Business Insurance

Landlord's Guide To Tenant Referencing

Finding the right person for your rental property can be tricky to say the least. Luckily, there are steps you can take to make things easier. Here we take a look at tenant referencing and the simple things you can do to increase your confidence that the tenant you've chosen is right for you.

As a landlord, deciding who you want to occupy your rental property can be a stressful and time-consuming process. After all, you are relying on them as a source of income! Whilst in the majority of cases tenants are well-behaved and cause minimal issues with landlords, there are inevitably some who can make your life as a landlord both extremely difficult and costly. Luckily, there are a variety of checks that can be carried out to help identify these risks early on which can help you to avoid potentially troublesome tenants.

Tenant referencing is standard practice when renting out property, so let’s take a look at what this process entails and the different types of referencing that are carried out.

What is tenant referencing?

Put simply, tenant referencing is the process of screening or conducting backgrounds checks on prospective tenants. It includes vital information that can help you make an informed decision regarding their suitability as a tenant. Whilst some types of tenant are perceived to be more or less risky, the main purpose of tenant referencing is to help you identify any risks before they sign on the dotted line to increase the likelihood of a peaceful tenancy.

What are the different types of tenant referencing?

There are a few types of tenant checks that are commonly carried out by landlords and letting agents which can help you paint a good picture of any tenant you are considering. These are:

Let’s take a look at each one of these in detail...

The Right To Rent Scheme applies only to residential tenancy agreements commencing on or after 1st of February 2016.

Right-to-rent checks are an incredibly important part of letting out a property in the UK. ‘Right to rent’ was brought into effect under the Immigration Act 2014 and essentially provides confirmation that prospective tenants are in the UK legally.

Restrictions are placed on illegal immigrants who are trying to access rental accommodation within the UK, and right-to-rent checks help with this. Because of this, checking a tenant's right-to-rent is a legal requirement in the UK.

What responsibilities do landlords and letting agents have?

As part of the right to rent process, landlords and letting agents are required to make a note of the date these checks were completed and also retain copies of documents provided. They also have other responsibilities, for example:

  • Checking the original documents that show tenants’ right to live in the UK with the tenant physically present to ensure they are valid
  • Conduct follow-up checks when appropriate (e.g. every year) to ensure their ‘Right-to-rent’ status hasn’t changed

There are plenty of resources out there to ensure you are doing your due-diligence as a landlord and following all necessary procedures.

What type of documents are accepted?

The type of documentation will determine whether a tenant has unlimited or time-limited right-to-rent in the UK.

Those with Unlimited right-to-rent include:

  • British and Irish Citizens
  • EEA Citizens with Settled Status
  • Those who have right of abode in the UK or have been granted indefinite leave to remain in the UK
  • Those with no time-limit imposed on their stay in the UK

Those with time-limited right-to-rent will have been granted leave to enter or remain in the UK for a limited period of time. This includes:

  • Those with pre-settled status under the EU settlement scheme
  • Those who have entered the UK under a work/family/study visa
  • Those who have humanitarian protection
  • Those who have been granted right-to-rent for a limited period of time by The Home Office (e.g. due to outstanding asylum)

Depending on the nationality of the prospective tenant, different types of documents can be presented to confirm an individual's right-to-rent in the UK. You may also be asked to provide more than one type of document depending on whether your potential tenant has unlimited or time-limited right-to-rent.

We’ve provided a summary below of the types of rent-to-rent documents that are accepted, but more details can be found here:

  • Valid passport
  • Valid UK driving license
  • Valid UK birth certificate
  • Valid national identity card
  • Valid visa
  • Valid biometric residency permit

When do right-to-rent checks need to be carried out?

Landlord and letting agents should ensure right-to-rent checks are carried out prior to granting a residential tenancy agreement. If the prospective tenant has unlimited right-to-rent these checks can be conducted at any point prior to the start of a letting. If, however, the prospective tenant has time-limited right-to-rent then these checks must be conducted within 28 days of the tenancy starting.

Don’t forget, if at any point during the tenancy you wish to add another person to the agreement these checks must also be carried out on them, too.

How often do right-to-rent checks need to be carried out?

If a tenant has unlimited right-to-rent then you needn’t worry about conducting any further right-to-rent checks during the remainder of their tenancy with you. You are responsible for keeping a record of your initial checks however, for both the duration of the tenancy and at least one year following this.

