UK Landlord Forum / Life

Hi all my first post.

Something has come up and I am a tad worried about it, as I am not sure that I have correctly complied with the new laws.

Prior to the new legislation, I always asked the tenant to pay the small fee (only £20) for their reference checks, making it clear that I wouldn't entertain renting to them without them being fully reference checked (i.e. their choice).  I would of course sell this to them by rightly saying that it not only protected me but the tenant too, since its an HMO and its a way of trying to ensure that all the tenants are more likely not to be a problem to each other.  This seemed to work well and I never really had any complaints, as most reasonable people understood that it was them that needed to be checked out.

I decided to have a break with no tenants for a while as I was doing work upgrading the property so my last tenant left a couple of months before the new law came into force.  I read up about the law as much as I could at the time it came in, and I thought that it was reasonably straight forward, that in future I would not be able to ask for the £20 upfront to reference check them.  No problem I thought I will just ask them to get the references explaining that I was no longer able to do this on their behalf.  Well that is what I thought!

I have had a situation recently, whereby someone paid a deposit and despite many requests for them to get references done and sent to me, they simply ignored me.  After a month I have just been asked for the deposit back, despite it being partly for reserving a particular room that they wanted, and since having to tell other possible tenants that it had been reserved.  I have since read up a little more on this because I wanted to know if I was able to make deductions for basically being messed around and having potentially losing out on other tenants who also wanted that particular room.  It turns out, apart from the maximum 5 weeks deposit (mine was much less than that) the maximum holding deposit is now ONLY 1 weeks rent, in this case just £75.  The deposit paid was £200, which I feel is fairly low and I only ask for it to give myself minimum protection, more of a good will gesture by the tenant to show willing and that they are serious about taking up a tenancy.  Had this person come forward with satisfactory references I would have simply made it a normal deposit and as I am a resident landlord banked it, as you don't need to do the government deposit scheme in such circumstances.  My concern is that I asked this person (who I now believe to have something to hide hence no references supplied) to apply to my normal referencing company for the references, believing that as I am not taking any money from them that is was fine.  However, I have now read a guide (produced since the law came into effect) on their website which states 'This means you will no longer be allowed to ask tenants to cover the cost of their own referencing. You also won't be able to charge check-in, inventory or admin fees'.   Obviously this was news to me and I have asked them to obtain references and referred them to the website.

It's a real mess and another kick in the teeth for landlords.  What am I supposed to say to them, I want references but cannot in any way tell you how to obtain them, but here is the list?  It's ridiculous.  Like any landlord I don't see why I should be lumbered with paying out for reference checks to make sure they are a good tenant, if you had 4 people going for one room are you supposed to shell out £80?  I only ever ask for a reference after meeting them face to face and getting a good gut feeling about them (albeit I obviously got it wrong with this last one!).
So, has anyone else come across this problem and what are you all doing? 

Personally there is no way I would ever let anyone into my property without being fully reference checked as I made this mistake many years ago, similar to this latest one, she paid a deposit and avoided being checked out and the only money I received was the deposit, it took me 6 months to get her out, thankfully the house wasn't too bad and I never let it again, I sold it due to the bad experience.  Obviously I learned a hard lesson, but I am now concerned about how to actually ask for a reference!  I cannot even say look on the internet because there might be an inference that you are pushing them towards referencing companies. 

I am really not sure what to do for the next person who comes to view and starts asking me questions, other than to send them an email and say this is what I need, up to you how you go about getting it!  These stupid politicians who decide on these laws have no idea the problems that they cause!

Anyway, I hope I have helped make Landlords aware of this problem and look forward to your experiences and suggestions.

All the best...Tony

Referencing paid for by the prospective Tenants was always quite a good way of ensuring you weren't dealing with tyre-kickers. The outcome was always useful too, of course.

Now you cannot do that - no matter what way you might try to get around it, if you want referencing done, then you have to go and pay a third party to do it. I'm not sure what you were trying to do by having the prospective Tenant engage their own referencing and supply you the output... I doubt that would ever fly. So your plan of sending them an email and saying it's up to you how you get it will only work with ignorant people... but that may come back to bite you. Just to be clear - you can't pass on the fees, no matter how clever you try to be.

As you mention, you can take a Holding Deposit... this has a similar effect of rooting-out tyre-kickers... but also those that are really keen but don't have any money whatsoever (I have had people so keen, but not be able to rake together £100)... you then pay for the referencing, you desperately want to have, yourself. You get something signed for the Holding Deposit that covers you retaining it if the referencing comes back unsatisfactory... and, of course, you need to not just willy-nilly referencing anyone, you gotta be choosy and you gotta ask questions up-front, like - "will referencing uncover any CCJs or things like that?" - so they have the opportunity to be honest, and shape your approach.

Why should you be lumbered with shelling-out for reference-checking your prospective Tenants... a) because you want the reference, they don't, and b) because it's the law... the fact that this is news to you only shines a light on you, I'm afraid. It was clear to the rest of us.

Thanks for your reply Hippograff, much appreciated.

