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Tenant referencing – how do you know a tenant is all they seem?

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Finding a good tenant – one who will pay the rent on time and look after your property – is something that landlords tell us they often worry about. Get it wrong and you could be faced with unpaid rent and damage to your property. You may even have to resort to seeking repossession of the property through the courts. And you will continue having to pay the mortgage without a tenant in situ.

Tenant referencing – spotting the fakes

passport 2Thorough tenant referencing is essential. It’s an issue we take very seriously and so we use an independent tenant referencing company to ensure all the necessary checks are done. Instances of fraud have increased dramatically over the last year so the job is becoming more complex – there are websites providing fake documents such as bank statements and utility bills and these fakes are getting much better and harder to detect. Most of these companies are often registered overseas so are able to escape UK law. The City of London Police Cyber Crime unit are able to get these websites shut down however, they simply re-appear under another name so the problem is difficult to control. Vigilance is all-important.

Fraud is increasing

Our referencing company report they see at least two applicants a week supplying false information whereas a year ago this would rarely happen. They have tried and tested systems in place to spot fake documents.

An important lesson to learn is that a smart, well presented applicant is not necessarily the ideal tenant they may seem to be. We recently referenced a tenant who came across very well and thought they would be easily approved however, when the full referencing report came back it revealed that they had falsified bank statements and changed their passport. A less thorough check would doubtlessly not have identified these discrepancies and left the landlord vulnerable to non-payment of rent.

Clearly, referencing is more important than ever, so we thought it would be useful to outline how we vet tenants before they are allowed to move in.

Thoroughly checking a potential tenant

First, the potential tenant’s employment company will be checked, verifying facts such as the company status and incorporation date. If there are any concerns, extra proof of income will be requested and checks will be continually made until we are completely satisfied. On occasion, people have been found claiming to work for companies that were only formed a few days before. The applicant may be listed as the sole director of this company when in fact they have told us they are an employee of a large organisation.

There have also been instances where fake ‘letting’ companies have been set up to provide references for landlords. In one case our referencing company found that an applicant’s accountant turned out to be the applicant himself – they checked the accountant’s website and found it had only been registered the week before. Sometimes people set up fake email addresses which are very similar to those of well-known companies so checking covering emails is crucial to identifying references have come from the correct source. It really is a minefield!

Landlord references

If there are any doubts about references given by previous ‘landlords’, our referencing company will carry out a Land Registry check and if there is a problem, track down the real landlord. They did this recently and found that the applicant had given false information and was £10,000 in arrears, clearly planning to abscond. The real landlord was then tracked down through LinkedIn.

It’s all in the detail

Using a professional referencing company is a more personal approach to referencing, rather than using automated credit referencing services which simply ‘crunch’ numbers using standard processes which is how many estate agencies operate. This may be quick but if the entire process is automated, no-one will ever actually look and see what is going on in detail. Our referencing company flags anything that looks suspicious, questioning its legitimacy and looking for further evidence to back this up.  This could, for example, show up a fake reference when two identical linked names on the electoral roll or credit check show up as referees.

The Immigration Act 2014 – what additional checks will landlords need to do?

A further check will be required as part of the tenant referencing process when the Immigration Act 2014 comes into force in October. Landlords will have to check whether new tenants have the right to live in the UK at the start of a tenancy and failure to do this may mean the landlord could face a jail sentence.

In reality, reputable letting agents will already be doing this. We carry out passport checks and also ask to see the tenant’s work permit or visa, if they need one, making sure to visually match the likeness of the applicant to the photo in the passport. We take a copy of the front and back of the visa and keep it on file.

Find out more about tenant referencing

Clearly, referencing a tenant is a painstaking process but absolutely essential if you are to get an accurate picture of the tenant’s financial and employment situation and to also find out how they conducted themselves during their last tenancy. Using a professional referencing company to do this for us is an invaluable safeguard for our landlords, helping to protect their rental property and their business. But be careful as no two agencies are the same, we recently failed a tenant as his references did not stack up, but he managed to go through another agent and rent the same property and surprise surprise after the first month he paid no rent and it took the landlord seven months to get him out of the property.

For more information on referencing please contact your nearest letting branch.



About the Author

Marc has been a board director since 2001 and oversees the company’s rental operations as well as developing new business. He is instrumental in the company’s expansion and works closely with Managing Director Anita Mehra to develop its core services. Read more about Marc von Grundherr here - Read full profile