The ultimate guide to tenant referencing

Thorough tenant referencing is one of the most important steps landlords and agents can take to defend themselves against troublesome tenants. By building up a detailed profile of prospective tenants during the tenant referencing process, red flags can be spotted early on and tenants who are likely to become an issue further down the line can be weeded out.

But if you don’t know what you’re looking for when carrying out tenant referencing, it can be easy to miss the warning signs. To help you get it right, in this guide we take an in depth look into what tenant referencing involves.

There’s a lot of information here, but you can skip ahead using the menu below:

What is tenant referencing?

Tenant referencing is the process of profiling a prospective tenant to find out if they will be able to pay the rent and are likely to look after a rental property. It helps landlords and letting agents to make an informed decision on whether to allow the tenant to rent a property. The tenant referencing process involves methodically gathering relevant information to build up a detailed profile of the prospective tenant, so that any risks can be identified.

 “When it comes to tenant referencing, you’re putting a jigsaw together, building up a picture of the prospective tenant’s renting history – whether they have defaulted on rent in the past or caused malicious damage to a property, whether they have had County Court Judgements against them and, most importantly, whether they can afford to pay the rent. No tenant should really be paying more than 30 per cent of their income on rent. Affordability is key.”

– Paul Shamplina, Founder of Landlord Action and Chief Commercial Officer at Hamilton Fraser

Why is tenant referencing important?

Before handing over the keys to your rental property, it’s important to be confident that your tenant is who they say they are, and that they can be trusted to look after your property. Your rental property is likely to be your most valuable asset, and you’ll want to do all you can to protect it and maximise the potential of your investment.

A robust referencing process will also reassure a reliable, honest tenant that they are in good hands and dealing with a professional landlord or agent. Matching the right tenant to the right property is key to making sure that the tenant takes good care of the property and will be able to pay their rent on time.

Referencing can actually play a role in helping you decide how much rent to charge. For example, you may choose to offer a lower rent to secure your perfect tenant.

“It’s important for landlords to set their own parameters when it comes to rent – opting to charge rent at the lower end of the market rate for the property might mean you have more tenants to choose from and this may save you money in the long run. A higher rent might sound like a better option in the short term, but it can limit your choice of tenants and cost you in void periods further down the line. It’s important to bear this in mind and make sure that you pick the tenant, rather than letting the tenant pick you. Referencing is key to this.”

– Paul Shamplina, Founder of Landlord Action and Chief Commercial Officer at Hamilton Fraser

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Tenant referencing and landlord insurance

In the event that a bad tenant slips through the net and causes malicious damage to your rental property, you’ll need to provide evidence that you carried out a robust tenant referencing process.

Steve Barnes, Associate Director at Hamilton Fraser Total Landlord Insurance, explains:

“Our premier policy offers protection against malicious damage by tenants and their guests, as well as loss of rent resulting from the need to carry out repairs. But for a claim to be successful, you’ll need to provide evidence that you did all you could to prevent the damage from happening in the first place.”

“You’ll need to show that your tenant passed a full and robust reference check and that you carried out regular inspections.”

– Steve Barnes, Associate Director at Hamilton Fraser Total Landlord Insurance

Tenant referencing and GDPR compliance

Before getting started on a tenant reference check, it’s important to bear in mind that tenant referencing is a data gathering exercise and must therefore be carried out in compliance with GDPR (General Data Protection Regulation).

You can find more general information about GDPR compliance on GOV.UK and information specific to landlords on the NRLA website, Rent Smart Wales and GOV.SCOT.

The ultimate guide to tenant referencing