Letting Agents and Tenant References and Checks by LettingFocus

Landlords using letting agents to find a tenant for them need to be very careful that they set out EXACTLY what references they expect the letting agent to obtain from the tenant as part of the reference checking process.
Those of you who have read my book “Successful Property Letting” will know that I tend to go a little bit further than most letting agents do in terms of the kind of the references I wish a tenant to provide.
Where the property in question is close to me I still tend to do the “finding tenant” job myself using websites like Upad -see the link at Services and Products for Landlords
I do the viewings myself and then get the tenants to provide the employers and past landlord references plus all necessary documents - which I then validate.
And I ask to see a lot of documentation too – bank statements, utility bills, proof of ID etc.
Plus I do a credit check.

Why Do It Yourself?

Sometimes I am pretty busy on my corporate consulting work and speaking engagements and I sometimes think to myself, “Hey, why am I still doing this myself?”
The answer is complex.
But I find that I can do reference checks a lot faster myself than a letting agent can do it, so I’m not sitting and waiting ages for a “Go” or “NO GO” decision on the tenant.
Plus I get to see all the references the tenants provide, I study them carefully and can make up my own mind as to whether they will be good tenants or not.
And with the stress and cost one has if one gets a tenant from hell, it is really a job that I am loathe to lose control of.

As an example of this, a consultee of mine recently used a letting agent.
The agent had the tenant fill in the application form. But though the tenant was from Korea (and clearly outside the EU) the agent did not think to ask to see the work permit from the Home Office.
Doh! Basic stuff! But all too common a problem, I'm afraid.

Agree What Checks Your Letting Agent Will Do

In this case, the landlord had not agreed in writing exactly what reference checks they wanted the letting agent to do when they had agreed for them to do the work to find the tenant.
It’s an easy mistake to make and one that I have to confess I have made in the past.
I do use letting agents from time to time (and I have to for my properties that are far away because I cannot physically do the viewings.)
However, the letting agency is fully appraised as to what refs I need and he sends me copies of the tenants application form and copies of the references obtained too.
I trust them.
In theory all good letting agents should be as thorough on reference checks as he is.
After all, they should not want to provide you with a duff tenant because that will strain your relationship (or it should!).
But some letting agency staff are blinded by the commission and frankly could not give a monkeys about the quality of the tenant.

Be Wary of Pure Commission Driven Letting Agents

This type of letting agent will have the view that as long as they have ticked the minimum number of boxes as part of the reference checks and have got their commission, they are happy with that.
A letting agency near us has staff that I know are entirely on commission. This is the sort of firm you should be wary of and keep on a tight rein.

Private Rented Sector Policy Is Often Made on the Hoof

As part of the corporate consultancy work I do for mortgage companies and in the social housing sector, I get to read a lot of position papers on the private rented sector.
But I am continually amazed that in the private rented sector, so much government policy is made without the benefit of any good quality research.
Julie Rugg in her superb report into the private rented sector found the same thing.
Policy has been and continues to be made that affects landlords and tenants but which is not rooted in valid research findings.
What research there is, is often limited in scope and uses too small sample sizes.
An example is the proposal to require houses converted to HMOs to obtain planning permission. It may be sensible policy, but where is the research to justify this proposal?
I may come back to this issue another time.

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Take care referencing and checking tenants even if you use a letting agent says LettingFocus.com

