The Tenant Referencing Process

The tenant referencing process is an important part of screening your tenants and making sure that you find the right person to take on your buy-to-let. Think about it – your buy-to-let is probably one of your most important financial assets. It’s important to take the right steps to protect it as much as possible. The tenant referencing process allows you to do this.

It’s a safety net for landlords, providing a little trust and peace of mind when taking on a new tenant. But what exactly does the tenant referencing process refer to, and what’s involved?

What is involved in the tenant referencing process?

When we apply for a job, we’re often asked to provide references from past employers. Tenant referencing is very similar. It serves to confirm a tenant’s past behaviour in other rented properties and gives you an idea of how likely they are to be able to afford their rent month to month. Typically, the tenant referencing process consists of:

• References from former landlords if applicable – this allows you to get an insight into how they have behaved previously as a tenant, if they paid their rent on time, and whether they treated past properties with respect
• Credit check – you must ask permission from your prospective tenant before you run a credit check, but this will allow you an insight into their financial circumstances and their track record in paying bills. This will also flag up any County Court Judgements (CCJs)
• Proof of employment/income – this could be copies of payslips, however, an employer reference is preferred so that you can confirm the tenant’s salary, job title, bonuses, and job security with the employer directly
• Proof of residency – this could be with either a council tax or utility bill from the last three months
• Proof of identity – this could be a passport or driving license
• Right to Rent – a landlord is legally obliged to ask to see a tenant’s passport or immigration documents to check that they have the right to live in the UK and to rent.

Remember – if a tenant fails the Right to Rent check, they are not legally allowed to rent your property. If you allow them to any way – or if you fail to run a Right to Rent check at all – you will be committing an offence.

If your tenant fails their credit check, it’s totally up to you whether you choose to rent to that tenant or not. There are many reasons why a perfectly good tenant may fail their credit check, such as simply not having a credit history at all. If you receive a bad reference from a former landlord, don’t let this put you off too quickly either. It’s important to consider whether they are being open and honest, or whether they are being unfair and unnecessarily negative. It’s difficult to know the full story and it may be that the prospective tenant is receiving an unjust bad reference.

What about unlawful discrimination?

Whilst you should always look for a tenant that you feel good about, it’s very important to be wary of not discriminating if and when you decide not to rent to someone. Whilst you can reject your tenant for failing a credit check, or not earning enough money, you cannot reject them for any of the following reasons:

• Age
• Gender or sexuality
• Marital status
• Being pregnant or having children
• Religion or beliefs
• Race or ethnicity
• Disabilities or health issues

These characteristics are referred to as the ‘protected characteristics’. None of these characteristics are a valid reason to reject a potential tenant, as they are not a reflection of the type of tenant someone will be. Rejecting someone on the basis of any of these is classed as unlawful discrimination.

So, what do I do if my tenant fails the referencing process?

As mentioned, unless they fail their Right to Rent check, you don’t have to do anything. You simply need to decide whether you would like to rent to this person, or whether you’d prefer to keep looking.

You may decide to request that a tenant that fails the referencing process gets themselves a guarantor. A guarantor is someone (usually family) who will take responsibility for the tenant’s obligations, including paying rent, if the tenant is unable to fulfil them. They can also step in if there is damage to the property that a tenant refuses to rectify. This is quite a common option for young, first-time renters.

A guarantor must be over 21 years of age, with a good credit history, financially stable, and a UK resident. If you do decide to use a guarantor, be sure to perform an affordability and credit check on them too, to make sure that they can pay rent.

Remember – the tenant referencing process is there to help you find the right tenants for your property, but it’s important to remain realistic throughout. A poor tenant reference needn’t spell an immediate ‘no’. Assess the results of the referencing process objectively and the level of risk you’re willing to accept when choosing a tenant.

Now that you’ve taken some steps to protect your property with tenant referencing, there are a few extra actions you can take. Did you know that you can protect your rental property with landlord insurance? This will cover you in the event of fire, theft, loss of rent and more. With CIA Landlords, you can compare landlord insurance to find the best policy for your needs. To find out more, contact us or get a quote.