Effective Tenant Referencing

Effective Tenant Referencing

Following a viewing of a rental property, a letting agent will hopefully receive an application from a prospective tenant wishing to take up a new tenancy at the property.

At this stage, the prospective new tenant will pay a fully refundable ‘Holding Deposit‘ equal to one week’s rent, to show commitment to their application for this particular property. Should the tenant pass the referencing process, that can be set against the remaining 4 weeks deposit they will owe, or the first month’s rent, but if they provide false or misleading information and therefore fail the referencing process, we do not have to refund this amount.

Once the ‘Holding Deposit‘ has been received, the letting agent must then fully vet that applicant on behalf of their landlord client, to check they are who they say they are, have a good financial standing and can provide good references from their employer and previous or current landlord.

At this early stage, it is worth remembering that even the most thorough tenant referencing only ever provides a ‘snapshot‘ of that persons history and of their current situation at that time, and provides no guarantee of their future performance. As you can imagine, an individuals work or personal circumstances can and do change, for example they may fall ill, their relationship may end or they may lose their job.

Professional letting agents will always try to be as thorough as possible at this early stage, when seeking references on prospective tenants, and this process should include:

1. Checking their Identity and Right to Reside in the UK – this can be done by asking for NI numbers, date of birth, passport/driving licence, recent bank statements or utility bills, current employment details and current address verification and Residence Permits/Home Office documents.

2. Seeking References – this will be from their current employer, confirming length of service, pay/salary information and security of employment. A written reference will also be sought from their previous or current landlord, to see if they have maintained their previous properties to an acceptable standard, and paid their rent on time. Agents will also conduct a credit reference, to ascertain previous payment history and see if there are any adverse/bad debts that have not yet been settled at any previous disclosed or undisclosed addresses. This would also confirm whether they have been located on the electoral roll at their previous and disclosed addresses.

3. Interview – from the first moment a prospective tenant calls to book a viewing, they are being interviewed. During the viewing, the letting agent should be asking questions regarding their property needs, their current situation, timescales and reasons why they’re looking to let this particular property. This face to face meeting will often give the letting agent a good indication of whether this individual is going to be suitable as a tenant, and is a vital part of the tenant referencing process.

There are sometimes situations where an agent needs to ‘think outside of the box‘ and use their commercial judgement. For example, when an individual is self-employed, as they cannot always provide the required 3 years account statements. In this case, most agents would look for a working, UK based Guarantor who is also a homeowner. The Guarantor would then need to undergo an ID, credit check and affordability check to ensure they fully understand the responsibility, and can pay the rent should the tenant fail to do so. They would also be issued with a copy of any tenancy agreement, to ensure they fully understand all of their responsibilities, and sign as Guarantor when the tenancy commences.

An agent always like to see a strong employment history, payslips or P60’s, as an applicants income must be sufficient (2.5 times) to cover the annual rent. Any agent should always give serious consideration to any application received, to ensure they’re being as fair and professional as possible, and giving that applicant the very best chance of being successful in their property application.

It is then up to the letting agent to make a fully detailed representation to the landlord of the applicants current status and suitability as a possible new tenant for their property, and as you would imagine, the final decision whether to grant a new tenancy always lies with the landlord.

Thorough tenant referencing is vital and can help a new tenancy run smoothly, which is at the end of the day, what all parties hope for.

We use the professional services of Let Alliance, one of the UK’s leading providers of tenant referencing, and ideally, we recommend all our landlord clients take out their Rent Guarantee & Legal Protection cover, which further ensures they will never miss a rent payment again!

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