What do tenant reference checks include?

Tenant reference checks help landlords gain insights into a prospective tenant’s financial reliability and renting history. Much like the recruitment process used in hiring employees, this process allows landlords to assess whether an applicant is a suitable fit for their property. Conducting reference checks can highlight potential risks and help landlords make informed decisions before entering into a tenancy agreement.

A standard tenant reference check usually involves several steps, similar to a pre-employment reference check carried out during the hiring process. These include:

Credit history

Credit checks provide an overview of a tenant’s financial background, much like how a hiring manager might review an applicant’s financial stability for certain roles. This part of the reference check process looks for any past issues with debt, such as unpaid bills, County Court Judgements (CCJs) or insolvency. A poor credit history does not always mean a tenant is unsuitable, but it may indicate a higher risk of missed rent payments.

A prospective tenant must give their consent before a credit check is carried out. Landlords and letting agents cannot conduct this check without the tenant’s agreement, and tenants have the right to decline. If a tenant does not consent, the landlord may need to consider alternative ways to assess financial reliability.

Employment and income verification

Employment and income checks confirm whether a tenant earns enough to cover the rent and whether their job is stable. This process is similar to verifying a candidate’s past performance during an interview process, where previous employers may be contacted to confirm job details. Landlords typically look for tenants who earn at least 2.5 to 3 times the monthly rent, though this varies. If a tenant is self-employed, they may need to provide tax returns or bank statements as part of the employee reference check process.

Previous landlord references

A reference from a previous landlord helps landlords understand how a tenant has behaved in past tenancies. This step can be compared to obtaining a personal reference during a hiring process, where a hiring manager might seek feedback on a candidate’s past performance. Previous landlords may provide details on rent payments, property care and overall conduct. A positive reference can reassure landlords, while a negative one may prompt further consideration.

Identity verification

Identity checks confirm that a tenant is who they claim to be. This is similar to verifying a job title and employment history during pre-employment reference checks. Any inconsistencies in a tenant’s application, such as different names or mismatched addresses, may require clarification before the tenancy is approved.

Right to rent checks

In England, landlords must conduct right-to-rent checks to confirm that a tenant has the legal right to live in the UK. This legal requirement is comparable to identity verification in the recruitment process, where right-to-work checks are carried out before employment begins. Failure to complete this check can result in penalties for the landlord.

What happens if a tenant fails referencing?

A failed reference check does not always mean a tenant is unsuitable. Some issues flagged during the process may have explanations or workarounds that landlords can consider before making a final decision. If a tenant does not pass referencing, landlords have several options to assess whether they can proceed with the tenancy while reducing potential risks.

Discuss concerns

A tenant may be able to explain issues raised in the reference check. For example, a past CCJ may already have been settled, but their credit file has not yet been updated. In some cases, an error on their credit report or incomplete paperwork could be the reason for the failed check. Speaking to the tenant directly can provide clarity and help landlords decide whether the issue is a cause for concern.

Accept a guarantor

If a tenant does not meet affordability criteria, they may still be a suitable applicant with the support of a guarantor. A guarantor agrees to cover the rent if the tenant is unable to pay, which can provide landlords with extra reassurance. The guarantor will need to pass affordability checks themselves, and their responsibilities should be clearly outlined in a written agreement.

Consider alternative financial checks

If affordability is a concern, landlords can look at other ways to assess a tenant’s financial stability. Reviewing recent bank statements, payslips or tax returns (for self-employed tenants) can provide a clearer picture of their ability to cover rent. Some tenants may have a reliable income but fail referencing due to irregular earnings, such as freelancers or contract workers. Checking alternative financial records may help landlords make a more informed decision.

Request upfront rent

Some landlords accept additional rent in advance to offset potential risks. A tenant who fails referencing but can offer several months’ rent upfront may still be in a strong position to proceed with the tenancy. This approach is often used for tenants with limited credit history, such as students or those moving from overseas, who may struggle to pass standard referencing checks. The amount of upfront rent required will depend on the landlord’s preference and any specific concerns raised during the reference check.

How long do reference checks take?

Most tenant reference checks are completed within a few days, though the timeframe can vary depending on the process used and the availability of information. Some referencing agencies offer same-day results, while others may take longer, particularly if they require responses from third parties.

Delays can occur for several reasons, such as waiting for previous landlords to provide references, verifying employment details, or resolving inconsistencies in an application. If a tenant has lived in multiple properties or changed jobs recently, gathering the necessary information may take longer. In some cases, tenants may need to provide additional documents to clarify certain details, which can also extend the process.

Landlords who need to move quickly may wish to discuss timeframes with the tenant or referencing provider in advance to set expectations.

How AST Assistance supports landlords

AST Assistance specialises in helping landlords to undertake tenant referencing and other aspects of property rental, ensuring the process is both thorough and efficient. While prospective tenants are encouraged to understand and prepare for tenant referencing, landlords can streamline the entire process and reduce risks by partnering with professional services.

Such services conduct comprehensive tenant referencing, detailed background checks, and offer expert advice on managing rental properties. These measures mean that if a prospective tenant fails referencing, landlords can make informed, confident decisions without delay. AST Assistance supports landlords in maintaining a fair and transparent process that benefits both parties, reducing the chances of miscommunication or potential issues when a tenant fails referencing.

For more details on how AST Assistance can help landlords manage tenant referencing or to learn more about the tenant-related services offered, call 01706 619954 or fill out our contact form.