The importance of tenant referencing

The importance of tenant referencing

In the UK, we have a robust legal framework that regulates the relationship between landlords and tenants. However, the law alone is not enough to protect both parties from potential risks and challenges. One of the most effective ways to safeguard against potential problems is to conduct tenant referencing before a tenancy starts.


Background check
First and foremost, referencing helps landlords identify reliable and trustworthy tenants. When renting out a property, landlords want to be assured that their tenants will pay rent on time, take care of the property and not cause any disturbances in the neighbourhood. Tenant referencing provides a detailed report of the prospective tenant's rental history, employment status, credit score, and other relevant information. This allows landlords to make informed decisions on who to rent their property to and avoid any unpleasant surprises later on.

Affordability
Some referencing providers (including those used by Sandersons UK) encourage the use of open banking. This is a much faster process as it enables them to check the money paid into a bank account matches the amount on a payslip rather than waiting for an HR department to respond to confirm the amount. It is impossible to foresee what could happen with someone's employment in the future but you can check their current financial position, how long they have been with the company etc for reassurance. If a tenant falls short on affordability based on the criteria the set, a Guarantor would be recommended.

Rent Guarantee & Legal Expenses insurance
If a landlord is reliant on the rent to pay a mortgage or would struggle to cover legal costs along with up to 6-9 months of unpaid rent to regain possession of the property then we would strongly urge them to have Rent Guarantee & Legal Expenses cover in place. This cover is typically offered after an acceptable reference has been produced by a third party provider.

Demonstrating due diligence
Tenant referencing can also help landlords avoid potential legal issues. If a tenant fails to pay rent or causes damage to the property, landlords may be required to take legal action. However, if a landlord has conducted a thorough referencing process, they can demonstrate that they have taken reasonable steps to assess the tenant's suitability and reduce the risk of any legal disputes arising.

Legal obligations
In 2014, the UK government introduced the Right to Rent scheme, which requires landlords to check the immigration status of their prospective tenants before renting out a property. The scheme aims to prevent illegal immigrants from accessing private rental accommodation in the UK, and landlords who fail to comply with the rules can face serious penalties. Landlords are required to check the identity and immigration status of all prospective tenants aged 18 or over who will be living in their property as their only or main residence. This includes checking the documents that prove the tenant's right to live in the UK, such as passports, visas, and biometric residence permits. Landlords must also check that the documents are genuine, and the tenant is the rightful owner of them.

Failure to report potentially fraudulent or suspicious documents to the Home Office can result in a fine of up to £3,000 per tenant.

Tenant right to rent checks are important for several reasons. Firstly, they help to prevent illegal immigrants from accessing private rental accommodation in the UK. By verifying a tenant's right to rent, landlords can ensure that they are not unwittingly facilitating illegal immigration, which can result in serious consequences for themselves and their property. If a landlord rents out a property to someone who does not have the right to rent in the UK, they may face legal action and be required to take steps to remove the tenant from the property. This can be a time-consuming and costly process, and can also result in reputational damage for the landlord.

It is worth noting that tenant right to rent checks must be conducted fairly and without discrimination. Landlords must check the right to rent of all prospective tenants, regardless of their race, nationality, or ethnic origin. Discrimination in any form is illegal and can result in legal action being taken against the landlord.

Security
Another important benefit of tenant referencing is that it can provide a degree of security for both the landlord and the tenant. By verifying a tenant's identity and background, landlords can ensure that they are not unwittingly renting out their property to someone with a criminal history or who may pose a risk to others in the neighbourhood. Similarly, tenants can be reassured that their landlord is trustworthy and has taken the necessary steps to ensure their safety and security.

Void periods
Void periods occur when a property is unoccupied between tenancies. This can be a costly and time-consuming issue for landlords, particularly if they have a mortgage to pay on the property. By conducting tenant referencing, landlords can attract reliable tenants who are more likely to stay in the property for a longer period, reducing the risk of void periods and associated costs.

Change of tenant
It is also important to note that tenant referencing is not just a one-time process. Landlords should conduct regular checks on their tenants and any new tenant if a change of sharer is requested. This ensures they continue to meet the requirements set out in their rental agreement and help landlords identify any potential issues before they become major problems, and take steps to resolve them before they escalate.

Market insights
Tenant referencing can also provide landlords with a valuable insight into their rental market. By analysing the data gathered from referencing checks, landlords can identify trends and patterns in their local rental market. This can help them make informed decisions about rental prices, property upgrades and other factors that can affect their rental income. When a property is sold, the sale price history is recorded on the land registry. The price is eventually updated on some of the portal price history for if it is sold again in future. When a property is let, there is no Land Registry equivalent where it is records. Sandersons UK are partnered with Dataloft who provide accurate market insights and reports based on data gathered from UK referencing providers on actual property rental amounts and tenant data.

In conclusion, tenant referencing is an essential process for landlords in the UK. It provides a range of benefits, including helping landlords to identify reliable tenants, comply with legal obligations, avoid legal issues and reduce void periods. Moreover, it can provide a degree of security for both landlords and tenants, and help landlords make informed decisions about their rental properties. By conducting thorough referencing checks, landlords can safeguard their investments, protect their income and ensure a positive renting experience for both themselves and their tenants.

If you wish to discuss renting your property in more detail, whether you should consider Rent Guarantee & Legal Expenses cover for your tenancy or any other matter please contact our Lettings team.


Get in touch with us

The Canterbury Lettings team have once again started as they mean to go on by letting 2/3 of our entire student property portfolio within the first month of going live.