How to vet prospective tenants

Finding a good tenant – one who will pay the rent on time and look after your property – is a major concern for landlords. Get it wrong and you could be faced with rent arrears and damage to your property. Although this can all sound fairly daunting, there are several things you can do before letting out your property to ensure that the tenancy runs as smoothly as possible.

First, you will probably want to carry out reference and credit checks on prospective tenants to ensure that they don’t have a history of erratic behaviour or skipping out on rent payments. Most property owners seek references from both previous landlords and employers, while some will examine tenants’ bank statements to assess ability to pay. It’s important to make sure any documents the tenant presents are genuine as there are numerous websites that sell fake bank statements and utility bills, often promoted under the guise of “novelty” documents.

Landlords may also wish to carry out credit checks to ensure tenants aren’t prone to getting into financial difficulty; however, this will require the written consent of the tenant, cautions the National Landlords Association. Credit checks will show how many accounts the tenant has, how many addresses they are linked to and any financial irregularities. If you use a letting agent to manage your rental property, they should undertake credit and reference checks on your behalf. However, it’s worth noting that the planned ban on letting agents’ fees means agents will no longer be able to pass these costs on to tenants.

Next, it is common practice to take a security deposit from the tenant. At the moment, landlords can require a higher deposit from tenants they consider “high risk”, such as pet owners or people who cannot prove their income. But in addition to the clampdown on letting agents’ fees, the government’s reforms will also limit the amount of money landlords can request as a security deposit to the equivalent of four weeks’ rent.

When you take a deposit from a tenant, you or your letting agent must place the money into one of three government-backed deposit schemes within 30 days of receiving it. The scheme will then either hold your deposit for free, or alternatively you can retain the deposit and pay the scheme to insure it.

If your property is in England or Wales, you can use the following schemes: Deposit Protection Service, MyDeposits, or Tenancy Deposit Scheme. In Scotland and Northern Ireland, there are separate deposit schemes – see Gov.scot and NIDirect.gov.uk for more details. These schemes offer a mediation service in the event of the landlord and tenant disagreeing about deductions for cleaning, damage or unpaid rent at the end of a tenancy. Landlords who fail to protect a tenant’s deposit or give them information about the scheme they’re using risk a fine of up to three times the deposit amount.

Finally, the recently introduced “right to rent” rules require landlords to check whether new tenants have the right to live in the UK. Before the start of a new tenancy, ascertain the residency status of all tenants aged 18 and over, even if they’re not named on the tenancy agreement. Ask the tenant for original documents that prove they can live in the UK, confirm that these are genuine (the Home Office’s Right to Rent guide explains how), and make and keep copies of the documents. If you don’t do this, you could end up being fined or imprisoned.