Tenant referencing helps landlords decide whether a potential tenant is likely to be able to pay their rent on time and keep their property in good condition. 

Referencing usually includes:

• A credit check.
• A check on employment and banking details.
• A previous landlord’s references.
• A check to make sure the tenant isn’t an illegal immigrant.

Do I really need tenant reference checks?

Yes. Checks can’t guarantee good tenants - but they can go a long way to helping you avoid bad ones. 

Your property is your investment. It may also be your former or future home. But even if you never live in it, you should do everything you can to make sure it’s well-looked after if you’re to maximise your ROI (and minimise your stress levels).

Tenants that cause damage and fail to pay rent can cost you significant sums. The bill for damage can far exceed a tenant’s security deposit and the costs of eviction can spiral if you have to go to court. The bill for legal fees, repairs and lost rent could be over £30,000.

Reference checks aren’t fail-safe

A previously good tenant with tip-top references and a perfect credit record will occasionally go rogue. You should always make sure you have cash in the bank to cover lost rent and unexpected repairs, especially if your property is mortgaged. 

You should also remember that you don’t have to take the first tenant that applies. Rental demand is high and if you have any doubts, it’s usually better to wait and find someone you’re confident in. If you need any persuasion to err on the side of caution, take a look at these nightmare tenant stories. From dead fish sealed into walls to plumber’s putty in the pipes they’re extreme, but worth noting as a reminder that people don’t always act reasonably.

It’s also worth noting that eviction is about to get more difficult. Section 21 evictions are being abolished, meaning that soon, you’ll only be able to evict using the expensive, time-consuming Section 8 process. 

Referencing checks in detail

Credit checks

As a landlord, you won’t be able to access the detailed information on loans and repayments that financial institutions can see when they run a credit check. But you will be able to see if they have any County Court Judgements or are bankrupt. 

Income checks

You should ask for evidence of income in the form of payslips, or verified accounts if the tenant is self-employed. You should also ask for three months’ bank statements. These will give you a good idea if the tenant is struggling financially as well as acting as extra proof of income.

Right to rent

Since February 2016, all landlords have been required to carry out Right to Rent checks on tenants to make sure they have the right to live in the UK. This means checking that they either have a UK passport or other proof of their right to residence. 

Some landlords have begun to refuse tenancies to EU citizens in the run-up to Brexit, but this breaks anti-discrimination laws. EU, EEA and Swiss citizens will keep their right to rent until after Brexit until the end of 2020, even if the UK leaves the EU without a deal. New arrangements will apply from January 2021. 

Landlord’s references

Ask the tenant’s last landlord for a reference, but remember that these can be faked. Ask for previous letting agency details if possible.

How to carry out reference checks

If you let via an agency, they will usually be able to carry out the checks on your behalf. If you’re working independently, it’s tempting to try and save money by doing the checks yourself, especially since tenant fees were banned in June. However, it’s usually a bad idea. It’s time-consuming and unless you’re experienced with checks, you’ll risk missing red flags that others might see. 

Tenant referencing companies charge somewhere between £20 and £100 per tenant, depending on what checks you need.

The Lyvly tenant referencing promise

We carry out all referencing checks on every tenant before we accept them into our shared living community. All Lyvly members are trusted, screened professionals. 

We also guarantee that we’ll pay your rent on time so you won’t have to worry about tenants’ income levels or their reliability. We’ll make sure the rent is in your bank account on its due date every month and we’ll take care of your property as if its our own.

To find out more about peace-of-mind letting with Lyvly, take a look at our website.