- What Is Included In The Tenant Reference Process?
- Why Do Landlords Skip The Tenant Reference Process?
- Tenant Referencing Timeline
- Pre-Viewing Referencing
- Post-Viewing Referencing
- Thorough Referencing
- Tenant Referencing Costs Since The Tenant Fee Ban
- How Much Are Tenant Referencing Fees?
- Early Warning Signs Of A Bad Tenant
- Obtaining A Tenant Reference Is A Wise Choice
If you’ve ever interviewed for a job, the prospective hire probably requested references. They wanted to know your backstory. Were you a reliable employee? Did you perform your job as expected? Did you leave on bad terms? These are all important things to know before hiring someone for a job. And they’re equally important when you’re choosing a tenant, enter the process of completing a tenant reference.
Tenant references give you a clear picture of the person you’re letting to. You want to get a good feel for their character, including their honesty, reliability, and financial background.
While referencing for renting isn’t a requirement, it’s a wise choice — whether you’re renting on your own or using a letting agent. This is an important step to perform before choosing a tenant or signing any contracts or agreements. Keep reading to learn more about the tenant reference process and why you should do it!
WHAT IS INCLUDED IN THE TENANT REFERENCE PROCESS?
The tenant reference process is designed to protect the landlord or the letting agent involved. By performing reference and background checks, landlords can avoid entering into contracts with unreliable, and sometimes disastrous, tenants. Tenant reference checks include employment status and credit checks, as well as prior rental history.
The last thing you want is to sign a contract with a tenant who is notorious for falling into rent arrears or damaging property. Some landlords pay property manager fees to have someone look after things in their absence.
WHY DO LANDLORDS SKIP THE TENANT REFERENCE PROCESS?
Some landlords and letting agents choose to forgo referencing tenants for a variety of foolish reasons. The main one being that they’re in a rush to fill a vacancy. Others skip it on it because it’s time-consuming. But here’s the catch. Spending a little time and money now will be well worth it in the end. Tenant references give you peace of mind that you’re choosing a tenant who will not only pay on time but properly care for your property. This is also good news for any property managers involved. Most, and the best letting agents include a background check as part of their services.
Even if you’re using a letting agent and they offer tenant reference services, it’s in your best interest to oversee and get involved in the process. If possible, meet the tenants before entering into an agreement. Ask your own questions and don’t leave it entirely up to your agent.
TENANT REFERENCING TIMELINE
Think of this step as the pre-interview. This is the first step toward finding a quality tenant. There are two common steps that occur at this stage of the game — a phone interview and providing the applicant with a tenancy application form. This is a quick way to weed out any undesirables. Most tenants who aren’t serious or responsible will bow out or change their minds when they see how prepared you are to vet them.
The phone interview is all about getting a good first impression. Remember, you aren’t interrogating the applicant but instead getting a feel for their personality. Keep it casual. Make a list of important questions before making the call. There’s no standard formula for asking questions. What is it that you want to know? What’s important to you as the landlord or letting agent? The applicant’s demeanor and phone etiquette will tell you a lot about their character.
Here are a few pieces of information to consider when speaking with the applicant on the phone.
- What date they want to move in
- The number of occupants, ages, and relationship with the tenant
- Details about their current landlord arrangement
- Employment details (current and prior)
- Personal details (Do they have pets? Do they smoke?)
- Contact information (phone number, full name, etc.)
If the applicant seems aggravated or bothered by your line of questioning, it may be time to find a new prospect.
Once the applicant passes your first round of questioning, you can schedule a viewing. During this step, they’ll actually get to see the property and ask their own questions. This is also your opportunity to meet them in person. First impressions tell you a lot about potential tenants. How are they dressed? Did they arrive on time? Are they clean and well-mannered? Remember, it’s ultimately your choice to let your property to them.
While this next step in the process doesn’t have to be done during the viewing, it involves a lot of paperwork so it makes the most sense to meet in person. This way, the applicant can provide documents in a secure way.
As strange as it may sound, an important step in completing a tenant reference is checking the person’s identification. That’s right — you should check their driver’s license to verify that they really are who they say they are. This isn’t just a recommendation — under section 22 of the Immigration Act 2014, landlords in England are actually required by law to verify that their tenants have proof of citizenship.
If you think this is a tedious step, think again. Violators can face a £3,000 fine.
One of the most important things to research about your tenant is that they actually have the funds to pay the rent! It’s not uncommon to request at least three months of recent payslips or other proof of employment. This helps confirm that they can sustain the rent and have reliable employment.
If the applicant makes it past this phase of the screening process, chances are they may be your next tenant. Now you can move forward with a more thorough background check without fear of wasting your time or energy.
At this point in the vetting process, you may only be left with one or two desirable candidates. After all, thorough referencing is reserved for only those applicants you’re serious about letting to.
Your first line of defense against incompetent renters is your instincts. Use your gut! That’s why it’s so important to meet with them in person before agreeing on anything. This is true even if you’re paying letting agent fees. Schedule a time to meet your agent and the applicant at your property. Make sure that you’re comfortable with them and their demeanor. Remember, you’re trusting this person with your home or property — first impressions and gut instincts go a long way.
In addition to your gut instincts, a professional referencing service can help do a lot of the dirty work when it comes to performing a tenant reference. Services generally include a credit check, financial check, tenant risk score, income reference, and a previous landlord reference. These thorough checks will uncover any red flags on their credit or financial history.
