How to vet your prospective tenants

Lawpack on March 27, 2020

You’re a landlord who is letting out your investment property. Who is your ideal tenant?

Here are the qualities you should be looking for in the ideal tenant. They should:

  • not smoke, and be professional, well mannered and well presented;
  • pay the rent on time, not bother their landlord very often, and never complain;
  • never have noisy parties, never bother their neighbours, never sublet, and generally not be any trouble to their landlord.

But the most important quality in a tenant is that they are HONEST. Landlords who have honest tenants can manage their investment property effectively and simply, as an honest tenant usually pays their rent on time, communicates well, and resolves any problems concerning the tenancy efficiently.

But how can landlords spot an honest tenant? You may think that you can trust your instincts when you meet a tenant for the first time, but there are some very plausible tenants who make a profession from ‘scamming’ landlords. These tenants are usually polite, well presented and have good jobs, but once they’ve signed the tenancy agreement, they can make a landlord’s life hell!

If you’re thinking of trusting an ‘honest face’, note that research undertaken by the Residential Landlords Association has shown that where no tenant checks are undertaken; landlords are seven times as likely to end up taking court proceedings.

Make sure that you’re not duped by these tenants, by following our five essential steps to tenant checking:

1. Credit referencing

A tenant referencing agency carries out checks on a prospective tenant’s credit worthiness and verifies the tenant’s personal details. These agencies offer various levels of service, but landlords should at least opt for the basic package which will check the following:

  • Electoral Roll to check out the tenant’s current and previous address
  • County Court Judgments (CCJ), bankruptcy and any court-based voluntary financial arrangements to find out whether the tenant has a poor credit history
  • An affordability check to make sure that the tenant can afford the rent on their stated income
  • Validate the tenant’s bank sort code and address to make sure that it’s legitimate
  • Check the details that the tenant has given the tenant referencing agency against any relevant stored data

The most important information a tenant referencing agency gathers is whether the tenant has a County Court Judgment (CCJ). If the tenant has a County Court Judgment (CCJ), this isn’t good news as it means that a creditor has previously taken the prospective tenant to court because of their non-payment of debts. If you find out, during the tenant checks, that the tenant has a number of County Court Judgments (CCJs) against them, DON’T let them sign a tenancy agreement.

Often the tenant reference agency will provide the landlord with a score of the tenants’ suitability as a tenant and it may suggest to the landlord a course of action. If the tenant gets a really low score, it may be due to the fact that the tenant has:

  • never used a credit card or borrowed money
  • no fixed address and/or they are not listed on the Electoral Roll
  • lived at their current address for a period of less than six months
  • been in employment for less than six months
  • been, or is, a student, or has a low income
  • a history of debts, late payments or Count Court Judgments (CCJs)

The tenant referencing agency’s scores should be used as guidance, but landlords shouldn’t read them too literally. For example, students will have a bad record as they move around frequently and they have a limited credit history. If this is the case, you can use a guarantor if you want to let out your investment property to students.

The tenant verification process should also involve an identification check to prevent ID fraud. Ask your prospective tenant to show you their passport to prove their identity.

2. An employer’s reference

With tenant referencing landlords can find out whether a prospective tenant is in permanent or temporary employment. If the tenant’s contract is about to expire, can they pay rent in the future?

What is the tenant’s salary? Landlords can use an employment reference to find out if the tenant can afford to pay the rent and, as a guide, you can calculate the tenants’ affordability of the rent in respect to their income by multiplying the monthly rent by 30. This will give you a rough indication of what the tenant’s minimum salary should be to be able to pay the rent. For example, a landlord wants to charge a monthly rent of £1,000. Multiply this by 30 and it equals £30,000. If the prospective tenant’s salary is £20,000, how is the tenant going to afford the rent without receiving benefits or sub-letting the investment property?

3. A bank reference

Landlords will find these tenant references to be the most difficult and time consuming to obtain, as they need written authorisation from the prospective tenant to allow the bank to respond. The bank will then charge a fee for their services and, even then, the bank will probably respond with a non-committal answer (e.g. ‘We see no reason why the tenant will not be able the meet the rent’). As the tenant could easily delve into their huge overdraft to pay the rent, a bank reference is probably not worth the bother.

If you can and the tenant is willing to give them to you, it may be wise to ask the tenant to provide you with copies of their last six months’ bank statements. These will show you the tenant’s monthly outgoings and they will flag up any worrying habits, such as a gambling addiction.

4. A landlord’s reference

If your prospective tenant is currently in rented accommodation, obtain a reference from their current landlord. Ask the following questions:

  • How long has the landlord had them as a tenant?
  • What rent do they pay?
  • Did they pay the rent promptly and in full each month?
  • Did they ever get into, or are presently in, rent arrears?
  • Have they cared for the investment property and its contents?
  • Would the current landlord accept them as a tenant again?

To prevent a prospective tenant from falsifying their landlord’s reference, you could always check it by ringing the current landlord up to verify the details.

