Oct 12

Deciding on tenants - There's no guarantee

There is no guarantee when it comes to deciding on tenants for your property, however, there are steps which can be taken to greatly minimise the risks of accepting problem tenants. It is advisable for all landlords to put in place an efficient referencing process designed to screen interested tenants. Making use of referencing services enables landlords to make informed decisions on which tenant is the most suitable for them to let the property to, failure to adequately check potential tenants can often lead to a disastrous tenancy which could have been easily avoided.

There are key elements that good referencing should always include, a credit check an employment reference and a previous landlord reference. These three separate references will be combined into a report providing landlords with information on both reliability and financial suitability. As an online estate agent letting hundreds of properties a week we have heard many horror stories caused by failure to properly check any one of these vital elements.

The easiest check to carry out is the Credit check: A credit check searches for adverse data such as County Court Judgments, bankruptcy and insolvency data. Credit checks also assist in establishing tenant identity although landlords are advised to seek a copy of photographic identification to supplement the referencing procedure. The credit check is a very quick and simple reference which can instantly throw up a history of missed payments or arrears.

Just recently a landlord came to us for advice, “My tenant has stopped paying rent and I have just regained access to the property” ...“how can I avoid this happening to me again in the future?” When exploring this case we discovered the landlord had gained only an employment reference for the tenant before agreeing to the tenancy and signing contracts. On the basis of the employment reference alone it appeared the tenant could afford the property as they had adequate income. However, their income did not tell the landlord anything about their reliability when it came to making rental payments. The landlord found when attempting to take the tenant to court he was one of a long line of people who this tenant owed money to. Had a credit check been performed before agreeing to the tenancy previous arrears would have been flagged immediately enabling the landlord to avoid a stressful and costly mistake.

Employment Reference: Employment references are used to confirm the prospective tenant’s current salary in order to calculate if the tenant is able to afford the rental fee. Information on the employment status is also gathered allowing the landlord to see if the employment terms are equal to the length of the tenancy agreement. A reputable referencing company will ensure the referee is genuine and not just a friend of the prospective tenant, be sure to enquire on how this process works before you decide to use the company for referencing purposes.

Previous Landlords Reference: The tenant’s previous landlords will be contacted to verify information with regards to rental payments and any rent arrears, they will also be asked to confirm that the property was kept in a good condition throughout the duration of the tenancy and whether or not any damage was incurred.

A recent client conducting referencing on wealthy tenants with a perfect credit history discovered within the previous landlord reference that considerable damage had been done to the tenant’s last property resulting in a dispute over the deposit being withheld. On the basis of this information the client decided to decline the tenants and wait for more suitable candidates.

To avoid losing a suitable tenant it is important not to waste time during the referencing process. The majority of referencing service providers will aim to have comprehensive reports compiled for you within 3 working days. If delays do occur for any reason be sure to keep in contact with your referencing provider and the prospective tenant to ensure good communication throughout the procedure.

Once the references are complete and you feel satisfied to proceed with the tenancy be sure to notify the tenant as soon as possible that their application has been successful and remember to request a copy of photographic identification from each tenant to keep in your records alongside the tenancy agreement and any other relevant documentation pertaining to the property rental.

Written by Urban Sales and Lettings nationwide online estate agents

About the author

Eddie Hooker Photograph Eddie Hooker has been involved in the insurance industry since 1985.  He worked with many large insurers such as Legal & General and AXA Insurance prior to setting up his own insurance business, Hamilton Fraser, in 1996.  Hamilton Fraser now employs over 130 staff out of their North London office, dealing with various insurance products for the buy-to-let property market such landlord insurance, rent guarantee insurance, emergency cover and tenancy deposit protection. 

Eddie and Hamilton Fraser Insurance first started to provide landlord insurance as early as 1996 when they became involved with the Small Landlord Association, which later became the National Landlords Association. 

By working closely with the industry’s leading companies Eddie and his team have built up a detailed understanding of the landlord market ensuring that the customer experience is founded on knowledge and support.  This has been highlighted in a recent customer survey that found that 95% of Hamilton Fraser customers were either satisfied or more than satisfied with the service provided by the company.

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