Online library

When taking on a new tenant a landlord is taking on a risk. Will they pay the rent on time? Will they look after the property? Will they leave when they are supposed to? This risk can be reduced by carrying out certain checks on the prospective tenant and therefore helping the landlord make an informed decision before granting the tenancy.

When taking on a new tenant a landlord is taking on a risk. Will they pay the rent on time? Will they look after the property? Will they leave when they are supposed to? This risk can be reduced by carrying out certain checks on the prospective tenant and therefore helping the landlord make an informed decision before granting the tenancy.

References can be sought from a number of different sources, for example a previous landlord or employer. Some landlords do it in person while others may outsource to a specialist referencing company or letting agent. In circumstances where it is difficult to obtain a reference or where a tenant may have difficulty meeting the rent, a landlord may seek a guarantor. The guarantor is usually then referenced the same way.

A landlord is ultimately responsible for the tenancy, even if they use a letting agent, so it is important to be satisfied that appropriate checks have been carried out BEFORE the tenancy is signed. This is particularly important in Houses in Multiple Occupation where the tenant may be sharing with other occupants.

In some areas where a Selective Licensing Scheme is in force, (England and Wales only), property managers may be required to carry out checks.

Finding the right tenant is not an exact science. A variety of tools are available:

• Shortlisting enquiries
• Referencing
• Credit reports
• Identity checks
• Specialist referencing companies
• Letting agents

Used correctly these tools can help reduce the risk of choosing a bad tenant. It is also an opportunity to demonstrate professionalism.

Obtaining references can delay a letting, so it is worth considering how useful they are likely to be.

It is also important to remember that good referencing and vetting is not a guarantee that a tenant will look after the property and pay the rent on time. There is no substitute for good management once the tenancy has started.

Some landlords choose to shortlist prospective tenants by asking a few questions by email or over the phone.

Having selected a prospective tenant many landlords will ask for a holding deposit or charge a referencing fee to help deter time wasters:

Some landlords choose to shortlist prospective tenants by asking a few questions by email or over the phone.

Having selected a prospective tenant many landlords will ask for a holding deposit or charge a referencing fee to help deter time wasters:

• A holding deposit is usually equivalent to one week’s rent. It would normally be returned unless the tenant pulled out of the property.
• A referencing fee would normally be equivalent to the cost of carrying out reference checks. A landlord would normally refund an equivalent sum if the tenant is successful.

The terms and conditions for a holding deposit or referencing fee and what they cover should be confirmed in writing.

In order to carry out checks it is necessary to ask for specific information. Many landlords will use an application form to collect this. A specialist referencing company will have their own.

It is important to get the balance right between collecting sufficient information and not being too intrusive. Information requested may include:

• Personal contact details
• Next of kin contact details
• Accommodation addresses for the past three years
• Contact details of previous landlords
• Income (could be Local Housing Allowance)
• Referee contact details

Landlords may also require assurance that their prospective tenant has no outstanding County Court Judgements against them and does not owe money to a landlord, local authority or utility company.

If a landlord intends to contact referees, or wishes to reserve the right to pass on information to a third party at the end of the tenancy (eg a utility company or a local authority), they must seek the tenant’s explicit written consent in advance.

If they intend to carry out a credit report, the prospective tenant must also sign to confirm that they understand a credit search will be made using a credit referencing agency.

For more about data protection refer to the library module ‘Data Protection and Freedom of Information’.

If a landlord intends to contact referees, or wishes to reserve the right to pass on information to a third party at the end of the tenancy (eg a utility company or a local authority), they must seek the tenant’s explicit written consent in advance.

If they intend to carry out a credit report, the prospective tenant must also sign to confirm that they understand a credit search will be made using a credit referencing agency.

For more about data protection refer to the library module ‘Data Protection and Freedom of Information’.