If a tenant has time-limited right-to-remain then follow-up checks must be conducted shortly before the end of their eligibility period, whichever of the below has the latest date:

  • 12 months after the date that the initial checks were carried out
  • When the tenants leave to enter or remain in the UK has expired
  • When the tenants Home Office issued immigration document has expired

Conducting these follow-up checks (if necessary) is crucial as it means you will retain your statutory excuse against a penalty.

Do right-to-rent checks apply to all tenants?

There are some types of living arrangements where a landlord or letting agent is not required to carry out right-to-rent checks. We’ve listed some of them below for your reference, but note you can find the full list here:

  • Social housing
  • Local authority accommodation
  • Accommodation by healthcare services (e.g. care homes, nursing homes, hospitals)
  • Hostels and refuges
  • Mobile homes
  • Student accommodation^

^Note, only accommodation specifically provided by educational bodies or private providers (e.g. halls of residence) are exempt from conducting right-to-rent checks. Right-to-rent checks are required in all other student accommodation in the private rental sector!

How to conduct a right-to-rent check

There are two ways to check a tenant's right-to-rent. These are:

  • Manual right-to-rent check
  • Online right-to-rent check

Both of the above methods consist of three key steps that must be completed in order for the check to be valid.

If conducting a manual right-to-rent check:

  • Obtain: tenants original documents (we’ve listed some of the accepted forms above!)
  • Check: compare the likeness of the documents to your prospective tenant. For example, do they appear to be the rightful holder of these documents? Do they resemble the photo? Do dates and information match up? Do they appear genuine and not tampered with?
  • Record and retain: make clear copies of the documents presented and make a note of the date you completed these checks. Also, ensure you retain copies and information for at least one year after the tenancy comes to an end.

If conducting an online right-to-rent check:

  • View your prospective tenants' right-to-rent status online here
  • Prospective tenant views their own Home Office right-to-rent record, they can then share this with you via a code
  • Check: this can happen via video link or in person, and is where you compare the likeness of the documents to your prospective tenant. For example, do they look like the rightful holder? Do they resemble the photo? Does the information match?
  • Record and retain: when conducting this check online you are given the option to print your prospective tenants right to rent profile. You must record the date of this check and store these records (either hard-copy or electronically) for the duration of the tenancy and at least one year after this

What are tenant credit checks?

Remember, as a landlord you must get consent from your prospective tenant(s) before conducting a credit check

The purpose of a credit check is to identify whether a prospective tenant has had any financial or legal issues in the past, for example failing to pay bills.

As a landlord, this may be your main source of income or you may rely on rental payments to pay off your mortgage, so of course you’ll want to ensure your tenants are paying their full rent in a timely manner! This can also help to avoid disputes further down the line, or worse, the hassle of going through eviction proceedings.

The purpose of these agencies is to collect all sorts of data (though mainly financial!), for example, if a person has any fraud convictions. The type of credit check that is carried out will determine what information you are able to obtain, but here is an idea of the types of information you can gain access to:

  • Name and date of birth
  • Current and previous address history
  • Details on their current account and overdraft
  • Previous credit taken out
  • Fraud convictions
  • Information held on pubic registers, such as The Register of Judgements, Orders and Fines.

Note: the full list is much longer and you can check that out here.

Crucially, landlords must gain permission from the tenant before carrying out a credit check, and this is typically provided in writing. If you perform a credit check without consent you could be reported to Trading Standards, so be careful!

Who can perform a credit check?

As a landlord you will need to use a third party to conduct a credit check. If you are supported by a letting agent you will typically find they can perform these checks for you, which is a bonus!

If you work alone then there the process is fairly simple as well, so don’t worry. You can find many third-party credit reference agencies online with a quick search, but be sure to do your research beforehand before committing. Whilst you may be swayed by cheap prices it is best to ensure that any credit check provided by a third party covers the areas you need it to, in order to get a good picture of any prospective tenants.

How much do credit checks cost?

The cost of a credit check largely depends on which agency you choose, but generally speaking they tend to fall somewhere between £15—30.

If you see these services being offered for less than this and they appear too good to be true then it’s definitely worth doing some digging to ensure you will be receiving all the information you need. Similarly, if you have been given a cost that is much higher than this make sure you know if you are getting anything extra for the premium.

What are tenant references?

Of course, one of the best ways to get a feel of any prospective tenant is to ask their previous landlord! This way you can gain a good understanding of how they conducted themselves during their tenancy and if there were any issues you should be aware of, such as not maintaining the property to an acceptable standard. This is one of the easiest ways to ensure you choose the right tenant for your rental property.

