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What Is Tenant Referencing And Why Is It Important?

Updated: Dec 13, 2020

Tenant referencing is a landlord’s or letting agents’ way of finding out information about a prospective tenant, so they can make an informed decision on whether to allow the tenant to rent the property.

Why reference tenants?

Landlords and letting agents need to have trust in any tenant that they will pay their rent on time, treat the property with respect and not be a nuisance to neighbours or others.

Referencing confirms the tenant’s past behaviour in other rented properties and whether they can afford to pay the rent, so there is confidence that the right tenant has been picked.

Landlords and letting agents must ask the prospective tenant’s permission to carry out a credit check. Obviously, if this is refused the landlord or letting agent may wish to decline the request to rent a property, based on the prospective tenant being a high-risk of being unable to pay the rent.

What referencing can be used

There are several forms of referencing that exist to provide a better understanding of a prospective tenant and whether they are suitable to rent the property.

Landlord Reference

This involves getting in touch with the tenant’s previous landlord to find out how they behaved as a tenant. They can tell you if the tenant paid rent on time, if they treated the property with respect and any other information that might influence the decision.

Credit Check

This reference will confirm the tenant’s credit history. Any County Court Judgements (CCJ), bankruptcy and insolvency will be brought up, which can show the tenant may have bad credit. These checks can even bring up past addresses and their details on the electoral roll (if any).

Tenant Affordability

Checks exist to confirm the tenant’s income, who their employer is and their contract dates, this can include a reference from the tenant’s employer too.

Right to Rent

Right to Rent referencing is done to ensure the tenant is legally allowed to rent a residential property in England. Find out more details on the Government website about Right to Rent.

Bad references

If a prospective tenant fails any of their reference checks, then they may not be allowed to rent the property. They may have bad credit history, treated their last property poorly or don’t earn enough to pay the rent. If a holding deposit was taken, it must be returned to the tenant within seven calendar days of making the decision not to enter the tenancy agreement.

If the references come back and show information the prospective tenant initially provided was false or misleading, then the holding deposit can be withheld. The details must be communicated in writing to the prospective tenant, with the reason for withholding the holding deposit.

Get a Guarantor

If the tenant does fail any references, or if there is a possibility in future that the tenant may struggle to pay rent, a request for them to have a guarantor instead can be made. A guarantor is someone who will take responsibility for the tenant’s obligations, including paying rent, if the tenant is unable to fulfil them.

Guarantors are more common with student tenants.

Be sure to perform an affordability and credit check on the guarantor too, to ensure that they will be able to pay rent.

Can tenants with bad references be refused?

It is the landlord’s or letting agent’s decision whether to accept a tenant or not; their references simply act as a way of making a more informed decision.

The only exemption is if a tenant in England fails a Right to Rent check, in which case the tenant is not legally allowed to rent the property. The landlord or letting agent is committing an offence if they allow someone who has knowingly failed Right to Rent checks to rent the property, or if they fail to make the proper Right to Rent checks before renting their property to the tenant.

When is it illegal to not allow a tenancy?

A landlord or letting agent cannot refuse a tenancy if it is based on unlawful discrimination. The following reasons to refuse a tenancy are considered unlawful discrimination:

  • A tenant’s age

  • Their gender or sexuality

  • Their marital status

  • Being pregnant or a woman with children

  • Their religion or beliefs

  • Their race/ethnicity

  • Having a disability/health issue

If the potential tenant fails any referencing checks the tenant can be refused the tenancy, but they cannot refused if it based on any of the characteristics in the list above.

Can tenants be refused who are on Universal Credit/Housing Benefits?

Only if a tenant fails any of their referencing checks, of if the mortgage on your buy-to-let property doesn’t allow you to rent it out to tenants on housing support.

Can tenants be charged for reference checks?

Tenants cannot be charged for any referencing checks. Following the Tenant Fees Act that came into effect in England in 2019, charges for references are now considered a Prohibited Payment and are illegal.

In Wales, the Renting Homes (Fees etc.) (Wales) Act 2019 also prevents such fees being charged to tenants. In Scotland, these charges are considered illegal premiums. Landlords or letting agents will need to cover the costs of any referencing they wish to undertake.

Who can arrange references?

A landlord can arrange tenant referencing by themselves, by requesting information from the tenant or by finding different reference providers that can undertake the referencing for a cost.

An easy way of making sure all the necessary referencing is made is by using an ARLA Propertymark Protected letting agent.

If you have any questions or would like any further information please contact us at lettings@tyne2let.co.uk or call 0191 228 6962.

Kind Regards,

The team at Tyne2Let

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