If you have ever applied or interviewed for a job, which I am pretty sure you have, and if you are here reading an article about tenant referencing, you must be familiar with the requirement of securing letters of recommendation or references from your previous employers and landlords.
In a similar fashion, tenant referencing is essentially a tenant’s character background check done by a landlord or on behalf of the landlord by his/her letting agent or property manager. Tenant referencing ensures that the potential tenant can be trusted, can afford to pay the rent and has the right to rent in the UK.
What Do You Need for Tenant Referencing?
The requirements and checks carried out during the tenant referencing process are typically dictated by the landlord or letting agent managing the property. Nonetheless, the majority of the tenant referencing checks are pretty much the same all over the UK.
Right To Rent
The foremost and only legal requirement that must be included in tenant referencing is the Right to Rent, as outlined in the Immigration Act 2014.
Right to Rent in tenant referencing basically means ensuring that your potential tenant is legally allowed to rent property in England. Typically, landlords doing tenant referencing check original documents from a potential tenant to ensure that they have the Right to Rent in the UK. It is recommended for landlords or anyone carrying out tenant referencing on their behalf to create copies of original documents and note down the date you carried out the check.
Why Is Tenant Referencing Important?
As things work, landlords don’t like to see the property vacant because void periods can be a nightmare if a new tenancy is not finalized before the notice period for tenants currently residing in the building ends. There is often a very calculated decision about how much notice does a landlord have to give to ensure the property does not remain vacant. Therefore, some landlords make the mistake of not going through with the tenant referencing process because of how tedious it can be. But the thing is, tenant referencing pays off. A little time and money allow you the peace of mind that your property is in safe and reliable hands. Otherwise, landlords not performing tenant references open their property to various risks of damages worth a lot more than the cost of a tenant referencing.
Why Should I Use A Tenant Referencing Service?
Tenant referencing and overall tenant management can be rightfully considered a hassle at times for landlords. This is because the Tenant Fees Act 2019 made it illegal for a tenant to be considered liable for the tenant referencing procedure. The responsibility falls on the landlords or the estate agents working on their behalf to cover the cost of the tenant referencing process. Therefore, tenant referencing, already a financial burden, may irate landlords if they also have to go through property management courses or set up a property management system, property management software or a property management app and endure the mental tax of the tenant referencing process. Especially for landlords handling multiple properties at once who operate as private landlords with no agents, the problem can aggravate.
On the other hand, if you use Lofti as your Property Management Software, tenant referencing is embedded in tenant onboarding flow, costs less than £13, is carried out in less than 48 hours and… is so well done that can be used to apply for a Rent Guarantee Insurance.
Tenant referencing services are also offered by property management companies. Companies offering tenant referencing services have specialist staff with cutting-edge technology running checks at lightning speed and delivering tenant referencing reports in an hour, a day or 2 days depending on how quickly the landlord needs tenant referencing done.
This takes away the time-consuming work landlords have to put in otherwise. While the word tenant referencing may just seem like a piece of cake in the first instance, when you consider having to notify your potential tenant that you will be running a background check, wait for their consent to start the process and relevant contacts, then send in emails or make calls or worst of all, physically meet the potential tenant’s employers and previous landlords, tenant referencing becomes a huge hassle. This is why landlords let tenant referencing services do it for them.
Can You Fail A Reference Check?
A pretty straightforward answer is, yes a tenant can fail the tenant referencing process.
If your landlord stumbles upon a bad reference during tenant referencing, you can fail the reference check. The bad reference could be anything, a low credit score, low income in proportion to the rent, minimal job security, your previous landlord or employer talking you down for any reason whatsoever, a criminal record, and more.
All of these reasons allow the landlord to consider tenant referencing failed and decline to let the property.
Rest assured, you can always try to make up for the failure. You could go up to your potential landlord and straightforwardly ask them which part of the tenant referencing check you failed and explain yourself. For example, most potential tenants struggle with credit scores often during tenant referencing.
As a remedy, you could offer a reference for tenant referencing from someone you borrowed from at one time and repaid. Or you could also offer a genuine reason for a bad reference if you have one to compensate for failed tenant referencing. For example, if one of your previous landlords talks you down during tenant referencing and you had issues with them during your tenancy, you can discuss them with the landlord and offer your perspective on the situation.
If tenant referencing doesn’t work at all, you can always arrange a rent guarantor. A rent guarantor is someone who takes the responsibility of paying rent on your behalf in case you fail to follow through with it.
A guarantor will also have to go through some form of rent guarantor referencing. The procedure will establish whether the guarantor has enough income or assets to pay the rent or not. Since this is quite a personal responsibility, typically, only family and close friends are listed as guarantors.
The landlord has to agree to the guarantor paying for the tenant after they have undergone tenant referencing as well and if the landlord agrees, the agreement needs to be written down in the tenancy agreement.
To avoid tenant referencing fails, tenants should build their credit scores, maintain relationships with employers and landlords, and apply for only letting properties that fall within their budget. The only situation where you are not allowed to rent a property and can do nothing about it via tenant referencing is when you don’t have the Right to Rent in the UK.
