Tenant referencing guide – what do landlords need to know?

Before letting a property, it’s important for landlords to find out more about prospective tenants.

This article explains everything you need to know about tenant referencing, from how to arrange a referencing check to what to do if a tenant has a bad reference.

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What is tenant referencing?

A thorough reference check helps a landlord to decide whether a prospective tenant is suitable to rent their property. It provides key information on a renter's employment history, ability to pay rent, and previous dealings with landlords.

Profiling tenants allows landlords to consider any potential risks and increase their chances of letting to a tenant who'll look after the property and pay their rent on time.

Letting agents can organise these checks on your behalf or you can manage them directly through a range of tenant referencing companies.

How does the tenant referencing process work?

Tenant referencing consists of several checks which combine to give the landlord all the information they need to decide on a renter’s suitability for their property.

Referencing companies will take a slightly different approach, but most comprehensive tenant referencing checks will include:

• proof of address - recent utility bills and bank statements prove that the tenant lives in the address they've given
• proof of ID - receiving a copy of a valid driving licence or passport confirms the tenant’s identity
• a credit check shows whether the renter is in debt or if they have any County Court Judgements (CCJs) – you’ll need to ask the tenant’s permission to do this
• a previous landlord reference lets you know more about the tenant’s rental history and any arrears, damage or disputes
• an employment reference confirms the tenant is being paid regularly and is who they say they are
• bank statements - three months of statements can give key information about a tenant’s financial situation
• Right to Rent checks - landlords are legally required to check that prospective tenants have the right to rent in the UK

How do you arrange a reference check for a tenant?

If you employ a letting agent to find a tenant or fully manage your property, it’s highly likely that tenant referencing will be included as part of their service.

If you self-manage, you can pay a small up-front fee of between £10 and £50 for a referencing company to complete the check.

Since 2019, as a result of the Tenant Fees Act, landlords in England have been unable to charge tenants for referencing checks. There are similar measures in place in Scotland and Wales. This means all referencing costs must be covered by the landlord or their letting agent.

Using tenant referencing companies

Although you can collect all the information for a referencing check yourself, it’s easier and more effective to use a tenant referencing company.

When choosing a provider to work with, you’ll need to consider things like the speed of checks, the level of detail, the cost and the reputation of the company.

You’ll need to decide what level of tenant referencing works for you and remember that paying slightly more now could reduce the chance of costly issues in the future.

Once you’ve chosen a provider and the check has been completed, you can assess the results and decide whether the tenant is suitable to rent your property.

What happens if a tenant fails the referencing check?

The majority of tenants will pass their referencing check, but some may fail all or part of the process.

For example, the tenant may fail their credit check if they have a low credit score or their employment reference and bank statements may show they can’t afford the rent.

There could be valid reasons why a tenant fails part of the referencing process and it doesn’t mean that a landlord can’t let their property to them.

However, it’s important to consider this decision carefully and check whether letting to a tenant who has failed their referencing will invalidate your insurance policy.

It’s illegal to let your property to a tenant who fails a Right to Rent check and refusing a tenancy based on discrimination such as gender, race or religion is also unlawful.

Do you need a guarantor?

If your prospective tenant fails or is unable to complete a referencing check, you could ask them to nominate a guarantor. If you let to students, who are more likely to have a lower income or limited financial history, a guarantor can give you more protection.

You’ll need to run some basic checks on the guarantor to make sure they are who they say they are and can afford to cover the tenant’s costs.

What other checks can landlords carry out?

Alongside comprehensive referencing, there are several things you can do to get a greater understanding of prospective tenants and whether they’re right for your property.

Meeting prospective tenants during the application process can be a useful way of seeing if they’re suitable and whether you could establish a positive relationship.

Checking their social media accounts is another way to gather further information which may help you to make a decision.

There are some red flags to be aware of which could indicate potential problem tenants or those attempting to commit fraud. These include:

• acting suspiciously
• being hard to contact
• refusing to provide information
• demanding to move in instantly

Most landlords will use a combination of referencing checks, gathering extra information and gut instinct to choose their tenants.

How long does tenant referencing take?

It can vary depending on which tenant referencing service you use. However, most companies aim to complete a check within 48 hours.

Checks can be completed quickly if tenants have all their information and documentation ready at the start of the process.

Previous landlord and employment references are the most likely to prolong the process. Sometimes tenants can speed these up by making direct contact.

Protecting your property

Tenant referencing and extra research can help you to make sure you have the best tenants in place. This sets you up for a smooth tenancy in which your property is looked after and the rent is paid in full and on time.

Once you have completed the referencing process and accepted an offer from tenants, you’ll need to draw up a tenancy agreement.

After that has been signed, you’ll need to prepare for the move-in, including carrying out key measures such as taking a security deposit from tenants and compiling a thorough inventory of the property.

Taking these steps gives you the protection and peace of mind you need to make the most of your investment.

Do you have an unanswered question about the tenant referencing process? Ask us in the comments below.