Nightmare Tenants and How to Avoid Them
In this article, buy to let expert David Lawrenson of www.LettingFocus.com explains why tenant referencing should really start as soon as you advertise to find a tenant. If you don’t do it right you risk getting a nightmare tenant.
Nightmare Tenants and How to Avoid Them
Maybe you have to know how much stress and hassle a nightmare tenant can be before you appreciate why it’s so important to get a good tenant.
Along with buying the right type of property in the right location, good referencing is probably the most important thing you will do as a landlord because it is good reference checks that will make sure you don’t get a tenant who turns into a nightmare. Getting a tenant from hell can be very costly indeed.
Tenant referencing takes place as soon as you start receiving calls about a place you are trying to let out.
When people call, have some paper at the ready to note of what they do – whether employed, where living now etc and make brief notes as you speak to them on the phone.
Stagger viewings apart a bit – say 20 to 30 minutes – to give you time to meet the potential tenants properly as well as giving you time to make notes after they have gone, but don’t worry if they cross over a bit as this will only enhance the sense of demand.
Your aim is to confirm what they told you earlier on the phone but be careful how you do this. Remember, you are trying to create a friendly trusting relationship. If they are to be good future tenants, they must like you too and if you fire hundred of questions at them, they will go elsewhere.
If there are any inconsistencies between what they say at the meeting with what they previously said on the phone, then enquire politely – but don’t interrogate.
What Tenant References Should You Look For?
The purpose of referencing is to check the person is who they say they are, that they can afford the rent and that they haven’t had a history of not honouring paying rent (or of other debts) in the past.
For an employed person you should look for an employer’s reference, a reference from a previous (and preferably last but one) landlord (the last landlord may say anything just to be rid of a problem tenant), proof of current address, proof of identity (such as a passport of new style driving licence with a photo) and a satisfactory credit reference report – and for non EU nationals, (whilst we are in it still!) plus proof of permit or a visa entitling them to work in the United Kingdom. Keep key documents as part of the “right to rent” checks.
If they are self employed, you may ask to see accounts or other proof of income and expenditure such as 6 months’ bank statements to show that they have money coming in. Otherwise request 3 months’ bank statements.
You can either give the tenant an application form to sign and complete giving their consent for you to approach referees or you could ask the prospective tenant to get the references themselves. The latter way is much faster.
What about just getting a letting agent to do all this?
That’s OK, but you should be aware that a few landlords have got their tenant from a bad letting agent who failed to do adequate checks.
So, get a good agent. Most are excellent but there are a few bad ones.
Tips for Picking a Good Letting Agent
- Ask the letting agent for references from past clients.
- Check membership of professional bodies such as the Association of Residential Letting Agents (ARLA), the Royal Institution of Chartered Surveyors (RICS), the National Association of Estate Agents (NAEA) or the National Approved Letting Scheme (NALS).
- There are lots of good agents who are outside these schemes but these bodies do afford some degree of protection for landlords against agent malpractice. (Each organisation provides different safeguards, so check what’s on offer.)
- If you use a letting agent to find a tenant, they will probably use an application form for the tenants to complete and sign allowing them (the agent) to seek references. Make sure it allows you to see the references too, if you wish.
Avoid ID Fraudster Nightmares
Proof of address is an important part of referencing checking. Ask to see last two quarters worth of utility bills, mobile phone bills or active bank or credit statements in that persons name as a check on their most recent address.
The thinking is that if the person in front of you is an ID fraudster, who has impersonated someone else’s identity, it will take a little while before the person whose identity has been stolen realises that either their post has been diverted or that their has been activity on their bank or credit card accounts that they did not authorise. That’s why it’s best to ask for quite a few months of this type of ID.
Do at least a basic credit enquiry check. This usually costs about £10 and the score will give you an indication of credit worthiness.
If the score is low, seek a guarantor who will legally have to pay the rent in the event that the tenant defaults. In the case of students this could be a parent.
For other types of prospective tenant such as people on local housing allowance, the guarantor should be someone else who is a home owner. Naturally, the guarantor’s income and outgoings should be checked out too.
It might be possible that you are asked to let to a company. If so, check whether it is a limited company and assess it’s financial worth by obtaining a copy of their report and accounts form Companies House.If the company is not stable, put the tenancy in the tenants name rather than the company, especially if they own a house somewhere else.collectors after he has gone.
This is a very basic guide to a detailed process, which is key to understand, even if you use a letting agent, as you must be sure they are doing this work properly.
Much more information about how to avoid nightmare tenants, (and only get great ones), is contained in my two books for landlords, with an especially detailed guide in my book, “Buy to Let Landlords’ Guide to Finding Great Tenants”. See the links below or Click here to download it. (Note: Paperback version is available from Amazon. Click here).
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