There are a number of referees to choose from:

Suitability for the property:

• Previous landlord
• Character reference

Ability to pay the rent:

• Proof of income from employer (if employed)
• Proof of income from accountant (if self employed)
• Proof of Local Housing Allowance entitlement (if unemployed or on low income)
• Proof of pension (if retired)

Some landlords may also ask to see bank statements from the last three months.

There are a number of referees to choose from:

Suitability for the property:

• Previous landlord
• Character reference

Ability to pay the rent:

• Proof of income from employer (if employed)
• Proof of income from accountant (if self employed)
• Proof of Local Housing Allowance entitlement (if unemployed or on low income)
• Proof of pension (if retired)

Some landlords may also ask to see bank statements from the last three months.

When contacting referees it is best practice to make a written request, enclosing a stamped addressed envelope. Most referees, especially employers, will not be able to offer verbal references.

When taking on a tenant who has rented before it is important to seek a reference from their landlord. Typical questions include:

• Dates of occupation?
• The amount of rent paid?
• Was the rent paid on time?
• Were there any problems during the tenancy (give details)?
• Were there any deductions from the tenant’s deposit (it taken)?
• Would they let to this tenant again?
• Any other relevant information?

For tenants who are unemployed or renting for the first time it may be appropriate to ask for a character reference, normally a home owner or a professional. Typical questions include:

• How long have they known the tenant?
• In what capacity?
• Do they consider the tenant to be reliable and trustworthy?
• Any other relevant information?

For tenants from overseas it may be appropriate to ask for a UK based character reference. For example from an employer, college, family member or friend.

Be wary of referees who can only be contacted by mobile phone, email or a PO Box address. They may be bogus.

Throughout the referencing process, it is important to keep careful records. This may be helpful to avoid disputes and may be useful to help trace a tenant if they abandon the property and/or owe money at the end of the tenancy.

A credit report can help landlords check that their tenant is who they say they are and identify irregularities that they may wish to consider.

Many of these services are only available from a specialist referencing company.

The information available may vary depending on the service provider but usually includes all or some of the following:

A credit report can help landlords check that their tenant is who they say they are and identify irregularities that they may wish to consider.

Many of these services are only available from a specialist referencing company.

The information available may vary depending on the service provider but usually includes all or some of the following:

• County Court Judgement (CCJ) Search
• Bankruptcy and Insolvency Search
• Residency/Address History Confirmation
• Alias Name Search
• Linked Addresses located and searched
• ID Verification Check

County Court Judgment Searches can also be purchased via the Court Service website.

Checking that a prospective tenant is who they say they are can help landlords reduce the risk of letting a property to someone who is:

• Seeking to commit fraud
• Intending to use the property for illegal purposes
• Living in the UK illegally

Landlords can check a UK citizen’s identity by following up references and carrying out a credit report. Many will also ask to see one form of photo ID and a copy of a council tax or utility bill dated within the past three months and showing the tenant’s name and the property where they previously lived.

Checking that a prospective tenant is who they say they are can help landlords reduce the risk of letting a property to someone who is:

• Seeking to commit fraud
• Intending to use the property for illegal purposes
• Living in the UK illegally

Landlords can check a UK citizen’s identity by following up references and carrying out a credit report. Many will also ask to see one form of photo ID and a copy of a council tax or utility bill dated within the past three months and showing the tenant’s name and the property where they previously lived.

In October 2013 the Government announced that carrying out checks could soon become obligatory; following the Government’s crackdown on illegal immigration, checking the immigration status of new tenants is likely to become mandatory, with fines of up to £3,000 for landlords who provide accommodation to illegal immigrants from outside the European Economic Area without making the correct checks.

The proposals will involve landlords taking reasonable steps, before the rental arrangement starts, to find out who is actually going to be living in the accommodation rather than only inquiring about the person who pays the rent or signs the tenancy agreement.

As a minimum, it is strongly advisable to ask for written references from a current employer or accountant, copies of recent bank statements as well as two pieces of identification of which at least one should be photo identification such as a driving licence or passport.

