These days many Landlords buy rent guarantee insurance. However, like all insurances, you have to make sure you comply with all the terms and conditions if you have to make a claim, which hopefully you won’t! One of those terms will inevitably be to have the applicants thoroughly referenced prior to signing any agreement with them.
Tenant referencing should cover 3 main areas:
1. Financial / Credit check – this can be the usual type of online credit check that anyone can do. This is very quick and will give you an instant answer whilst showing up any “nasties”. Some applicants will be in receipt of various benefits, some of which can be included in their financial statement.
2. Employment reference – there are two main aspects to this, one being to check the applicant is earning what they say they are earning and secondly that the contract is for a longer term than the tenancy. There is no point signing a 6 month tenancy with someone who potentially be out of work in 3 months! If the applicant is on a “zero hours” contract, check the terms of your insurance. Thankfully we find these are getting rarer.
3. Landlord reference – try and find a referencing company who will go back over at least the last 3 years addresses for an applicant. Some applicants, if they fall out with their Landlord, have been known to move back in with relatives so this is what they put on their referencing. However if you go back over a longer period the truth should come out!
There are now some referencing companies who offer a “tenant tracker” type arrangement. This can be very useful in that, during a tenancy, should a tenant be in receipt of a County Court Judgement, however small, the referencing company will advise the Landlord or agent. At this point there is no need to panic but it does give you the heads up to keep an eye on the tenant and possibly allow them to go on to a periodic contract, rather than another fixed term in order to give flexibility, should the worse come to the worse.
If you cover these bases you should comply with an insurance companies terms but please pop in and have a chat if you have any queries.