How important is tenant referencing?
In the world of property management, one crucial step that landlords overlook is tenant referencing. These checks are essential and could save you significant financial losses, here are a few reasons and a recent example of how.
Firstly, what is tenant referencing? This process involves thorough background checks on potential tenants before allowing them to move into your home. During this process, we check their credit history, and work position and obtain references from previous landlords.
Tenant referencing plays a vital role in safeguarding a landlord's financial interests. By conducting comprehensive credit checks, landlords can assess a potential tenant's financial stability and ability to meet rental obligations. This includes evaluating their credit history, employment status, and income level. By verifying these factors, landlords can minimise the risk of renting to individuals who may struggle to pay rent consistently, reducing the likelihood of costly evictions or unpaid rent.
Tenant referencing serves as a valuable tool for landlords to mitigate legal risks associated with renting out their property. By verifying a potential tenant's identity and conducting thorough checks, landlords can ensure that they are not unknowingly entering into agreements with individuals who may have a history of fraudulent activities or illegal behaviour. This proactive approach helps landlords avoid potential legal disputes, costly lawsuits, and damage to their reputation.
We have recently sold to a buyer, who owns a few properties in Kent that she has rented out. One of the houses was empty, so before reletting it out she felt the property could benefit from some refurbishment. Having worked with a particular contractor previously, she called them over to make some upgrades. The contractor had mentioned they knew someone looking for this type of property, and having worked with them in the past she trusted their word and moved in their recommendation without any advice from a professional letting agent. The new tenants moved in, paid the first month’s rent and deposit, and haven’t made a payment since. Unfortunately, no referencing was carried out which could have identified if this tenant had a track record of doing this. Sadly, as there is no referencing the landlord is also uninsured in this scenario, which means they will need to pursue court action to evict the tenants all whilst receiving no financial income. This process will likely take more than 6 months and cost them tens of thousands (on top of paying their mortgage!) to resolve, assuming she has followed all the legislation (we cover this in another blog). If they haven't it will likely be a much longer process.
Tenant referencing is an essential step for landlords to protect their financial interests, property, and community. By conducting comprehensive background checks, landlords can ensure the financial stability of potential tenants, protect their property and neighbours, mitigate legal risks, and avoid costly mistakes. The real-life example provided demonstrates the potential financial savings that can be achieved by implementing proper tenant referencing procedures. As responsible landlords, prioritising tenant referencing is crucial for a successful and secure rental experience.
If you need any further advice about letting your home get in touch with our team on our WhatsApp below.