The identity of people from overseas can be checked by asking to see their passport and taking UK based references. If a landlord is unsure what a passport should look like they can say they intend to get it checked by the authorities. This can deter those with less than honest intentions.

Landlords can engage a specialist referencing company as an alternative or to compliment their own checks.

Most companies will offer the option of a credit report or a full tenant check.

A full tenant check normally includes:

Landlords can engage a specialist referencing company as an alternative or to compliment their own checks.

Most companies will offer the option of a credit report or a full tenant check.

A full tenant check normally includes:

• a credit report
• landlord and employer references
• confirmation of bank details
• confirmation of previous property ownership
• income confirmation
• assessment of the prospective tenants ability to pay the rent

A specialist referencing service will only confirm facts. If a check ‘fails’ it does not necessarily mean that the tenant will be a bad tenant, but would normally be seen as an increased risk.

Reasons why tenants may ‘fail’ the professional referencing process include:

• County Court Judgements against their name. Even if they are satisfied, they are likely to show up on a credit check for some years. Court decrees, bankruptcy or administration orders will also affect the results.
• Poor income to rent ratio. Referencing agencies will usually use a ratio of around 2.5. This means that the gross salary must be at least 2.5 times their share of the rent. If there is more than one tenant, it may be possible for the rent to be apportioned unequally for referencing purposes. If the tenant is self employed, their income will be measured as an average of the last 3 years, as stated in their accounts. Undeclared payments received will not be classed as income.
• Breaks in employment. Any breaks in employment over the previous 6 months, other than the holiday entitlement, may cause the tenant to fail. Short term employment contracts are usually not acceptable for referencing purposes.
• Previous landlord’s reference. If the previous landlord was not happy with the tenant, they may refuse to give a reference.
• Poor credit score. Missed payments on credit cards and loans will have a detrimental effect on the credit score although the score generally has to be very bad to fail the tenant referencing process.

Letting agents can be used as an alternative to finding a tenant in person. Most agents will offer a variety of services including:

• Tenant find only
• Tenant find and rent collection
• Full management
• For more about using a letting agent refer to the library module ‘Using an Agent’.

Letting agents can be used as an alternative to finding a tenant in person. Most agents will offer a variety of services including:

• Tenant find only
• Tenant find and rent collection
• Full management
• For more about using a letting agent refer to the library module ‘Using an Agent’.

In certain markets it can be difficult to obtain a reference, such as letting to students who have no income and are renting for the first time.

A good way of minimising risk here is to ask for a guarantor, normally a parent or friend who is homeowner. The guarantor will be liable to meet the cost of any unpaid rent and/or damage to the property if not met by the tenant.

Guarantors should be referenced.

In certain markets it can be difficult to obtain a reference, such as letting to students who have no income and are renting for the first time.

A good way of minimising risk here is to ask for a guarantor, normally a parent or friend who is homeowner. The guarantor will be liable to meet the cost of any unpaid rent and/or damage to the property if not met by the tenant.

Guarantors should be referenced.

It is important that the guarantor has read and signed the letter of guarantee and a copy of the tenancy agreement before the tenant (include date and time signed). If this is not done the guarantee will not stand up in Court.

See the separate subject on Guarantors for more information.

The cost of referencing will vary depending on how it is carried out, how many checks are undertaken and whether a specialist referencing company or agent is used.

Many agents will pass on the cost to their client landlords and/or tenants. If this is the case it should be made clear that the fee is non refundable.

Most landlords do one of the following:

The cost of referencing will vary depending on how it is carried out, how many checks are undertaken and whether a specialist referencing company or agent is used.

Many agents will pass on the cost to their client landlords and/or tenants. If this is the case it should be made clear that the fee is non refundable.

Most landlords do one of the following:

• Incorporate the cost into the rent without taking a fee or deposit
• Incorporate the cost into the rent and take a holding deposit
• Charge for the cost of referencing and refund an equivalent sum if the tenant is successful