What is tenant referencing?

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.

Tenant Fees Act and charging for reference checks

Tenants cannot be charged for any referencing checks following the introduction of the 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 from being charged to tenants. In Scotland, these charges are considered illegal premiums so you will need to cover the cost of any referencing.

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 a viable guarantor. You will need to highlight the guarantor's 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
• Race/ethnicity
• 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.