Checking references on tenants Tips from LettingFocus.com

CHECKING REFERENCES ON TENANTS - TIPS FROM LETTINGFOCUS.COM

LettingFocus.com property expert David Lawrenson explains how landlords should do referencing checks on tenants. Ask us for more advice.

Landlord expert David Lawrenson of www.lettingfocus.com says, "The purpose of referencing a tenant is threefold:

1) to check the person is who they say they are

2) that they can afford the rent and

3) that they have honoured past commitments

Tenancy Application form

The starting point for any tenant reference check is getting the tenant to complete and sign a tenancy application form which should contain a statement giving you permission to carry out credit checks and seek references from employers and previous landlords.

In addition, you should ask for documentation providing proof of:

1) current and previous address

2) entitlement to work in the United Kingdom (Non EC nationals only)

3) identity

The more information collected on the tenancy application the better, because should the tenant subsequently abscond or leave owing money, this can be used to give vital tracing information. In addition, should the applicant make false statements, this document provides evidence for eviction under ground 17.

To check current and previous addresses, ask the tenant to show you the last three utility bills, mobile phone bills or bank statements.

Recent bank statements for the tenants' current account can be particularly useful as this will give an idea of whether the tenant is in credit and whether money (e.g. salary) is being paid into the account. Used in this way it acts as an additional check on the employers’ reference.

Check all tenants references carefully and call to verify them. Do background checks too. Don’t assume the company they say they work for really exists. Anyone can mock up a convincing letterhead! Check the company out at company’s house and on the web.

Tenants working on contracts or freelance should be asked for evidence of current contracts and regular income over a period of at least six months. Don’t be afraid to ask them to get their agent, accountant or clients to prove their past and / or future income too.

Landlord Referencing

It’s possible that the tenant's previous landlord will say anything if it helps to get rid of the problem tenant onto someone else. For these reasons, it’s best to get a reference from the landlord before the last one if they had one.

If letting to students, parents should be referenced too as well as being listed on the tenancy agreement as guarantors. Ideally, guarantors should be homeowners - which you can check by looking at the land registry website.

Letting to Companies

What about letting to companies? Check whether it is a limited company and assess its financial worth by obtaining a copy of their report and accounts from Companies House. If there is any doubt about the company’s stability, put the tenancy in the tenants name rather than the company’s, especially if they have assets like a house elsewhere. Then, check the individual’s references as you would any other person.

Don’t accept a “letter of guarantee” from a company either - insist on a deposit and cleared funds before anyone moves in.

Credit Scores and Tenants

As part of the referencing process, do a credit referencing check. You can do a basic one for less than £15. The credit reference report will usually include a score which can be used to assess whether the tenant is a good risk. The report should also tell you whether they have something negative in their credit history, like a county court judgement.

Anyone who owns their own home and has accounts they keep in credit will have a good credit score but someone who is highly indebted with lots of accounts can get also get a good score as long as they are meeting their repayments.

Young students, who have been renting for a few years, haven’t bothered to register on the voters’ role and who have applied for lots of loans will tend to have a low score. Another group with low scores are foreign nationals who have recently moved to the UK from a country with no credit data history.

Therefore you need common sense to interpret credit scores and be prepared to read the score together with other information.

About David Lawrenson and Lettingfocus.com

If you need more advice on tenant referencing and how to avoid getting the tenant from hell please contact me. I’m David Lawrenson from property investment consultants lettingfocus.com

I’m the author of the buy to let book “Successful Property Letting - How to Make Money in Buy to Let” which is the UK’s top selling property title. Click here to buy the book: property investment book

The new edition 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 below market value.

What’s unique about lettingfocus.com is that we offer independent property investment coaching because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, estate agent or bridging loan financier and do not receive commissions from any of these sources either.

For example, if a property investment you are thinking about is lousy, we’ll tell you straight and we can help with any aspect of being a landlord, buy to let and property investment.

We offer advice both at our property investment seminars and also on a one to one basis. Contact me for for information.

Lawrenson and Lettingfocus.com – Freelance Writer, Speaker and Consultant

I am an independent expert on the UK property market and a well known property investment blogger.

I also contribute to newspapers and a host of property websites as a freelance property journalist and I write a number of columns in the press and on the web.

My work as a property consultant and as a property speaker also stretches to helping companies such as banks, building societies, housing associations and web portals with their buy to let and property products and services.

You can read more about my landlords networking programme at my website lettingfocus.com. My next London property investors seminar meeting is coming soon. Contact me if you need any further information.