Tenant References and Guarantors
Before granting a tenancy, an agent should be confident that the tenant can and will pay the rent.
Tenant References
References must be obtained on applicants to establish certain facts about them including, for example, they are who they say they are, their employment is as stated and they are able to afford the rent.
The tenant application form should contain a clause whereby the applicant gives consent to their employer, bank and others being approached for a reference.
References from the following sources should be obtained.
Credit Check
Obtained from a credit reference agency or through a tenant referencing company. This will check the applicant's credit history, identity and whether the applicant has adverse data such any county court judgements against them.
Landlord Reference
Contact the previous landlord (where there is one) to establish amount of rent paid, whether there was any arrears, condition of the property at the end of the tenancy and whether they complied with their tenancy terms.
Employer Reference
Contact the employer to confirm the applicant is working for the company, their position, length of employment, current salary and permanency of role or contract.
Accountant Reference
If the applicant is self employed contact their accountant to verify their income.
Corporate Applicants
If the potential tenant is a company, agents should obtain references on the company to assess their creditworthiness. If the company is well known, the landlord may not be concerned about obtaining references. If this is the case, the agent should ask the landlord to sign an indemnity regarding this.
Guarantors
Some applicants may be unable to provide suitable references due to having a poor credit rating, for example. In this case, the landlord may decide to go ahead with the tenancy providing the applicant has a guarantor i.e. someone who will take on the tenant’s debt relating to the property if they fail to pay it.
A guarantor must be resident, and have a bank account, in the UK and be referenced to ensure they are financially capable of taking on payment of the rent.
Guarantor Agreement
A guarantor agreement may require them to pay rent arrears only or may require they guarantee against any financial loss the landlord might suffer. Agents must ensure they have the guarantors signed documents in their possession prior to the start of the tenancy and must ensure a copy of the tenancy agreement was given in time for the guarantor to seek advice if necessary prior to signing.
Applicants Without References or Guarantor
If an applicant is unable to provide full references or a guarantor the landlord must be fully advised so they can make a decision about proceeding. The landlord should sign an indemnity relating to the fact that references could not be obtained stating that the landlord is aware of the situation, wishes the tenancy to proceed and will not hold the agency liable if the tenant does not pay the rent or otherwise breaches their agreement.
An applicant may, of course, be able to pay the full fixed term rent in advance. If so, at the end of the term the tenant would have to pay a further full term in advance to renew or references should be taken.