You’ll also receive feedback and information from current and previous landlords. This information is invaluable since it provides specific details about the type of tenant they are. The tenant risk scores are also crucial because they provide you with a score on the level of risk of letting your property to a potential tenant.
TENANT REFERENCING COSTS SINCE THE TENANT FEE BAN
Prior to the tenant fee ban, the costs of referencing was included in a standard letting agent service. The actual cost of the reference was paid for by the tenant.
However since the tenant fee ban, the cost of tenant referencing has now in most cases been passed onto landlords. The tenant find packages have either increased in price or are now exclude tenant referencing, and available as optional add-ons.
This, alongside increasing regulations and taxes makes it harder for landlords to maintain their rental profit
HOW MUCH ARE TENANT REFERENCING FEES?
The House Shop offer credit checks and references below £20, as do Open Rent (not including tenant find services)
However there are some providers that charge upwards of £60.
Its important for landlords to note that prices mentioned above are per tenant. Costs for references can mount up. In addition the costs for references are regardless of if a tenant passes or fails a check. If the tenant fails, you’ll need to find another tenant… and yes, run a reference for them as well.
If you’re running a HMO property, the costs can be substantial
Costs of not completing tenant references
Some landlords may consider not completing tenant references. This will of course save money in the short term.
However, references are there to validate the tenants previous history on paying on time and their background (including right to rent etc).
Without running tenant reference checks, you open yourself up to risk. If the tenant has a bad history in paying rent, that behaviour is likely to be replicated for your property. This can accumulate in thousands of pounds in lost rental income.
It’s the same for damages. A ‘bad’ tenant could result in damage to your property. Damage means more costs in terms of repairs. Even worse, if the damage is substantial, you could find yourself unable to rent out the property until repairs are completed.
Adding to the nightmare, you could face complaints from neighbours about your tenant. Complaints lead to attention and potential restrictions from the council.
Not to scare you, but a bad tenant could refuse to leave. Eviction notices & going through the courts will result in £1,000’s, all while losing out on rental income and being chased for mortgage repayments from your lender, posing a risk to your own credit history.
The above is of course worse case and sometimes you may not complete tenant references and still get a good tenant. It comes down to a landlords risk appetite.
EARLY WARNING SIGNS OF A BAD TENANT
Even with the most thorough tenant referencing efforts, bad apples are bound to fall through the cracks. Your best defence against unwanted tenants is fast action. A zebra doesn’t change its stripes (as the old saying goes), which means if the tenant was a nightmare before, they’re able to be a nightmare again. And the early warning signs are likely there from the start — when you know what you’re looking for.
This is red flag number one. If your tenant is late on payments, even for one month, it’s a bad sign of what’s to come. And it likely means one of two things — either they lied on their application and don’t have the income to support the rent or they are bad budgeters and waste their rent money on other things. Either way, it leaves you with unpaid monthly expenses. If you’re feeling generous, give the tenant one warning. The next time they’re late, take it out of their security deposit (that’s part of the reason it’s there). And if all else fails, evict them!
Is your phone ringing off the hook because your tenant is complaining –again! Some tenants are just impossible to please and these are not the type of tenants you want. Constant and unreasonable complaints about things that are out of your control is a sure sign that you need to find new renters.
If the tenant is harassing your property manager, find out what legal recourse you can take. While it’s your responsibility to handle any serious repairs or maintenance issues, you’re not a slave and shouldn’t have to deal with harassment or unreasonable expectations from tenants.
Refusing to Let You In
During the time you’re letting your property out, it technically belongs to the tenants. But that doesn’t mean they can refuse to let you in. At the end of the day, your name is on the deed and the property belongs to you. If the tenant refuses access, there’s probably a reason and you should definitely be suspicious. Just keep in mind that most agreements detail that letters be granted “reasonable access”.
This means that you can enter but it must be pre-arranged and at an agreed-upon time and date. So, while you can’t show up unannounced for routine inspections, it’s recommended you perform them every few months to make sure things are up to par.
Complaints from Neighbors
Tenant complaints aren’t the only ones you need to worry about. Are your neighbours complaining about your tenants? Are they too loud, messy, or rude? While these might not be grounds to evict them, you want to maintain a positive relationship with your neighbours.
Especially since your neighbours can keep their eyes and ears on the property in your absence. We’re not suggesting you ask your neighbours to spy on your tenants but you should listen to what they have to say — especially if it’s negative.
They Give You the Silent Treatment
The only thing worse than tenants who call you incessantly with unreasonable complaints or pester your neighbours are ones that you never hear from. Are your tenants ignoring your phone calls, text messages, and emails?
Have you made several failed attempts to contact them in regard to payment, an inspection, or other questions and concerns? Although they don’t need to be at your beck and call, your tenants should at least be reasonably available to you. If they’re ignoring you and are past due on payments, it’s time to evict them and start the referencing process all over again.
OBTAINING A TENANT REFERENCE IS A WISE CHOICE
No, you don’t have to perform a tenant reference before letting your property, but it’s strongly advised. You wouldn’t trust just anyone with caring for your personal residence and you shouldn’t do it for your rental property, either. Whether you’re using a letting agent or acting as a landlord, referencing for renting is a wise decision. A short-term investment of extra time and energy now will result in long-term gains.