Your complete guide to tenant reference checks

Reference checks are one of the most important stages in the rental process for property managers, helping to keep you compliant, ensure you let to the right tenants, and increase the chances of a successful tenancy for all parties involved. 

We're breaking down everything you need to know about tenant referencing checks to make the process as seamless and efficient as possible. 

What are reference checks?

Reference checks are the series of checks and verifications that property managers carry out on prospective tenants to assess whether they are fit to rent a property. Property managers need to establish whether a prospective tenant is legally and financially able to rent their property before they can hand over the keys. They may also carry out further background checks to help build a personal profile of an applicant. As a result, many property managers will ask for a reference from a previous landlord, letting agent, or property manager. 

Why are tenant referencing checks important?

Your property is an extremely valuable asset. You need to ensure that you are protecting your investment by carrying out the proper checks. Gaining insight into a prospective tenant's rental, financial, and employment history will help you decide if they can be trusted to look after the property properly and make payments on time. You'll also become informed about any potential criminal convictions they may have had. 

What reference checks should you carry out?

There are lots of different potential reference checks you can carry out, some of which are legally required, and some of which are optional. We're breaking down some of the most common, and essential, tenant referencing checks you should consider. 

Proof of address

To establish a tenant's current address, most property managers ask for documents like a recent utility bill, council tax bill, or bank statement. You could also accept their previous tenancy agreement. 

Credit checks 

Running a credit check on your prospective tenant will help you establish that they are not in debt, do not have a poor credit history, and do not have any bankruptcy orders lodged against them. This will help you assess whether they are financially responsible.

Expenditure checks 

It is also common for property managers to ask for recent bank statements, usually from the previous one to three months. This will help you understand their financial situation and the level of disposable income they have more clearly. Using a government-backed scheme like Open Banking will help to protect all parties involved. Tenants can securely share their online banking information with third parties, helping to speed up the referencing process.

Reference from employer 

Obtaining a reference from a tenant's employer will confirm their current employment and salary. You need to establish whether your prospective tenant's income will cover the cost of the rent. Ideally, your tenant should be in regular employment, and the cost of the rent should be no more than 30% of their take-home pay. 

Reference from previous property manager

If your tenant has rented privately before, asking for a reference from their previous property manager or landlord can help you understand whether they are a reliable tenant. You'll gain insight into any missed payments or issues that arose during the tenancy. You can also identify any gaps in a tenant's rental history this way. With that being said, you shouldn't make any final decisions without investigating further, as there are plenty of legitimate reasons for gaps in rental history. Someone can be a great tenant even if they have never rented before. 

Should I ask my tenants to provide a guarantor?

If your applicant is in full-time employment and has passed the reference checks outlined above, they shouldn't need to provide a guarantor. However, there are circumstances where it is advisable to use one.

If you're renting to student tenants, it's unlikely that they will have permanent employment. They may also not have rented before. Therefore, it's sensible to ask them to provide a UK-based guarantor who can undergo the relevant credit and reference checks for them, to ensure that the rent will be covered if there's an issue.

Equally, if a residential tenant fails one of your reference checks, but you feel that they would still be a good fit for your property, you could ask them to provide a guarantor. This will offer you additional security.

Enhance referencing efficiency with Concurrent

Concurrent, an end-to-end property management solution from StuRents, facilitates integrated, in-platform tenant referencing checks. You can carry out automated reference and credit checks on both tenants and guarantors with our partners, Canopy and Homelet. You'll receive results directly into your account. Everything you need will be centralised and accessible, helping to speed up the referencing process while keeping you organised and compliant.

Want to find out more? Explore Concurrent's powerful capabilities or book a demo, today.