Hands-on approach

Although many agents do outsource their tenant referencing service to a third-party, there are others who prefer to keep the work in-house.

“We have so far avoided the temptation to outsource referencing and continue to undertake the task ourselves,” said Mark Sandall of Andrew Granger & Co. “This means we are able to monitor the situation more closely and build up a better relationship with the applicant. We can also see how the applicants conduct themselves through the referencing process to ensure they are suitable.”

Charlotte Baker of Belvoir in Melton Mowbray concurred. “We do our referencing in-house as we see it as an opportunity to really assess the tenant. We find it more revealing than a ‘yes or no’ from a referencing company, although we do use Experian for the credit check.”

Rent guarantee

For many landlords, their biggest fear is not being paid rent. Yet, despite the recovering economy, Shelter is warning that over 215,000 homes in England are at risk of eviction or repossession, equating to 4,140 households under threat every week, mainly because tenants are struggling to pay their rent, reinforcing the need for tenant reference checks.

“We also perform our own internet search on potential clients and use Lonres to ensure there is no detrimental information about them.” Nicky Ennor-Glynn Strutt & Parker

“Due to the high volume of repossessions, referencing procedures are even more important as there are tenants out there who are giving false information,” said Mike Howard of Mistoria Lettings.

Aside from tenant references, there are many companies offering a range of rent guarantee or loss of rent and legal expenses insurance schemes, to protect landlords against tenants who fail to pay their rent.

It is usually a condition of the rent guarantee insurance policy that the landlord from a specialist tenant referencing firm, before the start of a new tenancy.

Mandy Stevenette of Stevenette & Co said, “If you want to provide a rent guarantee, as part of a management service, it [tenant reference] is part of the requirement for that.”

Credit checks

Rosalind Florence, Head of Lettings at Glentree, who described tenant referencing as “much the same as if you are taking out a mortgage”, said that her firm use the services of a credit rating agency who check all aspects of a prospective tenant and then issue a credit rating.

“If it is an A rating then the credit rating agency will offer rent insurance cover, that is, if the tenant defaults the insurance cover will pay the rent until the tenant is evicted,” said Florence. “If the rating comes up as a B the tenant will be asked to supply a guarantor and the whole process starts again.”

“If the tenant cannot supply adequate references, an agency credit check will be taken out to ensure they are who they say they are and then the tenant will be asked to pay all the rent in advance,” she added.

Florence insists that it is everyone’s interest – agent, landlord and tenant – to ensure that the tenant is in a strong financial position” to meet their rent payments, proving a platform for “a happy relationship between all three parties”, but at what cost?

Tenant fees

The amount that agents charge tenants for things like tenant referencing has been a topic of hot debate in recent months, with the Labour party going as far as actually trying to ban agents from charging tenant fees by forcing a vote in the Commons in May, which they lost.

Although Labour’s policy was defeated by opposing MPs, the issue of tenant fees simply will simply not go away, with Shadow Housing Minister Emma Reynolds still insisting that more should be done.

So we asked a number of agents to explain how they recoup the cost of the tenant referencing  service and the majority said that they generally charge tenants a ‘reference charge’ or include the cost as part of a general ‘administration fee’, although some agents do also charge landlords, albeit usually a smaller amount.

“Our initial ‘tenancy set up’ charge is the tenants bundled up contribution towards the cost of referencing, tenancy agreements, assisting in setting up of utilities and general administration,” said Howard Cundey’s Arlo Risby. “The landlord also makes a smaller contribution toward the  administration of £100.”

W.A.Ellis charge a reference fee of £50 + VAT per person which is payable by the tenant. “This covers W.A.Ellis applying for and verifying individual references on the tenant, and also a credit check carried out by a referencing firm, LetRisks,” said Lucy Morton, Senior Partner at W.A.Ellis.”

Among the fees that they charge, Glentree ask tenants to pay for the credit check which costs approximately £25.

Rentify does not charge tenants for referencing. The company offers two services: a free credit check and comprehensive background references which cost £15 + VAT per tenant, paid for by the landlord.

Room for growth

With a growing number of people struggling to buy property, demand for rental homes will almost certainly rise, with the Intermediary Mortgage Lenders Association forecasting that 16.9 million homes, or 51 per cent, of all 33.1 million residential properties in the UK will be privately or socially rented by 2032, placing greater importance on the tenant referencing procedure in the process.

Some key referencing suppliers:

• Agent Assure www.agentassure.co.uk
• Assurant Let www.assurantintermediary.co.uk
• Call Credit www.callcredit.co.uk
• Endsleigh www.endsleigh.co.uk
• HomeLet www.homelet.co.uk
• LetRisks www.letrisks.com
• LetAlliance www.letalliance.co.uk
• Maras www.maras.co.uk
• Rentguard www.rentguard.co.uk
• SourceLet www.sourcelet.co.uk

Contacts:

• Belvoir www.belvoirlettings.com
• Strutt & Parker www.struttandparker.com
• Glentree Estates www.glentree.co.uk
• Stevenette and Co www.stevenette.com
• W.A.Ellis www.waellis.com
• Howard Cundey www.howardcundey.com
• Mistoria Lettings www.mistorialettings.co.uk
• Residential Landlords Association www.rla.org.uk
• Andrew Granger www.andrewgranger.co.uk
• Century 21 UK www.century21uk.com
• Rentify www.rentify.com