Tenant Referencing – why it’s important

Tenant referencing is very important, even if you’re renting to people you know. It protects both parties and helps you be sure you’re making a wise decision. Why? Because it flags potential problems, such as historic missed rental payments or poor credit, before you’ve signed a tenancy agreement.

Until recently, the cost of referencing potential tenants was passed to the tenants themselves. Not any more.

Since the tenancy fee ban came into force 1 June 2019, landlords and estate agents now need to cover the cost of doing background checks on prospective tenants.

Because the ban is new, some landlords may inadvertently – or deliberately – skip this step. But frankly, this is asking for trouble!

‘Nightmare’ tenant stories

The internet offers up plenty of landlord horror stories, such as the landlady in Hull who was forced to pay £300 for her tenant to leave, despite them leaving the property in an awful state, with holes in the walls and floors and rotting food strewn all over.

The tenant said she had housing benefit that would pay the landlady, but it turns out she wasn’t entitled to it and the landlady wasn’t paid a penny throughout the entire tenancy.

Then there’s the chap who caused £12,000 worth of damage to the property after a dispute about an electric meter.

Not even celebrity landlords are exempt from terrible tenants. Two years ago, English footballer Frank Lampard rented his £2 million London property to a woman who openly began using his basement for unlawful activities.

What should you be checking?

Financial Reliability

This will check whether your property falls into the affordability bracket for the prospective tenant, and whether their outgoings each month are consistently more than their income.

Scanning credit reports and credit history for CCJs or payment defaults

If a prospective tenant hasn’t been able to keep up with credit, loan or bill repayments this would raise a red flag.

Employment status

Confirmation of your new tenant’s employment status with confirmation of their contract type and/or length.

Tenancy track record

If your tenant is moving from another rented property it is important to ask for landlord references. Landlords tend to look out for each other, so if a tenant is to be avoided, a previous landlord is likely to let you know!

All these checks and reports will help you make an informed decision about the suitability of your new tenant.

If your prospective tenant raises a red flag in any of these checks it may be an immediate ‘no thanks’. You could also consider a guarantor if your worries are on a strictly financial basis.

It’s also important to remember that if you are taking out Rent Guarantee Insurance the policy will include that a tenant has passed affordability, proof of earnings, credit score and CCJ checks.

Regular property inspections

As well as all the credit and referencing checks that you should do at the start of the tenancy you should make sure you do regular property inspections.

This will make sure everything is being kept clean and in good working order, and that the property is not being used for something outside the terms of the tenancy agreement such as running a business.

The Howsy tenant referencing service

The good news is, such stress (and money drains) can easily be avoided. Unlike some traditional letting agents that charge an additional fee to vet prospective tenants, it’s included in both Howsy’s Standard, and Protect Plans.

From just £35 a month (or £65 in London) we do industry-standard credit checks and references on your tenants.

Usually all of this is done fast  – in under 72 hours. And our smart technology and experienced reference team will flag up fraudulent tenancy applications and misleading information within that time, too.

Always check the facts – or at least let us help you check them – and enjoy the benefits of having good tenants.