Tenant referencing is perhaps the best way for landlords to gain an understanding of who could be their future tenants. Naturally, owners will have encountered aspiring renters during an in-person property viewing, but with landlords’ minds often being on selling the property, not to mention the small amount of time they have with applicants at this stage of the process. Tenant referencing allows landlords to gain a rich understanding of each applicant’s financial and rental background, making it far easier for owners to decide which tenants will be the ideal fit for their rental opportunity.
Landlords are legally obligated to carry out right to rent checks on any prospective tenant that is over the age of 18. This right to rent check assesses the tenant’s ability to reside within the UK over the course of the tenancy, seeing the aspiring tenant provide the landlord with a series of identification documents to verify their immigration status. Put simply if a tenant is found to not have sufficient right to rent landlords are prohibited from entering into a tenancy with the applicant. If a rental property owner is found to be knowingly letting to an occupant that does not hold sufficient right to rent they could face a financial penalty as high as £3,000 per illegally situated tenant.
Typically, rental property owners will be required to pay a premium for each tenant that they wish to put through the referencing process, seeing the search for your ideal tenant quickly turn into a race against a quickly diminishing bank balance. However, when letting with PropertyLoop owners don’t pay for the essential steps in letting a property, with referencing being included in our commission-free renting revolution.
Although the overwhelming majority of landlords will approach a letting agent or specialist service to reference their tenants, it is possible for the more DIY hearted landlords to carry out these checks themselves. Whilst these services will of course cost, unless you are letting with PropertyLoop, the time and effort this saves owners, allowing them to concentrate on establishing a new tenancy, is invaluable.
If an applicant is unable to pass the referencing procedure, then depending on the reason for the shortcoming, landlords may still choose to let out their property to the aspiring tenant. Typically, this will be done if the tenant does not manage to fully pass the series of “affordability checks” put in place to assure landlords that the applicant will be able to afford the periodic expenses such as rent and utility bills. If this is the case owners will often demand that the tenant obtains a guarantor before moving into the property. With this being said if the landlord chooses to further protect their rental income through taking out tenant default insurance or rent guarantee insurance policies then it is likely they will face difficulty don so as insurance providers frequently site that the occupants of the property must pass the affordability checks in order for the landlord to have an effective policy.
Perhaps most commonly found amongst renters that are full-time students, guarantors can be an essential tool for property owners, allowing them to proceed into a tenancy knowing their rental income is protected. This is because the guarantor is an additional party to the tenancy that is liable for any missing rental payments, alongside damage to the rental property. However, particularly for international students, sourcing a guarantor is not always a viable option. In such instances, rental property owners are likely to ask the aspiring tenants for rent in advance. It is worth noting that, unlike the deposits that a tenant will be expected to pay before moving into a property, there is no legal limit on the amount of rent a landlord can request their tenant pay before moving into the property.
Usually, when a prospective tenant comes along they give you a holding deposit and then wait until you have checked their references before taking up the tenancy.
Those refences include a check on how much they earn. They should really be able to afford 2.5 or even 3 times the annual rent you’re charging.
Your prospective tenant’s credit file will also be checked to ensure they don’t have huge debts. This will also flag up issues such as bankruptcy and county court judgements and it’s up to you if you see this as a problem or something in the tenant’s past that they’ve coped with an moved on. In other words, that it’s no longer an issue.
Other reference checks include previous addresses and, if the individual has rented before, to get a letter of recommendation from a previous couple of landlords (if possible).
Incidentally, just because a prospective tenant has passed a Tenant Reference check, it doesn’t mean that you have to let your property to them. Perhaps on meeting them you get a gut feeling that you shouldn’t rent to them. That’s fine – just hand them back the deposit and keep looking. Usually, though, there is no problem.
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