Very soon, referencing will no longer be billable to tenants. But, of course this definitely doesn't mean you should give up on referencing your tenants altogether, and here's why...
Landlord priorities: void periods vs. repairs and arrears
Void periods cost a lot to landlords (up to £1869 every 18 months in London), but an untrustworthy tenant can cost even more and can even lead to costly disputes with you as the agent. This particularly messy case saw a landlord go head to head with Foxtons after their chosen tenants trashed his home leaving behind drug paraphernalia and pornography!
Landlords care about their tenants' backgrounds and finances, so referencing is a must regardless of whether tenants are footing the bill or not.
How much do County Court Judgements matter to landlords?
A recent report reveals that almost half of British landlords would refuse a tenant based on a poor credit report, with 48% stating they would reject a tenant who had a County Court Judgement (CCJ) in the past.
However, a CCJ is not necessarily a stop sign: the individual tenant's circumstances are always important (when backed up by evidence). In fact, these judgements can show up on a tenant's file for six years, sometimes even after they have been paid off. If a tenant is upfront and honest about a CCJ, it may not automatically mean they are a bad tenant. If you choose to proceed with a tenant who has a CCJ, consider taking a referenced guarantor.
Aside from asking for a guarantor, there are other ways to check a tenant's current financial stability. Checking tenants' proof of employment and sufficient income should be a given, yet a recent report states only 22% of tenants are asked for proof of sufficient funds for the rent . Even more worryingly, this report also reveals that only half of tenants are asked for ID, directly contravening Right to Rent regulations in place since February 2016.
Landlords don't want their costs to increase
Amid predictions that the ban on tenant fees will raise costs for landlords (and rents for tenants), preliminary results from our landlord survey show that landlords are most likely to leave their current agent if they raise fees (more insights in the full results out soon).
So, landlords want to have the same assurances that their tenants are trustworthy, but they don't want to take on the costs... of course!
How can you reference tenants without increasing costs for your business after the tenant fee ban?
Fortunately, Reposit offers free referencing when you let a property using us instead of a traditional deposit scheme. We currently offer agents and landlords a full ID check and a credit check to highlight any CCJs or other past issues.