It is also good practice to request an employer reference as well to get confirmation of income, and this will go a long way in reducing your chances of facing issues with rent arrears further down the line!

Can a landlord charge a tenant for references?

In 2019 it became illegal to charge a fee for acquiring tenant references — this is clearly stated in both The Tenant Fees Act (2019) and The Renting Homes Act (2019) for England and Wales Respectively. This also applies to Scotland, where such fees are considered ‘illegal premiums’.

What if a tenant fails their pre-tenancy checks?

If, when performing a credit check or obtaining references the end result is less than satisfactory there are couple of additional routes you can take to avoid dismissing the application completely.

One of the most common is to ask the tenant for details of a guarantor. In a nutshell, a guarantor agrees to take responsibility for the tenants' obligations to a landlord, for example, covering rent payments if the tenant misses or is unable to pay these themselves. Guarantors are most common with student tenants and are typically a parent.

It’s also important to perform adequate checks on the guarantor as well to ensure they are in a good position to accept this responsibility. It’s good practice to request an employer reference and perform a credit check to assess their financial stability, especially if they will be obligated to cover any rental payments missed by the tenant.

Remember, if you decide to opt for a guarantor you will need to outline their responsibilities either within the tenancy agreement or a deed of guarantee, and they will need to sign this jointly with the tenant.

Do I really need to carry out tenant referencing?

Whilst there is no legal requirement stating you must perform pre-tenancy checks on a tenant, it is certainly recommended. Not only does it give you peace of mind knowing you have done you due-diligence as a landlord to reduce the chances of issues and disputes arising later in the tenancy, but from a financial point of view, it really is in your best interests!

Most landlord insurance providers will only provide cover on the basis that adequate pre-tenancy checks have been carried out to identify and mitigate any costly issues from occurring during the tenancy period. Any providers who are willing to insure you without these checks are likely to offer you a premium because of this, so pre-tenancy screening is a simple and effective way to save money on your landlord insurance!

To show you how these checks can affect the upfront cost of landlord insurance we’ve compiled quotes for a 1 bedroom flat in a mid-sized town in the UK, with a rebuild cost of £200,000. These quotes relate to a no-frills policy consisting of buildings insurance and landlord liability of £2 million.

Here, we can compare the costs overall for landlord insurance with all, some and no tenant checks to see how they differ...

chart comparing the average cost of landlord insurance based on level of referencing
Costs can really vary so it's important to check prices from multiple sources!
Landlord Insurance Cost Calculations Based On Level Of Tenant ReferencingAnnual Premium

All checks

£193

Just 1 of these checks

£198

No checks

£228

As you can see, the average cost of landlord insurance increases considerably when no pre-tenancy checks are carried out. This is because insurance providers see this as inherently more risky, with an increased chance of a claim being made further down the line. In fact, you could save up to 15% on your landlord insurance by simply ensuring you screen your prospective tenants!

We also found that the pool of insurance providers willing to provide landlord insurance for a property where no checks are conducted is significantly smaller than when all recommended pre-tenancy checks are followed. This means it is ultimately more difficult to shop around for the best deal, as there are far less options available to you!

Remember though, these sample quotes are intended to be used as a guide only. Your quotes may be higher or lower than those outlined above depending on your individual circumstances.

Final thoughts

Whilst tenant referencing may seem like a hassle, it is a step that will likely save you from a headache or two further down the line. This is arguably one of the simplest ways for you to reduce your chances of encountering issues, such as late rent payments, during your tenancy. As we have seen, it also appeals to insurance providers as well, saving you some money along the way!

Whilst issues can and do occur with even the most reliable looking tenants, it is good practice to due your due-diligence before you allow them to sign on the dotted line.

FAQs

Tenant referencing is an incredibly important tool that landlords can use to assess the suitability of a prospective tenant. These checks are carried out before any formal agreement is signed and the terms of tenancy themselves typically depend on the outcome of these checks being satisfactory.

Common tenant reference checks include right-to-rent checks, tenant credit checks and obtaining landlord and/or employer references. It allows landlords and letting agents insight into how financially stable and reliable prospective tenants are as well as how they conduct themselves during a tenancy (e.g. do they take care of the property?).

This step is crucial as it means any potential issues can be highlighted before any agreements are signed and can help you to avoid potentially problematic or costly tenants!

It's important to understand that the information that different companies used to compile credit reports is not openly available to the public, and can only be securely accessed by a company that specifically needs this information (e.g. in the case of pre-tenancy checks!).

