What is a tenant reference?
Tenant referencing is a landlord’s way of finding out information about a prospective tenant. A tenant reference involves a number of checks and verifications to help landlords decide whether a tenant is suitable for their property. Some landlords carry out these checks themselves, while others use a professional tenant referencing company.
Most landlords and lettings agents carry out basic tenant references which usually involve at least a credit check. More comprehensive references involve things like employment checks, affordability calculators and other background screening measures.
Why tenant referencing is important?
Before you hand over your keys, it’s important to know who’s going to be living in your property. Tenant background checks will help you understand your tenant's renting history, finances and inform you of any criminal convictions they might have.
Carrying out even basic reference checks on an applicant will make sure they are who they say they are, can afford the rental payments and can be trusted to look after your property.
How long does tenant referencing take?
Factors out of your control, such as a previous landlord taking their time to respond to a reference request, can cause delays to the referencing process. If you’re using a professional tenant reference provider, you can typically expect to hear back within 2-3 days of them receiving the appropriate permissions and documentation. However, they can also encounter similar unavoidable problems which can hold things up.
How much does tenant referencing cost?
Professional referencing costs can vary depending on the company you use and the type of check you need. Professional referencing companies can charge anywhere between £15 and £40 per tenant.
If you’re doing the reference checks yourself, you may still encounter some costs along the way. For example, it costs £3 every time you want to access the Land Registry to check your tenant’s previous landlord is who they say they are. You might also need to pay a small fee if you want to run a basic credit check on a prospective tenant.
Credit check
There are plenty of online sites you can use to carry out credit checks on potential tenants. A credit check will confirm whether the tenant pays on time and if they have any County Court Judgements against them.
A history of missed payments, previous IVAs or payments to debt collection agencies can all be potential causes for concern. However, you should exercise your own judgment based on each individual case. A person missing a couple of payments in the past or having a poor credit score doesn’t mean they’ll be a bad tenant – especially if they happened because of redundancy of economic downturn. However, if someone has large outstanding priority debts like mortgage arrears or HMRC debt, they might be forced to pay those over-paying their rent.
Bank statements
It’s common for landlords to ask potential tenants for recent bank statements (usually the previous three months). Having their bank statements will help paint a clearer picture of the applicant’s financial situation and you’ll understand: • What they spend their money on
- When and how much they get paid
- How much disposable income they have
Employer reference
Asking someone to provide evidence of their employment history means you can assess their reliability and whether their income will cover the rental payments.
Be sure to ask for the reference letter to be written on company headed paper or through an official company email address. If you’re going to conduct the reference on the phone, you might want to call the company’s main switchboard and ask to speak to the person directly rather than using the number provided by the tenant.
Proof of address
To check the person’s current and previous addresses, here are the most commonly-accepted proof of address documents:
- Recent utility bill (excluding phone bill or insurance document)
- Council tax bill issued for the current year
- UK driving license
- Recent bank, credit card or building society statement
- Previous tenancy agreement
- Proof of identity
- Photo ID is the easiest way to prove the applicants are who they say they are. Asking for a driving license or passport is the most common way to check someone’s identity. A driving license is ideal because you can then confirm their address at the same time.
- If the tenant doesn’t have photo ID, you’ll need to carefully consider whether the other reference checks you carry out are enough to prove the tenant’s eligibility.
Previous landlord reference
If the tenant has previously lived in rental properties, references from their previous landlords can be invaluable when it comes to deciding whether you want to offer them a tenancy. It’s also a good opportunity to identity any gaps in the applicant’s rental history or in the landlord contact details they provide.
Right to rent certification
Every landlord in England must conduct ‘right to rent’ checks to ensure tenants can legally live in the UK. You need to check all new tenants, not just people you think aren’t British citizens. It’s against the law to discriminate against anyone because of where they’re from.
If you don’t carry out these checks or your tenant doesn’t meet the criteria, you could face a £3,000 fine. Find out more about your tenant’s right to rent by vising the government’s website here.
Should I use a professional tenant referencing company?
Using a professional and reputable tenant referencing company can save you valuable time. Most professional tenant reference providers offer different levels of service, from basic checks to comprehensive background investigations.
There are plenty of companies on the market offering this type of service so it’s important to do your homework before you part with any money. Ultimately it comes down to your own personal preference. Some landlords like to be more hands-on with their approach to get a feel for what the applicants are like. Whereas other landlords are more comfortable leaving it to the professionals.
