our free 30 point landlord checklist here.