Landlords Must Carry Out Tenant Referencing To Avoid Bad Tenants
2012 wasn’t really a great year to be a landlord
Almost 60% of landlords had problems with bad tenants in 2012
99,000 tenants didn’t pay rent for more than 2 months
Tenant evictions increased 8%
During 2012 some 59% of landlords were left out of pocket as they were forced to deal with tenants not paying their rent on time and according to LSL Property Services, over 99,000 tenants didn’t pay rent to their landlords for two months or more, the highest recorded number of tenant defaults since 2008.
Choosing the right tenant for a rental property can save landlords a long and often costly eviction process further down the line.
Landlords are encouraged to be extremely thorough when conducting background checks on prospective tenant applicants and referencing is all about information gathering and verification, it can be a time consuming and frustrating process if landlords are unsure of the procedures that need to be followed, maybe that’s why so many landlords trust experts like Legal 4 Landlords to conduct tenant referencing on their behalf.
Comprehensive tenant referencing should include obtaining copies of all the tenant’s bank statements for the past three months, previous landlord references to check the tenant paid rent on time and credit checks incorporating fraud indicators and employer references. Identity validation and proof of current address are vital, ideally the tenant should produce tax or insurance documents showing their current address, however, utility bills will suffice – and landlords or their appointed agents should take the time to talk at length to all prospective tenants.
Landlords should ask the prospective tenants lots of questions about their circumstances, including employment status, family life and reason for moving.
It is important for landlords to build strong relationships with their tenants from the outset, so it is a good idea for landlords to spend some time with the tenant during the application process. This approach also allows landlords to build up a picture of the person they are dealing with.”
Private rental sector (PRS) landlords can often be a little less rigorous in conducting background checks on prospective tenants than lettings agents are required to be. Sim Sekhon, spokesman for Legal 4 Landlords commented that “Prospective tenants with ulterior motives or bad renting history often try to target private landlords who source tenants themselves, because they are often lax on conducting background checks. That is why we developed our market leading Tenant Referencing service and added the protection of Rent Guarantee Insurance, to help landlords avoid bad tenants who don’t pay the rent.”
To reduce possible disputes over damage to the property, landlords or their appointed agents should conduct a thorough inventory, with photos, at the start of the tenancy – See our brief guide to inventories here.
All UK PRS landlords should also insist that the tenant pays a deposit, typically four to six weeks’ rent that must be held in one of the Government’s three tenancy deposit protection schemes, by law.
The value of the deposit may not be enough to cover big maintenance or repair problems, however, so landlord insurance is the most reassuring way of safeguarding against accidental damage to the rental property.
However, it is worth noting that some types of tenant such as students or tenants in receipt of state benefits such as local housing allowance (LHA) or housing benefit may not be allowed to be insured by some insurance providers, landlords are advised to check this with the insurance provider.
Once the tenant is in situ, make mid-term inspections every 3 months to ensure the property is being used according to the terms outlined within the Assured Shorthold Tenancy (AST) agreement and to monitor the condition of the rental property.
If the tenant repeatedly refuses to grant legitimate access, it can be a strong indicator that the landlord has reason to be suspicious. Sending in legitimate contractors for gas and electricity safety inspections can be a way to assess what’s going on at the rental property.
Rental properties in residential areas being turned into cannabis factories can also be a common occurrence, police England and Wales discover about 20 a day, resulting in many thousands of pounds worth of damage.
Other problems created by troublesome tenants include benefit fraud, drug rings and properties being turned into brothels.
Landlords are advised not to leave a tenancy to run itself. Landlords need to keep abreast of all new and surreptitious schemes and tricks pulled by bad tenants including benefit fraud and subletting.
Landlords should visit the rental property within a few weeks of the start of the tenancy, to confirm that they have rented it to the tenants they think they have.
The potential hassle, risk and expense of dealing with bad tenants drives many landlords to guaranteed rent insurance schemes, such as the one offered by Legal 4 Landlords. It guarantees an agreed rent if the tenant stops paying.
The rental property is the landlord’s investment, and like it or not, the landlord has responsibilities for the safety and security of the tenant as well as for any mistakes made by the landlords appointed agent, should they get things wrong.