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The most common reason given by landlords for not referencing their renters is that they “seemed nice” and they needed to fill the property quickly… don’t be one of these landlords!!!
UK landlords lose over £45.4 billion in rent arrears and property damage each year – and conducting a thorough and professional reference check on your potential tenants before they move in is the best way to avoid the bad renters that inflict this damage.
Top 5 Reasons to Reference Your Tenants:
- A professional reference will verify GENUINE employment: don’t take your tenants’ word for it!
- ID fraud is on the rise: since Right To Rent was introduced there has been a booming black market in fake and fraudulent ID documents – a proper reference will remove the guesswork from checking renters’ identities
- You could potentially void your mortgage or insurance agreements: most specialist landlord insurance products and BTL mortgage agreements will require you to have full and proper reference checks for any tenants living in the property.
- Evictions are time-consuming, costly and stressful: Trust us, you want to avoid an eviction at all costs. Making sure your tenants are suitable, reliable and can afford the rent before they move in is the best way to do this.
- Property damage costs UK landlords £4.5 billion each year: property damage repair costs can total thousands and totally wipe out your profits, getting a reference from previous landlords is the best way to avoid reckless renters.
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FULL ARTICLE: 5 Undeniable Reasons to Reference Your Tenants
Finding new tenants for your property is always a bit of a daunting prospect – how do you know if you’ve found the right tenants? How can you tell if they’ll take care of your property? Will they reliably pay the rent, on time and in full?
For many landlords, their biggest concern is making sure that they receive their rental income, on time and in full, each and every month – but with rising rental prices and low wages, affordability is becoming a problem for many renters.
The Facts and Figures
Recent research showed that 1 in 3 private renters on low wages are being forced to borrow money just to keep up with monthly rental costs. On top of this, according to research by Reeds Rains and Your Move, the number of tenants in serious rent arrears (more than 2 months behind with rent payments) increased by a whopping 14% in just 3 months last year.
From a landlords’ perspective, rent arrears can quickly erode margins and erase any prospect of making a profit, which is why it so vitally important that you ensure due diligence when working out if your potential tenants can afford your property. According to Access Legal, 40% of landlords have experienced tenants failing to pay rent, and 46% of renters who fall behind with rent won’t end up paying it back voluntarily – forcing an eviction and/or court proceedings.
In fact, in just the last 12 months, 28% of landlords say they have experienced rent arrears with at least one of their properties, with unpaid rent costing UK landlords an incredible £900 million every year.
One of the best ways to avoid bad tenants and put yourself in the best possible position when letting out your property is to conduct professional, thorough referencing and background checks on any potential new tenant. We really cannot overstate the importance of the referencing process when looking for new renters.
But just in case we haven’t already convinced you, here are 5 undeniable reasons to reference your tenants…
#1 A Professional Reference Will Verify Genuine Employment
As mentioned above, affordability is usually the most important factor to take into account when referencing a tenant, and confirming a renters’ income and employment is a crucial component of this.
Most landlords will ask their renters to provide brief details of their current employment, including who they currently work for and their annual salary. But what if your tenant puts forward false information, or over-exaggerates their salary?
Ordering a professional tenant referencing check will not just collect these details from the tenant, but will also verify them against a number of different sources and contact the employer to get written confirmation of the renters’ salary – helping you to make a proper assessment of whether the tenant can afford to rent your property.
2# ID Fraud is on The Rise
Verifying that your tenant is who they say they are is not as easy as it sounds.
Since the introduction of the Government’s Right To Rent checks, landlords have a legal obligation to obtain at least 1 of the approved forms of ID from their renters, check it, and make a copy for their records. Landlords who fail to do this risk a £3,000 fine and a possible criminal conviction for repeat offenders.
With the responsibility for verifying ID documents now falling to landlords or letting agents, and not to immigration professionals, there has been a huge boom in the number of criminal gangs producing and selling fake ID documents to help illegal immigrants secure housing in the UK.
Understandably, landlords are not immigration specialists and are often unaware of what they should be looking for when they “check” a potential renter’s ID. Criminals have taken advantage of this lack of knowledge and are exploiting it.
If a potential tenant manages to trick you and get a fake identity written into a tenancy agreement, not only could you face a Right To Rent penalty charge, but you could also find that your tenancy agreement is not enforceable. This can cause serious issues in regaining possession of your property and holding the tenants to the obligations laid out in the contract – such as paying rent, deposits, property damage and maintenance etc.
Any good professional reference check will include a Right To Rent check as standard and will take the guesswork out of verifying your renter’s identity. So, if you don’t feel comfortable taking on the responsibility of an immigration officer yourself, ordering a professional reference is definitely a good idea.
