In this in-depth article we look at tenant referencing costs and who pays for tenant referencing, to give landlords and tenants all the information they need to understand the referencing process and to find out…
How much does tenant referencing cost?
Tenant referencing costs can vary quite significantly depending on a number of factors – because of this, you could be expected to pay anywhere from £15 to £100 depending on your exact circumstances. Before we go into detail about the payment process for tenant referencing, the differences between landlords and letting agents, and how tenants ultimately pay for their background checks, let’s take a moment to understand what tenant referencing is and why you will have to pass a reference check to secure a new property.
What is tenant referencing?
The vast majority of landlords and letting agents will perform a background check on potential tenants before they commit to renting out their property. Tenant referencing is an essential part of the rental application process and renters will usually need to successfully pass at least a minimal vetting check before they can move into a property.
A tenant referencing check will usually include a credit check, affordability calculations, employer reference, past landlord reference and identity verification. But different referencing providers and agencies will use different variations of the standard check and may include additional extras to thoroughly vet potential tenants.
Find out more here:
Some landlords or letting agents will choose to perform these checks themselves by manually contacting credit referencing agencies, employers, landlords and other official bodies to verify a tenant’s details. But the majority of landlords and agents will use a third party referencing agency to perform the checks for them.
Who pays for tenant referencing?
In the vast majority of cases, the tenant will be expected to pay for reference checks. Sometimes the agent or landlord will offer to refund the referencing fee or deduct it from rent costs if the tenant goes on to rent the property. But if a tenant fails the referencing checks, they will not be able to recoup the reference fee and will have to accept the loss and move on to start the application process for a different property.
While there are a number of private landlords who will screen potential tenants themselves, most reference checks are conducted by specialist tenant referencing agencies who re-sell their services to both landlords and letting agents. The tenant referencing agency will charge the letting agent or landlord to carry out the checks, and then the cost will normally be passed on to the tenant.
At TheHouseShop.com, landlords can choose who pays for tenant referencing. They can either charge the tenant a one-off fee of £24.99 for a comprehensive reference report, or £9.99 for a basic check or they can choose the cover the cost themselves. This means that landlords can keep control of referencing their tenants and decide what they think is fair when charging their tenants.
Find out more about TheHouseShop’s tenant referencing services here: Tenant Referencing Checks for Landlords
Tenant referencing with private landlords vs letting agents
If you are renting from a private landlord, they will usually charge you a “referencing fee” which will cover the cost of the professional checks from the third party referencing agency, and perhaps leave a little extra to cover the landlords time spent dealing with the rental application. If, however, you are renting a property from a letting agent, the tenant referencing costs will usually be included as part of a general “admin fee” that covers all elements of the application process.
What is a letting agent ‘admin fee’ for renting?
As mentioned above, letting agents will charge tenants an “admin fee” when they are applying for a rental property. This admin fee will usually cover the tenant referencing costs, creation of the tenancy contract, ID verification, inventory checks and the agent’s time spent sorting out paperwork and coordinating the various parts of the process.
Average letting agent fees for tenants have risen significantly over the past 10 years and research from Citizens Advice Bureau currently places the average admin fee at around £300 per tenant (you can view the full research from Citizens Advice in their report ‘Still Let Down’ here). Your letting agent should always be able to tell you the cost of each individual fee including VAT and explain exactly what each charge/fee covers. A recent Advertising Standards Authority (ASA) ruling means that letting agents must not mislead consumers when publicising fees and tenants can complain to the ASA if fees are not represented accurately.
Letting agents have been criticised for charging extortionate admin fees to tenants, which is why many renters are now actively seeking out private landlords to avoid pricey agency fees. Private landlord does not normally charge general ‘admin fees’ and instead will only charge the tenant for the cost of tenant referencing via an intermediary referencing agency. This means that renting from a private landlord can be hundreds of pounds cheaper than renting from a letting agent.
How much do tenant referencing checks cost?
The costs of tenant referencing checks can vary significantly depending on the referencing company being used to carry out the checks and the level of detail included in the reference report.
For a simple tenant credit check, the fee can be anywhere from £5 – £20. All of the UK’s leading credit reference agencies offer a tenant check service where they will perform a credit check on the potential tenant and return a short report to the landlord or letting agent giving a recommendation on whether the tenant is suitable for the property in question.
Some of the main credit report companies in the UK are:
If your landlord or letting agent wants a more detailed assessment of your suitability for a property, they will employ a specialist tenant referencing agency who will perform not just a credit check, but also employer references, previous landlord references, affordability calculations and more. Tenant referencing agencies will charge anywhere from £15 – £90 for a professional tenant reference check, depending on the level of detail involved and how complex the tenant background checks are.
The above fees are the amount that your landlord or letting agent will pay for the reference checks, but they may charge the tenant more than this to cover the cost of their time spent dealing with the application.
How much should I expect to pay for tenant referencing?
If you are a tenant applying for a rental property, you should expect to pay anywhere from £20 – £50 for your referencing and background checks. The exact fee will depend on which referencing agency supplier your landlord or letting agent is using, but if you are asked to pay well above £50, you should consider challenging the fee and asking them to justify the high price before stumping up the cash.
You should also bear in mind that there could be additional referencing costs if you need to use a guarantor to secure a property.
Who pays for guarantor referencing?
If you know that you will need a guarantor to rent the property, or if your solo reference report comes back saying you will need a guarantor to secure the property – you will normally be expected to pay for your guarantor’s reference as well.
Sometimes the guarantor will be asked to pay for the referencing directly. In this case, it is up to the tenant to liaise with the guarantor and decide if they want to refund the cost of the guarantor’s reference checks.
Find out more here: Tenant Referencing and Guarantors
Our tenant referencing service allows you to choose who pays, the landlord or tenant