Summertime is a wonderful time of year and makes you feel good with a flow of endorphins. Blue-sky days, longer evenings with glorious sunsets, and warmer weather are perfect for enjoying your home’s outdoor spaces, carrying out property improvements, and moving. All of this and more makes this time of year one of the busiest for the UK rental market.
What is tenant referencing?
Typically conducted by a letting agent on the landlord’s behalf, tenant referencing involves checking various aspects of the applicant’s background to ensure they are responsible and financially stable. Let’s take a look at why tenant referencing is important, what checks you should carry out, and what your options are if a tenant fails their referencing check.
Why is tenant referencing important?
The process is crucial because it helps you, as a landlord, ensure you are renting your properties to reliable and responsible tenants, thereby reducing the risk of future disputes and financial losses. It’s also important because most landlord insurance providers require proper referencing checks to be carried out on all tenants.
What type of tenant referencing checks are there?
Credit check
You should conduct a soft credit check to confirm that the tenant does not have any outstanding debt or a poor credit history. It’s important to remember that you must obtain written permission from the tenant to conduct this check.
Employment and income verification
An employment check involves verifying a tenant's employment status and salary to ensure they have a steady source of income that will allow them to keep up with rent payments. Most landlords typically require the tenant's household income to be 2.5 times higher than the rent.
Previous landlord references
The tenant’s previous landlord is usually contacted to provide insights into their rental history and behaviour. This usually includes information regarding the tenant's payment history, property maintenance, and any issues during their tenancy.
Identity and Right to Rent check
You are legally required to conduct a Right to Rent check to verify that tenants have the legal right to live in the country. This check involves confirming the tenant's immigration status and requesting proof of identity and residency.
What can cause a reference to fail?
If any of the above checks are not passed, it could result in the tenant not passing the referencing process. There are a range of reasons these checks could fail, including poor credit history, insufficient income, employment instability, and issues with previous tenancies.
Another common reason for a reference not passing is tenants providing false information in a section of the referencing process. You may decide not to rent your property to a tenant if their previous behaviour or criminal record raises red flags.
How long does tenant referencing take?
The tenant referencing process can take anywhere between 48 hours and two weeks to complete, depending on how quickly the tenant, their guarantor, and their previous landlords and current employers take to provide the necessary information.
What laws are there regarding tenant referencing?
Tenant referencing is governed by several laws and regulations designed to ensure fairness, transparency, and personal data protection.
The Data Protection Act 2018 regulates the handling of personal data. You must ensure that all personal data collected during the referencing process is processed lawfully, transparently, and securely. Tenants have the right to know how their data is being used and to request access if necessary.
The Tenant Fees Act 2019 makes it illegal for landlords or agents to charge tenants for the cost of referencing checks, while the Equality Act 2010 ensures that landlords cannot discriminate against potential tenants based on characteristics such as age, disability, gender, race, or religion.
How your agent can help
Letting agents play a crucial role in facilitating the tenant referencing process, making it as smooth and efficient as possible. They can use their expertise and resources to verify tenant details, giving you peace of mind about their reliability. They can conduct all of the required checks on your behalf, saving you a lot of time and stress.