With regards to your final comments, I had researched this subject before the law came into affect and at no stage did I see anything about not asking tenants to pay for their own references and indeed I have now looked at the legislation and I still cannot see anything, albeit it is written in legal speak and difficult to understand I have not seen anything that suggests this, but I am happy to accept it must be there.

I realised last night before I read your reply what the answer to this is, and I agree with your suggestion regarding the holding deposit and so long as its only one week's rent you are covered.  Indeed the legislation makes it clear that if they mislead you, then you can retain the deposit and so cover your expenses obtaining references.  So in essence the answer is 1) ask for a holding deposit of one weeks rent (the simple fact anyone not wanting to do this would suggest that they are not committed or have severe financial problems which alone will set off alarm bells 2) Ask the correct questions. I would go so far as to get them to sign something confirming what you want, ie no CCJ's, no previous rent arrears, that they will provide a landlords reference, employers reference and if they don't want to get their own credit checks they will provide bank statements so you can determine how they manage their finances yourself! 

Essentially my problem is the location of the property and this unfortunately is leading to the standard of the tenants applying, hence my reason to cut my losses and sell up.  I will hope that next time I make a better choice of area and can attract tenants that are happy to provide all the references that I require.  Personally I don't think any landlord should be made to feel bad about asking for these, its our right to know who is going to rent our properties, for most of us its our income, not just a bit of extra money.

Anyway, once again thanks for your help.

Regards,

Tony

Interestingly, and perhaps to prove a point I have just come across this, so maybe I am not the only stupid person out there misunderstanding this new legislation lol

https://www.landlordtoday.co.uk/breaking-news/2019/12/new-matrix-aims-to-simplify-tenant-fees-ban

Some other Landlords have asked the prospective Tenants to show them their credit rating... you know, while looking over their shoulder on a laptop or phone or something - seeing a service (like what used to be Noddle - now Credit Karma - or Experian or whatever) is often good enough to forgo actual referencing. I've never done this. I now explain I cannot charge for referencing - some prospective Tenants are aware, some aren't, some don't understand the concept - and if they have any skeletons in their cupboard (CCJs) and then I say I want to take a Holding Deposit (for which I have a 1-pager we sign) and then I proceed to pay for referencing. That money is lost to me either way. If the tenancy goes ahead they get their Holding Deposit back and I absorb that cost. If the tenancy doesn't go ahead because they lied then - theoretically - I would retain the Holding Deposit and no-one is able to cry foul.

I say "theoretically" because I've never had to do it. The last prospective Tenants did, indeed, come back with a CCJ... they claimed it was a surprise, I accepted this, they then told me that they'd contacted the company (a Catalogue) and set up a payment plan. I accepted all this at face value. They've not missed a rent payment so far. Fingers-crossed. At the time I used uPad's referencing - so £75 per Tenant - and that meant the £100 Holding Deposit I took would mean we all lost out if it didn't go ahead... of course, there are cheaper (and uPad is no longer around anyway).

Interesting reply and thanks for the tips, I suppose at some point you have to take an element of risk.

I now have a great downloaded document I can use to follow and I am thinking in future of going along the lines of this:

1) Explain that I need references and why and say that i am not able to proceed to offer an AST unless they agree to be fully reference checked.  I have also found out it is a requirement of my insurance so I can throw that into the mix too.

2) Advise them what I want and ask them to sign a basic document to confirm no CCJ's, nor previous rent arrears, that they will provide a previous landlords reference, that they will provide an employers reference, that they will either provide a credit check report or alternatively their bank statements to myself or any reference company requesting this information

3) If they have not been put off by 2) above (because they have something to hide!) then ask for a small holding deposit equal to one weeks rent (this is not a huge sum and if they are that keen they would pay this, personally I would explain to them that I would not ask for this unless I was happy to proceed).  I would warn them that if anything within 2 proves not to be true regarding the conversations held, that they would risk losing their holding deposit, the law seems to suggest that you can keep it in such circumstances.  I think I would make sure that this warning is within any document to be signed under 2).

4) I would then order the references once I have the holding deposit and proceed hopefully to a successful let.

Obviously its a case of trust and building up a good relationship with the tenant but my view is that if any tenant has an issue with any of this then I would suggest that it would be wise not to proceed, as for the reference checks I have now found cheaper than £20 but even £20 is not expensive if they prove to be a good tenant, I just want to make sure that they are a good tenant and not end up costing me money on references that I would not have applied for if they had been honest in the first place. 

I think if someone likes your property that much then I would hope that they would be reasonable, but unfortunately a lot of tenants believe that we are all bad people just trying to rip them off, so even asking them for something reasonable might not seem that way to them.  I suppose I will only know when I come to try it next time, but of course I will make sure I have fully read the document first before I put together anything in case it could prove to create a problem for me at a later date.  It seems more and more tenants are looking for ways to sue for compensation and all these difficult to understand compliance laws just makes that easier, its no wonder many LL's are selling up....I think in 5 years time there will be a lot less available rental properties in the PRS and it will be the fault of the government.  Some parts of the document I read last night made me livid.

Anyway thanks for your help, I won't need to do it again for a long time so have plenty of time to make sure its compliant.  I might seek advice from Trading Standards too first who are supposed to be administering these new rules.

Regards,

Tony