Summertime is a wonderful time of year and makes you feel good with a flow of endorphins. Blue-sky days, longer evenings with glorious sunsets, and warmer weather are perfect for enjoying your home’s outdoor spaces, carrying out property improvements, and moving. All of this and more makes this time of year one of the busiest for the UK rental market.  

What is tenant referencing?  

Typically conducted by a letting agent on the landlord’s behalf, tenant referencing involves checking various aspects of the applicant’s background to ensure they are responsible and financially stable. Let’s take a look at why tenant referencing is important, what checks you should carry out, and what your options are if a tenant fails their referencing check.

Why is tenant referencing important?  

The process is crucial because it helps you, as a landlord, ensure you are renting your properties to reliable and responsible tenants, thereby reducing the risk of future disputes and financial losses. It’s also important because most landlord insurance providers require proper referencing checks to be carried out on all tenants.  

What type of tenant referencing checks are there?
Credit check  

You should conduct a soft credit check to confirm that the tenant does not have any outstanding debt or a poor credit history. It’s important to remember that you must obtain written permission from the tenant to conduct this check.  

Employment and income verification  

An employment check involves verifying a tenant's employment status and salary to ensure they have a steady source of income that will allow them to keep up with rent payments. Most landlords typically require the tenant's household income to be 2.5 times higher than the rent.

Previous landlord references  

The tenant’s previous landlord is usually contacted to provide insights into their rental history and behaviour. This usually includes information regarding the tenant's payment history, property maintenance, and any issues during their tenancy.

Identity and Right to Rent check  

You are legally required to conduct a Right to Rent check to verify that tenants have the legal right to live in the country. This check involves confirming the tenant's immigration status and requesting proof of identity and residency.

What can cause a reference to fail?  

If any of the above checks are not passed, it could result in the tenant not passing the referencing process. There are a range of reasons these checks could fail, including poor credit history, insufficient income, employment instability, and issues with previous tenancies.

Another common reason for a reference not passing is tenants providing false information in a section of the referencing process. You may decide not to rent your property to a tenant if their previous behaviour or criminal record raises red flags.

How long does tenant referencing take?  

The tenant referencing process can take anywhere between 48 hours and two weeks to complete, depending on how quickly the tenant, their guarantor, and their previous landlords and current employers take to provide the necessary information.

What laws are there regarding tenant referencing?  

Tenant referencing is governed by several laws and regulations designed to ensure fairness, transparency, and personal data protection.

The Data Protection Act 2018 regulates the handling of personal data. You must ensure that all personal data collected during the referencing process is processed lawfully, transparently, and securely. Tenants have the right to know how their data is being used and to request access if necessary.

The Tenant Fees Act 2019 makes it illegal for landlords or agents to charge tenants for the cost of referencing checks, while the Equality Act 2010 ensures that landlords cannot discriminate against potential tenants based on characteristics such as age, disability, gender, race, or religion.

How your agent can help  

Letting agents play a crucial role in facilitating the tenant referencing process, making it as smooth and efficient as possible. They can use their expertise and resources to verify tenant details, giving you peace of mind about their reliability. They can conduct all of the required checks on your behalf, saving you a lot of time and stress.

It’s no secret that the cost of renting has increased significantly in recent years, and much of this has to do with supply and demand and the increasing costs of borrowing for landlords. The market is steadily improving but there’s a lot that landlords and tenants can do to keep costs down.

Tenant tips that may help to manage costs

Use smart meters

If the energy bills are in your name, you are entitled to choose which energy supplier you use. You may also choose to have energy metres installed. This could track and help you to reduce energy consumption. Limiting energy waste, even if bills aren’t included, will keep you on good terms with your landlord. Using energy-efficient appliances will also help.

Choose an energy-efficient property

Sometimes it’s hard to find a property that meets all your needs. As well as having the right number of rooms in the right location, you should also place importance on the EPC rating of the property you are looking to rent. The higher the rating, the more energy-efficient it will be. This will more than likely be a sure sign that the property is in good condition.

Set a budget  

A property where you feel happy is a home you can enjoy. This could mean more entertaining at home instead of feeling like you have to go out. Planning your monthly expenditure and cooking at home in a decent kitchen might create room for more savings. Having food shopping, energy usage, and entertainment budgets can inspire creative and fun ways of living.

Find the right property

Registering with a good agent so that they can send you details of properties that are about to become available always helps in your search. You can discuss your requirements and then peruse potential matches that appear in your inbox. If you choose a fully managed property, you could benefit from year-round, 24/7 maintenance and support.

