What tenant referencing checks can be carried out?
There are several forms of referencing that exist to provide a better understanding of a prospective tenant and whether they are suitable to rent the property.
It is a legal requirement to carry out Right to Rent checks on all occupiers aged 18 or over. This is done to ensure the tenant is legally allowed to rent a residential property in England. If they fail the Right to Rent check, you can not legally rent the property to that indivisual. Find out more on the Government website.
You must first ask the prospective tenant’s permission to carry out a credit check. If refused, this puts the tenant at a high-risk of falling into rent arrears so you may wish to seek out a guarantor or request more rent in advance. A credit check will confirm the tenant’s credit history, highlight County Court Judgements (CCJs), a bankruptcy or insolvency.
Request the details of your tenant's previous landlord so you ask them how they conducted themselves as a tenant. This a great way to establish whether there were any major issues with their previous tenancy such as rent arrears or damage. You can also request a reference from their employer to confirm the income and contract dates. Good references will go a long way to assuring that the right tenant has been chosen.
Tenant Fees Act and charging for reference checks
Tenants cannot be charged for any referencing checks following the introduction of Tenant Fees Act. The legislation which came into effect for England in 2019, classes reference checks as a Prohibited Payment.
In Wales, the Renting Homes (Fees etc.) (Wales) Act 2019 also prevents such fees being charged to tenants. In Scotland, these charges are considered illegal premiums so you will need to cover the cost of any referencing they wish to undertake.
Returning the holding deposit
If you decide not to rent to a prospective tenant based on their references, a holding deposit (if one was taken) must be returned to the tenant within seven days of your decision. You may only retain the holding deposit if the tenant:
- Failed the Right to Rent check
- Intentionally provided false or misleading information
If you take this course of action, you must write to the tenant within seven days and explain why you are keeping the holding deposit. You may also retain the holding deposit if they change their mind about renting the property but must still write to them. Failure to do so will result in the holding deposit being returned regardless of failed checks.
Using a guarantor
If the tenant returns a poor reference, you could utilise a guarantor instead. A guarantor is someone who will take responsibility for the tenant’s obligations if the tenant is unable to fulfil them, including the payment of rent. This is particularly common with student tenants.
Be sure to perform finance checks on the guarantor too, an employer reference and a credit check will help ensure that they will be viable guarantor. You will need to highlight the guarantors responsibilities through a deed of guarantee or within the tenancy agreement.
When is it illegal to refuse a tenancy?
It is the landlord’s decision whether to accept a tenant and referencing serves as a means to make an informed decision. However, you cannot refuse a tenancy if your reasons could be classed as discrimination. The following characteristics would be considered unlawful discrimination:
- Age of the tenant
- Gender or sexuality
- Marital status
- Pregnancy or a woman with children
- Religious beliefs
- A disability or health issue
Universal Credit and housing benefits
You can only refuse a tenant on Universal Credit if your buy-to-let mortgage prohibits you from renting it out to tenants on housing support.
For more advice, find your local ARLA Propertymark Protected expert
Propertymark Protected members can help you find a suitable tenant by undertaking referencing for you and ensure lawful Right to Rent checks are carried out. By using a Propertymark member you are guaranteed to be consulting with a professional agent who will give you up-to-date advice and guidance.