10 Key tenant reference checks
Tenant reference or risk?
A landlord’s biggest asset is undoubtedly their property, so why do so many landlords still fail to take full tenant references? This is a question I have been asking myself for years. When you apply for a store card to buy goods from a retailer, or look to take finance out to purchase expensive household items such as a sofa, you are credit checked for affordability. It’s the same when renting out a property, or at least it should be!
Admittedly, even with tenant referencing, there’s no way to guarantee a tenancy will be problem-free, but surly it’s worth minimizing that risk wherever possible? Let’s take two recent examples where landlords had to instruct Landlord Action to evict their tenants – BOTH cases as a result of bogus referencing.
In the first instance, a landlord had advertised her property herself using an online consumer site, and although had the foresight to ask for referencing, didn’t really know what she was looking for, or whether it was legitimate. The tenant turned out to be a serial bad tenant who moved from property to property conning landlords.
In the second case, the landlord used a letting agent which, through their own in-house referencing service, obtained a letter from the tenant’s so-called “employer” advising that the tenant was working as an accountant.
As it turned out, he had actually only been on work experience at the company for three weeks. The paperwork was falsified. (Both of these cases feature on the new series of Channel Five’s “Nightmare Tenants, Slum Landlords”).
In my experience, landlords are often too focused on getting a tenant into their property quickly to avoid a void, rather than finding the right tenant for their property. Private landlords are often less rigorous with their tenant background checks than lettings agents too.
Remember, at the point of referencing, your prospective tenant clearly wants your property and will be keen to secure it before another tenant does. Demand for rental properties is high, so don’t be rushed into letting someone move in quickly before they have ticked all of your boxes.
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:
- Is who they say they are
- Has the financial means to pay the rent on time every month
- Is worthy of being entrusted with your investment
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10 key tenant reference check questions for landlords
- Proof of identity – driving license or passport. Ideally the driving licence, as this will have an address on it which landlords can check out.
- ‘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.
- National Insurance number – this proves the tenant is legitimately working in the UK.
- 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).
- Bank statements – Ask for the last three months’ bank statements. These help landlords understand when the individual is paid, how regular that payment is, how much is ‘spare’ at the end of the month and what they spend their money on.
- Employer’s reference – It’s essential to secure this via both a telephone conversation and a letter on the company’s headed paper. As you can see from cases we have dealt with, it’s very easy for tenants to ‘doctor’ a paper reference and simply give a landlord a friend’s mobile number to call.
- 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. It costs just £4 for this information.
- Guarantor referencing – If the tenant is using a guarantor, this individual must also be referenced in the same way.
- Tenant credit checks – These show that a tenant pays their debts on time and doesn’t have any County Court Judgements against them.
- 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.
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Tenant Referencing is simply putting together a jigsaw on risk management. Where has the tenant been? Have they been paying their rent? Are they still working? Do the dates on their last or current tenancy agreements match up?
I have met some landlords who will even visit their prospective tenants at their current address to complete the tenant application form, just so they can get a feel for who the tenant is, and what condition that tenant keeps the property in.
You may want to physically collect all the information yourself from the tenants, but it takes time to collect referencing information and verify it properly. Tenants with untoward motives for securing a rental property will often target private landlords who find tenants themselves. If you can’t give the process the time it requires, I would always recommend using an established tenant referencing provider, who will professionally ascertain the financial capabilities of the tenant.
As a landlord, you want a reliable tenant who pays the rent on time and looks after your property. Remember, a good tenant is worth their weight in gold, and if he/she refuses to provide any piece of information, you should question what they are hiding.
Once you find a good tenant, keep them! Some landlords even offer a reduced rent to good tenants who have proved their reliability, just to encourage them to stay on in the property as long as possible. In the long term, the discount pays for itself by avoiding void periods and renewed letting fees.
Total Landlord Insurance has a special offer to provide a free tenant reference check for any landlord, with the opportunity to purchase a complete rent guarantee product, protecting them from none payment of rent and covering legal eviction costs. For more information visit www.totaltenantreferencing.co.uk