What should a landlord do if an applicant fails a reference check?

Our monthly ‘Advice Clinic’ series shares the answers to questions our landlords have been asking. This month, Marc von Grundherr, Lettings Director, explains the tenant referencing process.

What should a landlord do if an applicant fails a reference check?

Appearances can be deceptive – and that also applies to potential tenants who may not always be what they seem. It’s why we are taking tenant referencing extremely seriously. Thoroughly vetting a potential tenant safeguards against the likelihood of unpaid rent and damage to property and saves both us and landlords hassle and stress.

But reliable, honest tenants do sometimes fail a reference check for a variety of reasons. So how do we go about referencing a tenant and what do we do if an applicant fails the checks?

Referencing tenants

We carry out a range of referencing techniques to verify an applicant’s identity, employment status and right to live in the UK.

Bank and employer references

We use an independent tenant referencing company to undertake employment and bank checks, verifying the applicant’s employment history and confirming the employer’s company status. We also obtain proof of income to confirm that the tenant has the means to pay the rent.

Landlord’s references

Ideally we also ask for a reference from a previous landlord to check that the tenant pays their rent on time and has looked after previous properties well. Many letting agencies don’t ask for this type of reference but we feel it is very important to ensure that a tenant has a good track record of looking after a property.

Immigration checks

There are also legal regulations that must be complied with – in particular, the Immigration Act 2014 (often called ‘Right to Rent’ regulations) which means that residential landlords must check the immigration status of any new tenant, verifying their right to live in the UK. Failure to comply with these regulations could mean fines of up to £3,000 for landlords if they grant a tenancy to someone who does not have the right to live in the UK.

What happens if a tenant fails a reference check?

There are instances when a tenant fails a reference check and we are unable to rent a property to them. For example, they may have a County Court Judgement against them or they may not have the right to live in the UK and so fail Immigration Act checks. These are issues which cannot be overcome.

But even good tenants sometimes fail a reference check, often for quite mundane reasons and there are a lot of ‘grey’ areas where we can usually find a solution.

Young professionals or new graduates could fail the referencing process as they do not have a full employment history and therefore cannot provide an employer’s reference. They may have a low income or a low credit score. They may be working as a freelance contractor, on a temporary employment contract or they may be moving to the UK from overseas and cannot provide full references. Similarly, students will rarely pass a conventional credit check.

A tenant guarantor

In these cases, we often advise tenants to find a tenant guarantor – someone who will take on their liabilities if they cannot meet their obligations during the tenancy – either by being unable to pay the rent or by incurring costs by causing damage to the property.

Most people think of tenant guarantors as acting on behalf of students, usually their children/dependents, but it can also be a useful backup for younger professionals starting out in their career without conventional references. A guarantor is often a parent, but can also be a friend or even an employer.

A tenant guarantor is a good option for landlords, offering protection if things do go wrong and the tenant gets into financial difficulties. If this happens, the tenant guarantor becomes responsible for any rent arrears or damage, and if they don’t pay, the landlord can take legal action against them.

Rent paid in advance

There are a couple of other options we recommend if an applicant cannot find a tenant guarantor, for example, we might ask them to pay several months’ rent in advance – maybe six months or a year.

A larger deposit

Another possibility is to ask them to pay a larger deposit if the risk of damage to the property is greater. We usually do this if a tenant has a pet, for example.

Finding the right solution

If a tenant fails a reference check, we resolve them on an individual basis by discussing the matter with our landlord and deciding together what is the best solution for them. The landlord can agree to one of these alternatives, or they may prefer to rent the property to another tenant. Our priority is to find an outcome that meets the landlord’s needs and also protects their financial position and their property.

To find out more about our tenant referencing process, you can post a comment below or email us at info@benhams.com .