What is the point of tenant referencing, and what will a letting agent check?
Why is tenant referencing important?If you are a landlord, your rental property is probably one of your most important financial assets and you will undoubtedly be keen to protect it as much as possible and maximise the potential of your investment. Robust tenant referencing is important, because it acts as a safeguard for landlords and provides peace of mind. In addition, tenants can be reassured that they are dealing with a professional company that cares about the wellbeing of clients. Matching a reliable and trustworthy tenant to the right property will help to ensure that they will enjoy living there, will take care of it and can pay their rent on time.
What will be checked during the tenant referencing process?Belvoir uses an external company called Let Alliance to deal with tenant applications and complete the referencing process. The checks that Let Alliance will undertake include:
- Proof of identity – to ensure that the potential tenant is who they claim to be, and that they live at the address provided etc. Two forms of ID must be provided – one must be photo ID and another must be proof of residency with a recent utility/phone or council tax bill or driving license. A birth certificate is not sufficient proof of ID.
- Credit check – A credit check will be undertaken by Let Alliance to ensure that the potential tenant has no outstanding or unsettled County Court Judgements (CCJs) against them, and that no Bankruptcy orders have been lodged against an individual. If a tenant has multiple CCJs then the application will automatically be declined. If the CCJ's are declared and satisfied (paid in full) at less than £5000 then this is acceptable provided the applicant has a guarantor. If the CCJs amount to £300 or less and have been paid in full this will be acceptable for the tenancy.
- Previous housing reference – Checks will be made with the tenant’s current landlord (if the tenant has rented a property before) to ensure there are no outstanding rental arrears and that no damage has been reported at the property.
- Employment references – the tenant’s employer will need to verify the applicant’s job title, annual salary plus bonuses, their start date and an assurance that the position is ongoing and unlikely to change or end in the near future. A reference must be provided by a line manager or an authorised individual in HR or payroll.
- Right to Rent – Prior to starting or renewing a tenancy a landlord or letting agent is legally required to ask to see the tenant’s immigration documents or passport. They will also ask to see the documents of any other adults that will be living at the property. This is done to check that the tenant has the right to live in the UK and to rent - and is called the ‘right to rent check’.
What information does a tenant need to supply?Tenants can speed up the referencing process by having all the necessary documentation available.
- A completed application form, which can be obtained from the tenant’s local Belvoir office
- Three consecutive months of bank statements
- Two proofs of address from a current residence
- Passport or residence document (the agent will take a copy of these documents)
- Proof of employment (or accountant’s details if self-employed).
- Proof of any benefit entitlement if this applies.
What If a tenant does not pass referencing?For various reasons, there will be occasions when clients are unable to meet all of Belvoir’s referencing needs. This could be because they are students, have just started a new or temporary job, have no credit history or they are on a low salary. But don’t worry, because this does not mean that renting a property will be impossible – for example, tenants may be able to provide the landlord with details of a guarantor (someone who will pay the rent for them if they are unable to do so), or pay rent in advance. Importantly, if a tenant does not pass the ‘right to rent’ check the landlord will legally be unable to rent a property to them.
What is a guarantor?In simple terms, a guarantor is someone who will agree to pay a tenant’s rent if the tenant is unable to pay it, or there is damage to the property that the tenant refuses to rectify. A guarantor can be a family member or a trusted close friend, but importantly, once someone has agreed to undertake this role, they will be required to pay the rent if the tenant is unable to do so. Failure to comply with guarantor requirements could result in the landlord taking legal action to reclaim outstanding debts. Any guarantor agreement must be made in writing to comply with legal requirements, and Belvoir will undertake the same referencing checks as for a tenant, including credit checks. Please note that a guarantor may also be needed if a potential tenant has been self-employed for less than two years, or is in temporary/fixed term contract employment.
Who can be a guarantor?Almost anyone can be a guarantor, provided they are over 21 years of age, with a good credit history, financial stability, and ideally also be a homeowner. Suitable guarantors must also be resident in the UK, hold a UK bank account and meet the rent to income ratio calculation, which is 36 x the rent share of the tenant.
Can a pensioner be a guarantor?A pensioner can be a guarantor for a potential tenant provided they meet the above criteria.
How much does a guarantor need to earn?A guarantor should have monthly income in excess of three times the monthly rent they are guaranteeing. For example, if the monthly rent is £500 the guarantor needs to bring in monthly income of £1500 per month.
How long does the tenant referencing process take?Belvoir endeavours to make the tenant referencing process as quick and efficient as possible. Tenants can speed up the process by having all their documentation readily available. It is hoped that the entire process will take approximately 48 hours.
To find out more about Belvoir’s referencing guidelines please do not hesitate to contact your local office to find out what we can do for you as a landlord, or tenant.