Tenant Referencing since tenant fees ban

[TonyHSFC]

Hi all my first post.

Something has come up and I am a tad worried about it, as I am not sure that I have correctly complied with the new laws.

Prior to the new legislation, I always asked the tenant to pay the small fee (only £20) for their reference checks, making it clear that I wouldn't entertain renting to them without them being fully reference checked (ie their choice).  I would of course sell this to them by rightly saying that it not only protected me but the tenant too, since its a HMO and its a way of trying to ensure that all the tenants are more likely not to be a problem to each other.  This seemed to work well and I never really had any complaints, as most reasonable people understood that it was them that needed to be checked out.

I decided to have a break with no tenants for a while as I was doing work upgrading the property so my last tenant left a couple of months before the new law came into force.  I read up about the law as much as I could at the time it came in, and I thought that it was reasonably straight forward, that in future I would not be able to ask for the £20 upfront to reference check them.  No problem I thought I will just ask them to get the references explaining that I was no longer able to do this on their behalf.  Well that is what I thought!

I have had a situation recently, whereby someone paid a deposit and despite many requests for them to get references done and sent to me, they simply ignored me.  After a month I have just been asked for the deposit back, despite it being partly for reserving a particular room that they wanted, and since having to tell other possible tenants that it had been reserved.  I have since read up a little more on this because I wanted to know if I was able to make deductions for basically being messed around and having potentially losing out on other tenants who also wanted that particular room.  It turns out, apart from the maximum 5 weeks deposit (mine was much less than that) the maximum holding deposit it now ONLY 1 weeks rent, in this case just £75.  The deposit paid was £200, which I feel is fairly low and I only ask for it to give myself minimum protection, more of a good will gesture by the tenant to show willing and that they are serious about taking up a tenancy.  Had this person come forward with satisfactory references I would have simply made it a normal deposit and as I am a resident landlord banked it, as you don't need to do the government deposit scheme in such circumstances.  My concern is that I asked this person (who I now believe to have something to hide hence no references supplied) to apply to my normal referencing company for the references, believing that as I am not taking any money from them that is was fine.  However, I have now read a guide (produced since the law came into effect) on their website which states 'This means you will no longer be allowed to ask tenants to cover the cost of their own referencing. You also won’t be able to charge check-in, inventory or admin fees'.   Obviously this was news to me and I have asked them to obtain references and referred them to the website. 

Its a real mess and another kick in the teeth for landlords.  What am I supposed to say to them, I want references but cannot in any way tell you how to obtain them, but here is the list?  It's ridiculous.  Like any landlord I don't see why I should be lumbered with paying out for reference checks to make sure they are a good tenant, if you had 4 people going for one room are you supposed to shell out £80?  I only ever ask for a reference after meeting them face to face and getting a good gut feeling about them (albeit I obviously got it wrong with this last one!).

So, has anyone else come across this problem and what are you all doing?  Personally there is no way I would ever let anyone into my property without being fully reference checked as I made this mistake many years ago, similar to this latest one, she paid a deposit and avoided being checked out and the only money I received as the deposit, it took me 6 months to get her out, thankfully the house wasn't too bad and I never let it again, I sold it due to the bad experience.  Obviously I learned a hard lesson, but I am now concerned about how to actually ask for a reference!  I cannot even say look on the internet because there might be an inference that you are pushing them towards referencing companies.  I am really not sure what to do for the next person who comes to view and starts asking me questions, other than to send them an email and say this is what I need, up to you how you go about getting it!  These stupid politicians who decide on these laws have no idea the problems that they cause!

Anyway, I hope I have helped make Landlords aware of this problem and look forward to your experiences and suggesting.

All the best...Tony

 

 

 

 

 

 

 

 

 

[Richlist]

My understanding is no fees can be charged to the tenant so you can either increase the rent to cover your costs or accept that your profits will take a hit.

Most of us have increased the rents.

Others are selling up.

[TonyHSFC]

Thanks, its difficult to increase rents to account for small charges but of course as you say we take the hit, it sounds like you are selling up from what you said?

I have decided to sell up this house as with things like this its just too difficult to manage and buy a flat and just deal with one tenant.  I will still get them to pay the costs though I will just tell them what I want and leave it with them as to how they get the information, a lot of it they can do themselves if they can be bothered, but things like credit checks are always going to cost at least £10, I think I might just say something vague like have a look around the internet to see if there are any companies offering services, I won't be putting anything in writing though!

Thanks for your quick reply, its much appreciated.

Regards,

Tony

[TonyHSFC]

Sorry its late, misread you are not selling up, you said others are....my excuse is its very late lol, I need to get some sleep!

[Melboy]

I think I paid around £10 for tenant referencing on my last tenant which was 18 months ago.   I was happy to pay this as for me as it is built into the rental charge and is also a tax deductible expense.  A small sum to pay for some peace of mind imo and more to the point it works for me.

I also pay the £20 (or so) to protect the deposit with the DPS and I keep the tenants deposit money in a totally separate account.

[Grampa]

I would say £80 outlay to find a good tenant is good value. If you instructed a agent to find your tenant you would be paying a lot more. But they would be filtering out all the unsuitable tenants at a early stage before any referencing costs are incurred.

They would do this by a combination of the below:

1. Experience and first impressions of applicants .
2. A very detailed application form filled out and scrutinized.
3. References obtained from previous landlords and employers
4. Seeing sight of bank statements which gives an insight to how they manage their funds.

Then if happy with the above the final "paid for " references would be obtained to which would/could be cross referenced against the above and would/could highlight anything they are trying to hide which would then be dug deeper into. 

