Landlords, be Diligent - Credit Reference your Tenants!

It goes without saying that the economy is on its back foot and with National employers such as Woolworths, MFI, Land Rover and BT making redundancies across the country, Landlords need to be extra diligent before signing on the dotted line of the Tenancy Agreement.

Source: J. Daines - LettingaProperty.com

So before you go ahead and sign up your tenant there are a couple of things you should be looking at to try and build a profile of your tenant and even though I would always recommend a credit check on your tenant, there are other ways to weigh up the likelihood of whether you have a "good tenant" or not.

These are the steps I would take with all my tenants:

1 ) Credit Check - Ensure that your tenant(s) provide you with an up-to-date credit check.  The tenant can visit Credit Expert or Consumer Credit Check for a FREE credit check, and if they are happy to show you the outcome of the check (as data protection will be in force) and as long as it is clear, you know that the Tenant does / does not have a poor credit history.  You will be on the lookout for CC J's (County Court Judgements).  These are unsatisfied bills that have gone to court.  Be aware that on occasion, there can be a valid reason for a CCJ, such as moving address and forgetting to cancel a bill!  If you do not seek a credit report from the tenant, you may wish to use a Tenant Referencing Agency, however, there will be a charge for this.

2 ) Employers Reference - On too many occasions, I have seen Landlords and Letting Agents accept a letter from the Employer saying that they are employed and confirmation of their salary.  This is OK, however, if you are to be thorough, you should also seek to understand the financial stability of the Employer.  My first step would be to visit Companies House and for £2.00 you can order the last years set of financial accounts.  I would suggest that you are diligent with this and do not assume that as it is a big Company, there won't be issues (take Woolies as an example).

3 ) Previous Landlords Reference - Again, be extra diligent.  It is not too difficult to falsely impersonate a landlord and write a glowing report on behalf of a tenant.  I am not saying that this happens a lot however, if you are going to be extra diligent, try and get a contact telephone number for the Landlord and call them or request a copy of the old Tenancy Agreement.

4 ) Guarantor - there is no line that must be crossed before you can ask for a Guarantor - most letting agents will ask for a Guarantor agreement if the tenant is either a) unemployed b) they have CCJs or c) are on Local Housing Allowance or Benefits. You can ask for a Guarantor to sign an agreement to say that they will be responsible for the tenants financial and performance liability of the tenancy agreement.  This will give you extra protection.

5 ) Rent Guarantee and Income Protection -  For as little as £50 for 6 months, it is absolutely worth it.  To know that your rental income is guaranteed during the period of your tenancy agreement is an absolute must.  Most of the companies that offer a Rent Protection scheme also throw in a few thousand pounds for Legal expenses too!

6 ) Three months rent in advance - if you can. If you don't ask, you don't get.

7 ) Request a Security Deposit - I am sure that you are aware by now that all deposits must be placed with a Government Backed Deposit Scheme otherwise you could be slapped with a fine 3 times as much!  I would always ask for 6 - 8 weeks deposit, NEVER one month, as the temptation for the Tenant to use the deposit as the last months rent is too great.

8 ) Professional Property Management Software - Do it right!  Even if you only have one property to manage, a lot of these software providers also include tenancy agreements, letters, reminders etc.  I am impressed with Property Portfolio Software and who also have the backing of the RLA (Residential Landlords Association) and PropertyResidential.co.uk

9) Get the right level of Buildings and Contents insurance -  I read somewhere that the majority of landlord and tenant insurance claims result from wine being spilt on carpets.  Ensure that you choose a Landlord insurance provider that covers property that is occupied by tenants.   And as an extra precaution, check to see what level of unoccupied cover they offer as most insurers only provide 30 days.

No one has a crystal ball and it is always going to be difficult to "judge a book by its cover" so please take all the necessary steps to ensure that the tenant you have chosen for your property is the right one, even though you just want the property let!

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