For a landlord, there is plenty of freedom to deny potential tenants whenever there seems to be a hint of trouble even if there is no outright reason found during tenant referencing. However, a landlord cannot refuse tenancy based on illegal discrimination. Illegal discrimination can entail withholding someone’s rights including the right to rent based on their age (above 18), race or ethnicity, gender and sexuality, disability, religion or marital status.
When a landlord denies to let a property after tenant referencing fails, they can no longer keep the holding deposit and have to fully refund it within seven days. It is illegal to deduct any fees for tenants referencing from the deposit as defined in the Tenant Fees Act 2019.
However, if the potential tenant provides misleading/false information or pulls out of the potential tenancy agreement before the deadline for the tenant referencing process has passed, a landlord can keep the entire holding deposit.
Tenant referencing is a hassle and can be scary for someone desperately looking for a new place to rent. As a tenant, you should always keep a few things in mind when it comes to tenant referencing. Firstly, honesty is your best friend.
Pretty much like our elders used to say, one lie gives only birth to another lie. At the moment, you must feel like perhaps the gap in your employment history will not look good during tenant referencing or that one landlord who always created problems for you may talk you down.
These are all valid concerns but lying to perfect your references is not an option during the tenant referencing process. It is dishonest and unethical to withhold or manipulate information from someone trusting you with an asset as valuable as their property.
You might be thinking, what if I lie due to circumstances but I have always been a good tenant? The landlord does not know that and is choosing to trust someone who is flat-out dubious. Indeed, when you get caught in a spin of lies during tenant referencing, you can fail to land the lease regardless of how necessary or ethical you think it was to lie for it.
The landlord will see you as an untrustworthy tenant even if you manage to convince them to grant you the tenancy. Worst case scenario, the landlord will mark your tenant referencing failed, deny the tenancy and even withhold the entire holding deposit for providing misleading or false information.
The most important thing is, there is no reason for you to lie even if you think that you will fail the tenant referencing check. This is because more than often, a landlord will be understanding your background history and strike an arrangement for you such as offering to have the possibility to include a guarantor on the lease.
The second important thing to remember as a tenant is to fill out the tenant referencing details and submit them as soon as possible. Typically, an ideal turnaround time should be a day or two but never more than that.
This is because your landlord’s interest is to arrange for a tenant to occupy the vacant property as soon as possible or they will keep losing money on the property as long as it stays empty.
This means that if you take too long to think about which references to use, if your references are good enough, and so on, chances are that the landlord will simply hand over the property to another potential tenant that manages to submit the tenant referencing details quicker than you. Therefore, you should account for how fast-paced the real estate industry in the UK is.
Another important step in establishing that your tenant referencing checks are done as quickly as a flash is to ensure you have notified your referrals about the tenant referencing process. Referrals are people providing you with recommendations during the tenant referencing process such as your employer or your previous landlord.
If you fail to correspond with your referrals and ensure they are well aware of the process and how quickly it needs to get done, your tenancy application will probably come to a halt. If the landlord is doing the tenant referencing checks themselves, they may not even bother to follow up with your referrals for a reference and just move forward with whichever potential tenant has available referrals.
Thirdly, you should always consider carefully if the property you are applying to let is suitable within your budget and will not compromise your finances. A general rule to follow for tenant referencing checks is to ensure that the rent of the property you are interested in should be your household income divided by 2.5.
So for instance, your disposable monthly household income is 2000 GBP. Then your rent should be 800 GBP or lower. It is important to note here that the word used is household income and not individual or personal income.
A household can be formed by a singular person, a couple, or a blood-related, step, or adopted family. So let’s say, the rent of the property you are looking to let is 800 GBP. Your monthly salary is 1000 GBP but you live with your parents, who both earn 500 GBP each. As a household, you can contribute to rent equally or in proportion to your income but the bottom line is that you all, as a single household, can rent the property with an 800 GBP monthly rent.
As we discussed earlier, if all resorts fail during tenant referencing, you can almost always still land the property you want to rent by arranging an agreement with a rent guarantor. Landlords are usually okay with having a rent guarantor included in the tenancy agreement document. The rent guarantor reduces their risk and gives them the peace of mind of having a responsible person providing the necessary finances for covering the rent of the property even if the tenant is not up to the mark.
Even though it is more than appropriate for a landlord to be concerned about the tenant not being upstanding themselves so even if they don’t default on a rental payment, they may be damaging the let in other ways such as not taking care of repairs or using property maintenance services such as ppm as an alternative.
There may be a need for landlord inspection notice in these cases to ensure that the tenants follow through with their responsibilities to be on their exemplary conduct such as those outlined in Section 8 of the Landlord and Tenant Act 1954.
To understand why a landlord might still allow such a tenant to let the property, let’s assume that you are a guarantor for a friend. Since you put down in writing that you are responsible for them, you will force your friend to be accountable for their actions and act in a manner that does not damage your reputation.
At the end of the day, it is important to just sit back and relax once you have filled out the necessary applications and provided the required documents for tenant referencing because eventually, things will work out in your favour.
Check out our article on tenant credit checks.