Even asking the question if they can obtain a guarantor and how they reply and the reasons why they cant  tells a lot about a tenant.  (though not having one doesn't make them a bad tenant)

Trying to be a landlord on the cheap increases the risk of poor tenants and falling foul of the law and the financial penalties that incurs  if you dont comply which is the area you appear to be creeping into. 

 

  

[Melboy]

Oh! Yes! It is absolutely essential to follow the guidelines of thoroughly referencing any prospective tenant.

I am amazed that after all the publicity on TV shows about bad tenants newby landlords still fail to carry out the basic of checks on their future tenants and then they wonder why they are thousands of pounds out of of pocket when things go sour.

I have to admit even an old dog like me is still learning and in recent years I follow Richlists comprehensive format when selecting any new tenant.

[TonyHSFC]

Hi All,

Thanks for your replies, I have got this one sorted now, done a lot of reading and have downloaded some very good well written and dare I say it easy to understand guides.

A few things, whilst I understand the reasons why this law came into place, unscrupulous landlords and agents charging ridiculous high fees, I think its penalised the majority rather than the few.  Personally whilst it's OK to say you cannot charge for example for references, I think we should be able to say we need references and that if they wish to rent our properties they need to arrange for what information you require, even if this does mean they pay small fees.  The work around for this is to take a holding deposit, get something signed stating what you want in terms of references and that they will provide it either direct to yourself or via a referencing agent.  If they are then found to be lying or attempting to avoid being referenced checked (as was the case for me) then you are entitled to keep the holding deposit.   I have always tried to do the right thing but equally I don't see why my time should be wasted by people trying it on.  I will ensure that I stay within the law and that in future I don't make any mistakes as I seem to have on this occasion.  Thankfully I have also found out that these new laws only apply to Assured Shorthold Tenancy agreements, and that it does not apply to the resident landlord situation which I am, so I can now breathe knowing that I cannot be fined on account of this new legislation.  Lesson learned.

Anyway, thanks for your help.

Regards,

Tony

[Richlist]

I agree with Grampa, asking an applicant a few basic simple questions around employment, finances and current tenancy should highlight any issues. The result is that by the time you pay for formal references.......you are pretty sure the applicant is going to pass.

To me, it seems the obvious course to take.

[TonyHSFC]

Yes Richlist I have asked verbally before but not done an application form as such or insisted on all the same evidence being provided before requesting formal references for the simple reason this is the first time since the new law came into force, before I would explain the cost and simply ask them to pay it but I agree its definitely a good idea and the way to go in future so I will draft up my own application form with all the key points and information needed. If they also sign it confirming they don't have rent arrears elsewhere or CCJs you should be on a winner...doing this sort of process in future should quickly put off the dodgy ones because they will know that they are only wasting their own time...in fact this process can be explained even before wasting time showing them the property..learning and experience is everything to stay ahead of the nightmare tenants...its a shame there isn't a national database of them but that would upset the PC brigade 

[Grampa]

Yes you are right a residential landlord doesnt need to comply as it/if is classed as a non-housing act tenancy. These will be mainly be a lodger type arrangements  where someone rents a room in a house (which the landlord lives in as well) and  they shares one or both of the cooking/toilet facilities with others.

Be careful you dont fall into the trap of thinking you are safe with what you think is a non-housing act tenancy but your tenants/lodgers have their own (not shared) cooking area , toilet and  and are able to lock their own door. This would meet the criteria of a assured shorthold tenancy because they are self contained units. 

Some useful questions to put on an application form are:

1. Next of kin + address (this can be an extra address to chase up ex-tenants + plus it helps if the tenant die)
2. Vehicle detail (for the purpose of knowing whose cars belong to whom + plus it helps to know some of their assets if they default on their rent)
3. Last 2/3 addresses and reasons for leaving and those landlords details for the purpose of getting a referance

I could go on but just heading off to work

 

 

[Carryon Regardless]

It looks like my favoured method of taking a guarantor is still as good as any protection. Preferably a home owning guarantor.

On the principle that the guarantor is the protection where a tenancy goes faulty  I concern myself less than some would around searching comprehensively the history of the tenant. But I still see value in previous tenancy and employment checks. Previous tenancy checks, they being lalndlord reference, might not be considered reliable though, so I have been known to turn up at tea time w/o warning with an additional form that I'd forgotten. Seeing how they live now is valuable.

But does the new legislation prevent us charging the guarantor for checks on them?

How they organise settlement between themselves is up to them.

In truth my check is £3 at the Land Registry, but it was usual, before, for an up front admin cost of £80 - £150 to be applied.

[Grampa]

But even if you dont check the previous landlords still getting the information as part of the whole  referencing and decision making process it still gives you an insight to the potential tenant. Such as historically  how long they stay in one place or if they move on fairly quickly. I'm not suggesting you make a decision based on that alone but taken in context with all the other info collated (such as bank statements) and a detailed application form will give you a fairly good insight to the person you are considering renting your property to. Its not fool proof but good referencing increases the chances of getting a good tenant.  Also if something doesnt add up or feels right steer clear. 

[Carryon Regardless]

Yep, agreed. I've often seen gaps in the tenancy history. While I may be told they were abroad it's more often they were 'away' some where else. Around Rhyl and such like you need to be a habitual offender or a total savage to be given such a holiday.

Also the type of location they were lving at tells a story on character. On the principle of where you live is what you are, if they come from the ghetto you may find they will bring it with them. Life style, guests, well general attitude.

But are we able to charge gaurantors for checks?

[Grampa]

nope

 

[Richlist]

But I guess you can still provisionally check out any potential guarantor in the same way as you would any tenant applicant i.e. application form, usual questions to determine their suitability etc.