3# You Could Unintentionally Void Your Mortgage or Insurance Agreements
Many Buy To Let mortgage providers will state somewhere in the small print of your agreement that you MUST conduct a thorough and detailed reference check on any potential tenant before they move into the property. This is because your mortgage provider cares about your rent being paid on time just as much as you do!
You may also find that your specialist landlord insurance policy requires all renters to be professionally referenced to comply with the policy terms.
A Cautionary Tale: Imagine this scenario…
You’re in a desperate rush to find new tenants for your property and you’ve found a great couple of young professionals who seem perfect for the tenancy. They tell you that they are happy to pay 3 months’ rent up-front but that they need to move into the property ASAP.
They seem nice enough and the employment and income details they provided seem well within the affordability range for your property – so you decide to forgo the proper referencing checks and agree to the tenancy.
They do, as promised, pay the 3 months’ rent up-front, but when it comes to month 4, they fail to pay the rent on the due date. You chase them up about the missed payment and are given a believable excuse and a promise that payment will be made within the week.
At this point, you do some research into how you can handle the problem of rent arrears and come across a product called ‘Rent Guarantee Insurance’. This sounds like the perfect solution and would protect your rental income by ensuring that you get paid on time each and every month regardless of whether the renters pay or not! Phew!
BUT… then you read the requirements for a rent guarantee service and discover that you can’t take out rent guarantee cover for any property unless full renter referencing checks were completed prior to the renters moving in!!!
Skipping out on referencing checks may seem like an okay idea at the time when you are desperate to fill an empty property and think you can trust your potential new renters – but the consequences can be far worse and long-lasting than you probably realised at the time.
From your mortgage agreement to your insurance policy – a lack of proper references can be a real pain to deal with further down the line.
A full renter referencing check containing employment and income verification, ID verification, Right To Rent checks, previous landlord references, criminal history, credit report and more can be completed and the results returned to you within just 48 hours! So there really is no excuse not to properly reference your tenants.
4# Evictions Are Time-Consuming, Costly and Stressful
As a landlord, you need to do absolutely everything you can to avoid going through an eviction. Evicting tenants is surprisingly difficult for the landlord, and even if everything goes smoothly, the process will take many months to complete.
Unlike almost any other service provider, landlords are unable to terminate a contract with their client if the agreed payment is not received. On the contrary, you actually have a legal obligation to uphold your side of the deal, irrespective of whether your tenant pays the rent or not.
Only the courts can legally end a tenancy agreement on the basis of non-payment, and even then, only after at least 2 months of debt have been accrued and a warrant for possession has been granted.
It will usually cost a landlord £500 just to get their tenants to court, then you need to take into account the loss of rent, any damage to the property and the cost of your time. The evictions process in the UK is far from straightforward, and if you accidentally make a mistake in the paperwork, or issue the wrong type of eviction notice – you could be right back to square one and have to start the process all over again.
One of the best ways to avoid the dreaded evictions process is to make sure you’ve found good, trustworthy and reliable renters for your property. Conducting thorough background checks on any potential tenant really is essential if you want to enjoy a hassle-free tenancy.
Of course, there are times when even a good tenant who has passed their referencing checks with flying colours will get into trouble and may find themselves unable to pay the rent. But the chances of encountering this situation and being forced to start eviction proceedings are hugely diminished if you have properly assessed your renters’ suitability before they move in.
5# Property Damage Costs UK Landlords over £4.5 billion every year!
Aside from paying the rent on time, you will also want to know that your new tenants are going to take care of your property and keep it in tip-top condition. Any good landlord will understand that even the best renter in the world will leave a certain amount of wear and tear damage over the course of their tenancy, but there are some tenants who can wreak havoc for you and your property by essentially trashing the place.
Property damage costs UK landlords over £4.5 billion each year – many times more than the amount lost in unpaid rent and arrears. Whether it’s from a disgruntled renter after an eviction notice has been served, or simply a bad tenant from the start of the tenancy, property damage can wipe out your profits as a landlord and make your life a nightmare.
Previous landlord references are a critical part of a proper rental background check and can reveal a fair amount about what you can expect from your potential new tenant. If you can get confirmation from the renters’ previous landlord that they have been a reliable and trustworthy tenant who has taken excellent care of the property and reported any accidental damages as soon as it happened – it is safe to expect that they will do the same in your property. If, however, the past landlord puts forward a vague reference that doesn’t mention anything about the state of the property, or explicitly states that the tenants did damage to the property, you should see this as an immediate red flag and should NOT agree to the tenancy.
So there you have it! The top 5 undeniable reasons why you should ALWAYS reference your potential new tenants.
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