Tenant reference checks – a guide for landlords

tenant reference checks

Any landlord will tell you that letting property is never risk-free. But you can minimise the risk by carefully checking your tenant's references.

In this article, we run through the primary checks you need to make before taking on a new tenant and suggest some of the resources that can help to make the process simpler.

Why tenant references matter

Here's a straightforward fact every landlord needs to know: the average time it takes to evict a private tenant is eight months. By correctly conducting a tenancy reference check now, you can save yourself a lot of trouble later.

Gut feelings will always play a part in making decisions about tenants, but they need to be supported by hard evidence when your income and your property are at stake.

With thorough tenant references, you can give yourself peace of mind by confirming:

  • Identity: they are who they say they are.
  • Financial security: they have the money to pay the rent on time.
  • Trustworthiness: they don't have a record of defaulting on rent or mistreating a property.

What does tenant referencing involve?

A thorough tenant reference will follow this nine-point checklist:

1. Proof of identity

Ideally the prospective tenant's driving licence or passport. This government document makes clear which documents can be used or combined as proof of identity.

2. Right to Rent check

In England, all landlords are legally obliged to ensure that a prospective tenant has the legal right to live in the UK. Failure to do so can result in a civil penalty of up to £3,000. This government guide sets out which documents can be used as proof of Right to Rent. If you are using a letting agent or referencing company, it's vital to make sure that this is included in their service.

3. National Insurance number

This proves that the tenant is legally working in the UK.

4. Proof of address

Preferably their last three months' electricity, gas or water bills. Mobile phone bills are not suitable for a landlord reference.

5. The tenant’s last three months' bank statements

This will show not only when, how regularly and how much they are paid, but also whether they are living within their means.

6. An employer reference

Beware of people who just give a friend's phone number as an employer reference. That's why it pays to ask for a written reference on the firm's official stationery or letter-headed paper. Double-check by calling the named person via the main switchboard.

7. Previous landlord reference

If the tenant is moving from another rented property, you can ask for a reference from their current landlord. A Land Registry check costs just £3.00 - a small price to confirm that the person named on the reference is the real owner of the property.

8. Guarantor reference

If a guarantor reference is offered, check it as carefully as you would vet an employer reference.

9. Credit references

These will show that the person in question doesn't run up significant debts or have County Court Judgements against their name. People have been known to provide false credit reports, so always insist on a new check each time, rather than relying on information the tenant offers.

Serving a data privacy notice

Since May 2019, the General Data Protection Regulation (GDPR) has required landlords to give tenants and any other residents or guarantors information about how their data will be used.

You must provide this information at the point that the data is collected. To make sure you are GDPR-compliant, you should give your new tenants and any other residents or guarantors a privacy notice. This document sets out the landlord's contact details and the purposes for which the personal data will be used. You can read more about how to make sure you are complying with GDPR here.

Consider using a letting agent or specialist tenant referencing company

As there is a long list of things to check when doing tenant referencing, most landlords don't have the time and resources required. That's why it can help to go through letting agents or tenant referencing companies.

If you're working through a letting agent, make sure they are current members of safeagent or ARLA Propertymark. Membership of these organisations means they will automatically be insured, which means you can claim compensation if they go out of business.

How much does a tenant reference check cost?

Most tenant referencing companies charge between £15.00 and £70.00 for checks. As you might expect, the degree of thoroughness is reflected in the price, so the cheapest is unlikely to be best. There's a lot at stake, so it pays to shop around.

What happens if a prospective tenant fails a check?

Failing the Right to Rent check is a deal-breaker because it makes letting a property to that person illegal. Otherwise, renting to someone with a bad reference is entirely at the landlord's discretion. You know the risk, so you can make an informed decision.

How long does tenant referencing take?

It should only take a few days for a prospective tenant to collect all the information and paperwork you have requested.

Once the tenant has provided the information, the full referencing process should take around 48 hours. If it takes longer, that's often because an employer or previous landlord is slow to provide references. In such cases, talk to the tenant and find out what the problem is, rather than just waiting and hoping.

What about DSS tenants on housing benefits or Universal Credit?

Tenants on housing benefit or Universal Credit are often referred to as 'DSS tenants' (Department of Social Services). This is now a defunct government agency that has been replaced by the Department for Work and Pensions (DWP).

Perhaps you are wary of renting to tenants on low incomes, fearing that they may fail to keep up the payments. If so, it is worth bearing in mind that there are legal safeguards if a tenant goes into arrears. After eight weeks, you can request the local authority to start paying the money directly to you, rather than to the tenant.

There can also be advantages in renting to people who take benefits. There's a large pool available, and there's evidence that such tenants tend to stay with one landlord longer, providing you with welcome stability.

Don't be guilty of unlawful discrimination

You cannot refuse a tenant for any of the following reasons:

  • age
  • sexuality
  • gender
  • marital status
  • pregnancy or having children
  • religion
  • race/ethnicity
  • a health issue or disability

All of these count as unlawful discrimination.

You've checked your tenants, now check your landlord insurance

Making a thorough tenant reference check can go a long way to protecting you and your property in the long run. Making sure you are adequately covered against damage to your property and contents is equally essential. You are not required by law to have landlord insurance, but it's a sensible precaution, to protect your property against accidental damage. Landlord insurance from Bollington can provide you with up to £10 million cover for buildings, contents and loss of rent per location. Even the most reliable tenants have mishaps from time to time.

The good news is that you're in precisely the right place to secure the best possible property owners' insurance cover from Bollington. We work closely with multiple insurers to find you the best value landlord policy. Get your landlord insurance quote.