When you engage the services of a tenant referencing provider (or the letting agency) you expect them to provide the type of service they say. So if they say their checks/procedures are comprehensive, thorough, in depth etc., you would expect that – wouldn’t you? Unfortunately there are far too many operators in this industry that offer a sub-standard service that is failing a lot of landlords. Below I share some of the main reasons tenant referencing agencies are failing landlords.
- You cannot rely on just a credit check. Landlords should not confuse a credit check as a tenant reference. Especially over the internet, you will see many companies referring to this as a tenant reference. It is not! It will only show if one has any CCJ, (county court judgements) defaults, on the electoral roll etc. Do not accept this as tenant referencing it should be an element of the overall tenant referencing procedure.
- You need to have an identity check. Any tenant referencing provider should offer you an ID check and ideally an AML (anti-money laundering) check as standard. Without this you cannot possibly know whether your prospective tenant is who they say they are. Without taking a copy of Passport or Drivers Licence, you cannot do a proper ID. Also with the introduction of the Immigration Act landlords are required to see original documents and make copies to do a statutory declaration. See government website for more details.
- Supporting documentation are a must. All prospective tenants must submit a completed application form and supply standard supporting documents. Additional supporting documents must be taken depending on tenant category. So for example if you have a prospective tenant who is a current homeowner, they may be looking to rent for legitimate reasons, but you should request a copy of their recent annual mortgage statement. There will be no tenancy confirmation to source – so how else will you be able to satisfy yourself that they have been paying this commitment and that their property was not subject of a repossession order?
- A Proper affordability Check. Without supporting documents you cannot possibly do a proper affordability. It is an absolute myth to even consider that two separate people earning £30k per annum have the same disposable income – they don’t! You cannot therefore use these absolutely silly calculations of 20 OR 30 times rent multiples and give it a green light. It does not work and surely anyone with some reasonable common sense can see how this type of approach can put a landlord at risk of accepting a tenant who really cannot afford the rent. Work out how much surplus they have on average each month and what is the new rent they will be paying. It is impossible to get blood out of a stone so multiples have never worked.
- Ask the right questions to current or previous landlords. To ask if a tenant has paid on time and there is no rent arrears history is not enough. Having knowledge of a tenant’s attitude during the tenancy is important too – after all, you do need to manage them. **There is a golden nugget question you must have in every confirmation of tenancy letter – Depending on that answer you will also need to do a further check to verify information. A word of warning: Landlords please do not knowingly pass on your rogue tenants to other unsuspecting landlords – it only allows them back into the private rented sector (PRS). We each have a moral and ethical obligation to each fellow landlord to root out this poisonous practice. It is only when we can do so, that we stop the rogue tenants (and by this I mean the types who never have any intention of paying us) to enter the PRS. The possession process is long and getting longer with finalising eviction dates. No government is helping on this very serious matter. If you or I stole groceries from one of the big six supermarkets there would be severe repercussions. If we do not pass on rogue tenants where will they go? There is little social housing to choose from. The only alternative they will have, is to shape up or frankly live on the streets, unless the kind home of Mum and Dad will put them up. Remember do not pass on your rogue tenants – see point 9.
- Be prepared to dig deeper. You cannot just rely on the information that is presented on the application form. ** You have to satisfy yourself that what the tenant is declaring is true. Look out for any abnormalities on the application form and or supporting documents.
- Make sure you have a “fit” guarantor. There is very little point in taking a guarantor if they are not a UK homeowner. If your tenant defaults on the rent and you then take legal action against the Guarantor, if successful in gaining judgement you want to enforce it, where it will make the biggest impact. Whilst you could get a County Court Order (CCJ) against them, better if the guarantor is a UK homeowner and place a charging order on their property. No point in suing a “man of straw”. Guarantors need to be vetted as well.
- You must communicate with your prospective Tenants. All referencing must have a human element to it, purely relying on the computer to deal with all conversations can never be a good thing. Always follow up on what you have discussed in written form but you need to speak to your prospective tenants, (just think of all the disaster stories around internet dating). Besides, an application is like a CV, it does not have all the answers and so clarification needed.
- Additional safe-guarding. Make sure you are a member of a website like Tenants History (www.tenantshistory.co.uk) as this gives landlords an added advantage to be able to record details about their existing tenants, their conduct and rate them at the end of the tenancy. It allows other landlords who are also members to access this information too. It also ensures that rogue tenants do not enter the private rented sector.
- Data Protection. Does your tenant referencing agency allow you to review their findings of their referencing? (I do not just mean their reports). By informing the subject (the tenant) of what will happen to their data and documents and providing you get their signed consent (make it part of their declaration), there really should be no issue in sending information to the third party (landlord). This also gives extra trust and transparency to the landlord.
- The importance of getting your prospective tenants referenced checked comprehensively is very important, regardless of what type of property. The consequences of getting it wrong can be harsh. This could result in loss of rent and eventually your mortgage lender deciding to call in the LPA Receivers to manage your property and you never given back control.
- It is so disappointing to know that at the moment in the UK we have no industry standard for referencing tenants and it is a highly vital component when letting property to get right. If you sign on that tenancy agreement without the proper due diligence of your prospective tenants you will be heading for what I call the “tumble down effect”.
** Certain information deliberately omitted as fraudsters do not need to know exactly what we are doing.
© Copyright 2016 George Ellis Property Services