So far the credit crunch has not led to any large increases in unemployment.
However, I see the press is now carrying more stories of lay offs here and there - so we can expect some rises in unemployment to start to filter through to the official figures before too long.
How does this affect landlords?
Well, I would say that today more than ever, you need to make sure that the tenants you get are good ones and are fully referenced plus that they are in the type of sector of the economy where they are less likely to lose their jobs.
Why?
Well, if they lose their jobs they may struggle to pay the rent and / or have to move to less expensive accommodation – which is bad for them and whichever way you look at it, also means more hassle and expense for you the landlord.
In the worst case, it could also mean that they could stay put and just not pay any rent at all – meaning you have to seek repossession - and that process can take months, often with little chance of you ever recovering the money owed.
In the current environment, if I had to choose between equally good tenant candidates – one of whom worked in an economically shaky sector and another who worked in a (usually) slightly safer public sector job as a teacher or a civil servant, I know which one I would sooner go for.
Yes, it’s tough on some – but hey I’m not the one who was responsible for the state the economy is supposedly in.
Also, if you use a letting agent, don’t fully trust to new agent on this issue unless you have used them for a while and know they are reputable and can be trusted on this.
Sadly, there are a few rogue agents out there who cut corners on referencing and don’t do it properly.
Remember it will be you, not the agent, who is the one who loses out financially if the tenant turns bad.
So ask the agent to let you see references they obtained.
And don’t listen to all the guff some letting agents will give you about the "Data Protection Act and that you cannot see the references, the reference report of the tenants application form" because your tenant should have authorised for you, the landlord, to see the references on the application form he filled in when applying to rent the property.
If your agent won't let you see these things, go to one who will.
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of landlord advisors lettingfocus.com.
I’m the author of “Successful Property Letting - How to Make Money in Buy to Let” which for the last 2 years has been the UK’s top selling property title - buy the UK's top selling property investment book.
It is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on buying property below market value.
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I also work as a consultant helping banks, building societies, housing associations and web portals with their buy to let and property products and services and am a regular speaker at property shows.
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Tenants and Data Protection by David Lawrenson of Letting Focus

As the incidence of credit and ID fraud increases, so landlords have had to collect more and more information on tenants to ensure that they don’t get the tenant from hell.
Only by using a proper referencing system can lanldords be sure that the person standing in front us who wants to rent a house, is really who they say they are and can afford to pay the rent with no hassles.
In my experience most tenant applicants understand this and are happy to provide the information we need to do our credit and reference checks.
In fact, I only had one potential tenant who objected to providing previous utility bills such as proof of past address. Needless to say, I didn’t let to her!

You Need a Thorough Tenants Referencing System
A thorough tenants’ referencing system will deter tenants with a history of not paying their rent and also potential ID fraudsters who will seek an easier, “greener” landlord elsewhere.
But there are laws about what landlords can and can’t do with the information we collect and landlords who abuse the data they hold on tenants can get themselves in trouble.
Fortunately the Information Commissioner (formerly the Data Protection Registrar) sets out some guidance for landlords that explains what landlords can and cannot do with tenant data.
The Information Commissioners says if you use an agent to find a tenant and they obtain references for you, you are entitled to see the references as long as your agent makes it clear to the tenant on the tenant application form or in writing that this will happen.
If the agent says he can’t change his application form or get the tenants’ consent to this, I’d suggest you go to a more amenable agent.

Checking Tenant References Yourself
If you do the referencing yourself, you should always tell tenants what you will do with the information they give you and what credit checks and searches of databases you will do – the key thing is to be clear about how you will use information and not to use information for any purpose that is unreasonable.
Suppose you let out a shared house to say two or more tenants in which each tenant is “jointly and severally” liable to pay the whole rent – i.e. they do not each have individual agreements.
In this case, if one doesn’t pay, you can seek to recover the balance owing from any one of the other tenants (or their guarantors) if they have them.
In these circumstances you would, by implication, be revealing that there was a shortfall in the rent receipts due because one or more tenants have not paid their “share.”
As they are all party to a legal contract, you are perfectly within your rights to do this.

Tracing Agents and Other Third Parties
Other third parties who can be given the tenant details would include debt collection agencies or tracing agents who will need information on money owing to do their job. The Information Commissioner advises landlords to make it clear in the tenancy agreement that this could happen in the event that the tenant leaves with money owing.
Landlords should not give previous tenants’ new address to new occupiers unless the old tenants have requested this happen in writing.
To find out more about referencing tenants and how to find a good tenant ask me.

ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
We are LettingFocus.com - the landlords’ expert and I’m David Lawrenson, the author of “Successful Property Letting” - the UK’s top selling property and buy to let book for the last 3 years.
I have been a landlord and property investor myself for over 25 years.
At LettingFocus we offer independent unbiased advice for landlords and property investors on a one to one mentoring and coaching basis as well as occasional group seminars.
Unlike many in the still largely unregulated buy to let and property “advice” business I am not linked to a property company, developer, estate agency or bridging loan provider.
As such I am able to give unbiased independent advice on where to buy (which areas), what type of property to buy, when to buy and how to buy property at a low price. I can also explain how to reduce the risk of getting a bad tenant.
We help you make money in property by showing you the ways that work and which are of minimal risk to you.

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