Referencing your Tenants and Guarantors

Photo by Gonzalo Facello on Unsplash

Your new prospective tenants has viewed your property and fallen in love with it!

What next?
There are lots of different options when referencing your tenants from done for you, to undertaking the task yourself. Depending on your time you might decide to outsource it, where you see the completed report and the tenant deals directly with the referencing company or if you have more time you might opt to collate all the information yourself and get the tenant to complete their application on the referencing portal and upload their documents.

There are pros and cons to both, but personally I prefer to see all the information and then upload it our end. Recently I have seen a number of prospective tenants actually lying to get through the door to view properties (2 in one week, for the same property)! I understand there is a shortage of rental properties and a surge in demand, but I am not sure how they think they will secure the property once you start the referencing process. They tell you they earn a certain amount and it is for 2 people, yet from the information they give you verbally, then it is doubtful they really do earn this. By asking them to complete a tenant application it is possible to find out before you start their tenancy application whether they are likely to pass the affordability or have any credit issues. At which point the salary drops significantly and it becomes just for one person. 

 I recently learned of one company where the prospective tenants can choose the information they choose to share in relation to their bank statements. Having referenced lots of tenants over the last few years some things are not always clear cut. Yes their credit score might be okay, but when you actually look at their bank statements, certain things might stand out, like a gambling habit or always being overdrawn. Obviously they might get lucky one day and win a large amount from their gambling habit, but as a Landlord you don't want to take the risk that your rent might not be paid.

At this point you might decide no or you might decide to ask for a guarantor. The choice is yours. I have recently seen some discussion around the role of guarantors and that perhaps one day everyone taking out a tenancy will be required to have one. Again the criteria varies slightly for some people. Some insist on a home owner while others look at affordability and providing they meet the criteria are happy with this. However, for student accommodation this will depend. Some landlords and agents are happy with the parent signing the guarantor documents and nothing else, while others are more rigorous.

The general criteria that the clients I work with opt for ensures that they can get rent guarantee insurance are:-

• have lived and worked in the UK for at least the last 3 years
  
• have the right to live here for the term of the tenancy
  
• have a clear credit history
  
• earn at least three times the monthly rent
  
• are prepared to be fully referenced including a credit check, employment reference and provide their ID and proof of income 
• be prepared to sign all the documents

Not everyone has a guarantor available to them and for some people this limits their access to the private rental sector. There are guarantor companies available and while some agents and landlords don't  accept them, others are willing to. They work by the tenant paying them a set amount at the start of the tenancy and at the time of each renewal. This covers the landlord for rent arrears and other things like damage. However, you do need to look at the terms and conditions carefully before deciding to go ahead. Some policies insist that if you are taking tenants who claim benefits their rent must be paid directly to the landlord.  In the current situation a lot of tenants who are in work receive a top up of benefits and are very capable of managing their budgets and this does feel like they are being penalised for needing a top up.  As anyone who has ever tried to get rent payments directly to the landlord they are often refused, so this is not quite as straightforward as it might seem. Also as soon as the tenant is a few days late (typically less than a week) you need to notify the rent guarantee company.  I think the advice here is do your homework and work out what is best for you.

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