This doesn't mean, however, that you yourself can do a credit check on a tenant — as a landlord you will have to use a third party to do this. If you work alongside a letting agent you will usually find they are able to do this for you, but if not you can find a variety of tenant credit check companies online with a quick search.

The cost of conducting a credit check on your prospective tenant(s) depends on the external agency you choose.

From our research we found the average cost of a credit check tends to fall between £15—30. You may find you are quoted a cost that is more or less than this, and if this happens we'd urge you to do your research to ensure you are getting all the information you need.

As a landlord you will need to use a third party to conduct a credit check. If you work with a letting agent you will typically find they are able to do this for you, and even if this isn't the case you can find a range of third-party tenant credit check companies online with a quick search.

No, you cannot.

From June 2019, after the introduction of The Tenant Fees Act (2019), it became illegal for landlords and letting agents to charge a tenant for the costs of carrying out a credit check.

This also applies to other administration fees associated with setting up a tenancy such as guarantor fees, obtaining references and completing right-to-rent checks!

As such, landlords and letting agents are responsible for ensuring these costs are covered.

This depends on the type of credit check that is carried out. Some will give an extremely comprehensive breakdown of a prospective tenant's financial history whereas others can give you a more general overview. Here is a feel of the types of information you can gain access to when a credit reference company carries out a credit check for you:

  • Name and date of birth
  • Current and previous address history
  • Details on their current account and overdraft
  • Previous credit taken out
  • Fraud convictions

Note, this list is not exhaustive. You can get a more detailed view of all the information accessible to you here.

Obtaining references for a prospective tenant is an easy way for landlords or letting agents to gain insight into how the tenant conducts themselves during a tenancy, as well as more information about their current employer, job role and salary.

The most common types of references that landlords or letting agents request are from a tenant's current employer and current landlord/letting agent. In some situations a guarantor may be required, and it's common for landlords to request a reference from them as well.

Well, this depends on a couple of factors. Tenant reference checks can take as little as 48 hours to complete if both the tenant and referees are swift in submitting their information. However, this process can take considerably longer especially if employers or previous landlords are being particularly difficult to get hold of!

Our advice to all landlords is to be clear with any prospective tenant that it is their responsibility to ensure their referees are fulfilling their duties in a timely manner, and that any significant delays could jeopardize their chances of securing a tenancy with you.

References are a fantastic way to understand any prospective tenant more personally, but of course this depends on what questions you want to know the answers to in the first place! There are some key pieces of information you will want your tenant's references to corroborate to ensure they really are who they say they are. For example:

  • Confirming their current or previous address
  • Do they have any pets?
  • How long have they lives at the property?
  • Confirming their current place of work and job title (if applicable)
  • Confirming their current place of study and subject (if applicable)
  • What is their monthly salary?

It is also good to ask about how a tenant has behaved in their current or previous tenancy and even the workplace to get an idea of their personality and character. You might want to ask any of the following, for example:

  • Did they look after the property or cause any damage?
  • Did they get their deposit back in full and if not, why not?
  • Did they pay their rent and/or bills on time?
  • Would you rent to this tenant again and if not, why not?
  • How would they describe the tenant in the workplace?


Of course these are just some examples, there are plenty of resources out there to help you avoid potentially problematic tenants. For example here and here.

The Immigration Act 2014 makes it a legal requirement for landlords and letting agents to carry out right-to-rent checks on tenants to ensure they have a legal right to live in the UK. If you fail to undertake these checks this could result in a hefty fine or even jail time.

Credit checks and obtaining references, whilst not a legal requirement in the UK, are most definitely recommended. Not only will they help you avoid potentially problematic tenants, but many types of landlord insurance and indeed, landlord insurance providers have these checks as a condition that must be met in order to take these polices out in the first place!

Absolutely! It is common for both landlords and letting agents to assess the financial risk of any prospective tenant to ensure they can afford to make rental payments. There are many ways you can do this, for example a credit check provides a very comprehensive overview of an individual's financial records.

If you do wish to request a bank reference or statement from a tenant remember that you will need their express permission to do so (unless the tenant obtains this information themselves!), so ensure you get this in writing.

Emily Bunt

Emily is a psychology graduate from the University of Kent, currently working as a Data Analyst at NimbleFins focused on insurance content for SMEs. Prior to this she worked in market research at Kantar, investigating consumer behaviour and decision making, as well as in a supporting role in the field of mental health. Learn more at LinkedIn.

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