Since the Renters’ Rights Act abolished Section 21 ‘no fault’ evictions earlier this year, tenant referencing has become a much bigger deal for private landlords in the UK.
Referencing is a useful tool, and it’s fair to say that a positive result is a likely indicator of a good future tenant. Landlords assume that the rent will be paid in full and on time, and the tenant will respect their property. But what happens if there are problems with the reference?
A failed reference check always introduces a level of uncertainty. It raises questions about why the failure happened and how much of a risk it poses.
Fortunately, a failed check is not always a dead end. Our letting agents in Ilford have joined forces with our letting agents in Newbury Park to look at how landlords might approach five different referencing red flags.
Read on to discover what is required for a reference check, and how to interpret the results.
What’s needed for the tenant referencing checklist?
- ID verification, to prove the person’s identity and address.
- Affordability check, to confirm the applicant earns enough to pay the rent requested. Credit check, to discover whether the applicant has any CCJs, is in debt, or has previously defaulted on bill payments.
- Employment reference to confirm the applicant’s employment status.
- Previous landlord reference to identify whether the landlord experienced any problems with the tenant.
- Right to rent check, to discover whether the applicant has the legal right to rent a property in England.
Referencing red flags
1. No proof of address
An applicant’s inability to provide proof of their address could be a sign of fraud. But there may be good reasons why this information is missing. The applicant could be moving from abroad to work in the UK or be living in accommodation where someone else pays the bills.
Where conventional forms of address verification aren’t available, the applicant can be asked to produce alternative documents, including official correspondence from employers, education providers and medical or government sources.
2. A failed Affordability Check
If an applicant’s monthly income is less than two and a half times the rent, they will fail the affordability check.
When an affordability check fails, it’s always worth asking whether the applicant intends to use a different source of funding to pay the rent, for example, savings.
You could also ask if they can provide a guarantor to cover rent payments. The guarantor must then go through the same set of affordability checks.
Rent guarantee insurance can ease worries about unexpected loss of income. If a tenant falls into arrears, the insurance will cover the non-payment of rent over a capped timeframe (often 6 – 12 months). The insurance also covers the cost of solicitors and court fees if eviction is required.
3. A low credit score
A low credit rating will no doubt ring alarm bells, but it’s not necessarily a reason for rejection. If your applicant has never taken out a loan or owned a credit card, there will be no credit history, and this could result in a lower score.
Credit check scoring is based purely on payment history and just one late payment can spoil a positive score, so a poor result is not necessarily a red flag. Landlords may want to take a broader view, considering the applicant’s background as a whole, when making a decision.
4. An unsatisfactory reference from a past landlord
Clearly, a bad reference that might include late payment, damage or anti-social behaviour should elicit a straight ‘no’ to the applicant.
When you speak to the landlord, or question them via email, ask clear questions: “Did the tenant pay the rent on time?”, “Was there any property damage?”, “Did they keep up with utility bills and council tax?”
If the answer is ‘Yes’ to all these questions but the landlord is still being negative, don’t rush to judgement. Any issues that arose between the tenant and their previous landlord aren’t guaranteed to continue into a new tenancy.
5. A Failed Right to Rent Check.
If a potential tenant fails a Right to Rent Check, you must stop the referencing process immediately or you will be in breach of UK immigration law.
Landlords who let to disqualified tenants can face large fines, criminal prosecution and even imprisonment.
Where can I get expert help and advice?
The banning of ‘no fault’ evictions has put pressure on landlords to carry out detailed screening and make the right decisions when vetting applicants.
Whether you are a busy landlord with a large portfolio or you are just starting out, our qualified lettings staff are ready to carry out the necessary checks to secure your ideal tenant.
The East London lettings market is exceptionally busy right now, so contact us today to get things started.
If you are looking to buy, sell or rent a property in Ilford, explore our latest listings below.
For more details or to book a free property valuation, contact our Ilford team today — our property experts are here to guide you through every step of your property journey.
Call us at 020 3972 7341 or email info@oaklandestates.co.uk.
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