Also, remember that a current landlord may give a glowing reference just to get rid of a bad tenant, so it may be wise to check with the tenant’s landlord before the current landlord as they will have nothing to hide. Also, you can check the tenant’s bank statements to make sure that the rent is being paid each month.

Bear in mind, too, that letting agents are on a ‘finder’s fee’, so they may not be as thorough in their reference checks.

If your prospective tenant has not rented before and is a homeowner who has decided to sell their property and rent, you obviously won’t be able to get a landlord’s reference. In this case a landlord should ask for copies of the tenant’s last six months’ mortgage statements to check that they were not behind with their mortgage payment. If the tenant refuses, has the tenant got something to hide?

5. The tenants’ personal reference

As with the landlord’s reference, a personal reference is very subjective. So, again, don’t worry too much about it.

Related Link:

Why a written tenancy agreement is necessary

Lawpack on March 27, 2020

Having a tenancy agreement is vital for any landlord. It’s so important to get the tenancy in writing as it protects your property, sets out your obligations and that of your tenant’s, plus it prevents potential disputes between you and your tenant in the future.

Although there is no legal requirement for you to create an assured shorthold tenancy (AST) in England and Wales, all landlords should ensure that their tenants have signed a written tenancy agreement prior to letting them into the rental property.

But in Scotland all landlords must have a written tenancy agreement for the tenancy to be a provate residential tenancy (PRT).

The disadvantages of not getting it in writing 
  • If you make arrangements informally with your tenant, there may be arguments later about the tenancy terms, even if these were clearly discussed when the tenant moved into the property.
  • Once a tenant is in occupation, you cannot then force them to sign an agreement that varies the terms of their tenancy, so it’s essential that this is done before the tenant goes in.
  • You will not be able to use the accelerated possession procedure to evict the tenant, where there is no written agreement.

The advantages of getting it in writing 

  • A formal agreement protects your position and regulates the tenant’s use of the property.
  • If you intend to take a damage deposit, which has to be protected under one of the statutory tenancy deposit schemes, you will need to make an agreement.
  • If no written tenancy agreement is provided, you’re required, by law, to provide the tenant with written details of the main terms of their tenancy within six months; so you may as well provide a proper written agreement to begin with.
  • Housing Benefit offices require tenants claiming benefit to produce a signed tenancy agreement.
Lettings not needing an agreement

Although all tenancies should have a formal written agreement, licences don’t always need them. For example, written agreements are not necessary in the following circumstances:

  • Letting a room in your house to lodgers. However, we still do advise you to get it in writing with a Lodger Agreement.
  • Bed-and-breakfast accommodation.

But even if a formal tenancy agreement isn’t provided in these circumstances, there should always be some paperwork to prove the terms of the letting, in case there is a dispute at a later date.

More information

Landlords: why you can’t disturb your tenants

Lawpack on March 27, 2020

Every tenancy agreement contains what is called the ‘covenant of quiet enjoyment’. This doesn’t just mean that tenants are entitled to a noise-free environment, but that they have the right to live in the property undisturbed.

This means that not only do they have the right not to face eviction, but also that you, as the landlord, should respect their rights and not do anything that will adversely affect their occupation of the property.

The covenant of quiet enjoyment is most commonly invoked to protect tenants whose landlord is trying to ‘persuade’ them to leave, perhaps because they are in rent arrears or because they want the property back for their own use, but they are reluctant to go to court for an eviction notice.

For example, such landlords may constantly visit the property, shout threats at the tenant, and interrupt the gas and electricity supply. This sort of behaviour is illegal and can attract both a criminal charge and make the landlord liable for civil proceedings for an injunction and/or damages.

But the covenant for quiet enjoyment can also apply to other matters. For example, it can cover your failure to comply with tenancy law by not repairing the property

It’s important that you keep the property in proper repair, and that you don’t intrude on the tenant’s privacy. These may conflict, as clearly you will have to go to the property from time to time to carry out your inspections and repairing obligations.

Some tenants may object to this and call it harassment (particularly if they are in rent arrears). If there is a problem of this nature or is likely to be, then you should take care to only visit the property by appointment or by the invitation of the tenant.

You should never use your keys to enter the property without the tenants’ knowledge or permission, other than in cases of genuine emergency.

If the tenant objects to you attending to do inspections or carry out repairs, then you cannot enter the property. This situation is rare, however, and if it occurs, then you should consider whether you should bring proceedings for eviction.

Note that if the tenant’s failure to allow access for repairs is causing the property to deteriorate, this may in itself be a ground for possession. But this should only be used if the deterioration is very serious and urgent remedial work is needed.

If you treat your tenant with respect and comply with your obligations under tenancy law, you will be protecting yourself from any potential claims from your tenants. You will also find it easier to enforce your own rights against the tenant, should this be necessary.

Although a covenant of quiet enjoyment is not implied into licence agreements, licensees have the right to use the property for the purpose for which occupation was granted, which gives them a certain amount of similar protection for the duration of the licence agreement.