Landlord tips that may help to reduce costs

Regularly review mortgage costs

As a landlord, you want to keep the cost of any buy-to-let mortgages to a minimum. Getting the right advice from a good mortgage advisor could help with this. Some landlords have reduced the size of their portfolios to reduce borrowings. Others have chosen to expand with the expectation of lowering interest rates, buying up properties that are being sold by retiring landlords.

Check tenant credentials thoroughly  

Whether you are expanding, contracting, or beginning your buy-to-let portfolio, screening tenants is vital. You do not want to place tenants in your property who may not be able to pay the rent. There are insurance policies that can help with this situation. Getting reliable and referenced tenants can reduce this risk and the potential costs spiralling.

Improve your property and keep on top of maintenance  

Making your property more energy-efficient could mean higher rents. If your property is in good condition and highly presentable, it will be more desirable. You also want to keep on top of maintenance issues before they become expensive problems. Good properties usually attract good tenants so taking this approach will help the process go more smoothly.

Choose a managed letting service  

You may view a part-managed or fully managed letting service as another expense, but it could save you money. Managing a property can be time consuming. From maintenance and inspection to referencing tenants, there is a lot to do. Having an expert team take care of things gives you more time and the peace of mind that everything will be carried out in a compliant and efficient manner.

Final thoughts  

The media portrays a negative and fraught relationship between tenants and landlords. The reality is that tenants and landlords face similar challenges that stem from the same issues in common. Often, a good letting agent can bridge the gap by helping to set better standards for both parties.

Increasing your return on investment is in your interests as a landlord. Property improvements can lead to bigger capital returns, and higher rental revenue. Here are some different improvements that could do this without breaking the bank.

Get to know your target audience  

Targeting your property to young families means improving different parts of your property than that of a student let for example. Family-oriented homes will benefit from improved garden spaces and a bigger kitchen with good seating. Young professionals and students may appreciate smart home technology. It is worth noting that going down the HMO (Home in Multiple Occupancy) route for a student let, requires significant investment, however, could increase your rental revenue significantly.

Give your property real street appeal  

First impressions do last, and if your property sets the right tone from the beginning, then your tenants, future buyers, and tenants’ neighbours will appreciate it. This will maintain a good reputation for you and your property. A weed-free front lawn, painted fence, gate and front facia guarantee your tenants a nice welcome home and can increase tenant satisfaction.

Make the most of outdoor spaces  

If your property has a large or small outdoor space, make the most of it. Nice outdoor spaces are becoming expected and add a lot of value because they are highly sought-after. Comfortable seating will make a big impact and work well with low-maintenance gardens. Leaving a little room for your tenant’s creativity so they can add a homely feeling is also important. Adding French doors or slide walls as part of bigger renovations could help increase rent significantly. Conversely, if space is extremely limited, think outside the box. For example, an eggshell chair, a vertical garden, or a matching two-seater dining set can make a big difference.

Increase the energy efficiency of the property

Anything that reduces the cost of energy for your tenants will most likely increase the level of demand for your property. LED lighting, better insulation, or a more water-efficient shower head are minor improvements which can have a major impact. Better radiators can help to modernise the appearance of rooms and also increase efficiency. If you want to make bigger, greener investments, solar panels, which can sometimes produce enough electricity to sell back to the local grid, as well as supply your property, could be a worthwhile investment.

Improve the kitchen or bathroom  

Deciding which is more important largely depends on the condition of each. But improving the property’s kitchen or bathroom will make a big impression. You may decide to complete an entire refurb on both. If your property’s bathroom and kitchen need attention and there is only enough in the budget to refurbish one from scratch, don’t worry. There are lots of less costly things you can do to make improvements. From regrouting and re-caulking between tiles, to repainting, new flooring, and better lighting. These can give a new lease of life with relative ease and will make the property in question highly desirable.

Create some space  

While most people like a feeling of cosiness, especially during the winter, dinginess is much less in demand. Knocking down walls and opting for an open-plan layout can modernise your property while creating space. More light and more room could equal more rent. It’s important to budget for bigger renovations and have the correct level of paperwork from building control. That said, wall removal is not very high in the cost scale of home improvements. If your property is furnished, create space by choosing furniture and its arrangement that works best with your property’s floor plan. Sourcing furniture on social media or through a charitable organisation could potentially save you thousands.