Here, Tom Entwistle passes on his thoughts on dealing with tenant selection and securing a good tenant-letting in the current economic climate.
Rental accommodation is in short supply, it’s a landlord’s market at the present time in residential lettings. It makes life hard for prospective tenants, so much so that some tenants are resorting to fraud – forging fake documents in a desperate attempt to get selected.
Given the shortage of good rental accommodation, particularly in the capital and in other big cities, as well as in many holiday destinations, tenants are finding it very difficult to secure accommodation when vacancies come up.
When applications for desirable lets can number into double figures, securing a let becomes a race to be first to apply, and even then becoming the lucky tenant becomes a bit of a lottery. That’s because landlords can be more selective in who they take on.
One industry tenant-services company has reported a four-fold increase in fraudulent tenancy applications over the past two years, which included doctoring bank statements exaggerating income, faking jobs and job references, and hidden criminal records.
Savvy computer wiz-kids are making it even harder to detect these sorts of fraud by using the latest artificial intelligence tools to produce much more sophisticated and complex examples of deception – some people are going to surprising lengths to deceive.
On the other side of the coin, landlords want to make sure they accept only A1 tenants every time. Consequently, for landlords, especially at a time when evictions may become more difficult with the proposed removal of Section 21, a comprehensive selection process becomes essential.
Screening and Selecting Tenants – the most important task landlords and agents do!
Screening, verifying and selecting tenants is probably the most important task a landlord or agent does. It’s both a skill and a routine that are well worth developing.
The best way to avoid problems with tenants is to avoid taking on problem tenants in the first place.
TenantVERIFY® checks, which include Credit Checks and Referencing, are very important parts of the screening process. However, this is not the whole process – see Advice on Tenant Screening, a 20 point Checklist
In these times of increasing identity fraud, it’s also very important to carry out thorough Identity Checks. To a large extent these Checks overlap with the legal requirement for landlords and agents to carry out Right-to-Rent Checks – do the Right-to-Rent Checks correctly and you have determined identity.
As a landlord or agent, you are in the best position to check identity, by checking the person in front of you against photo ID documents. Take a phone picture or photocopy of the photo ID – usually a driver’s licence or passport Identity Checks. You can also take a “mugshot” photo of the individual at the same time, for your records.
With the “Right to Rent” checks required under the Immigration Act 2014 it is more important than ever to check a tenant applicant’s ID
The successful landlord will eliminate 95% plus of all letting problems through the careful screening and selection of tenants.
Landlords are always anxious when they have a property vacant and want to fill the vacancy as fast as possible, but always remember this: no tenant at all is 100 times better than a bad one in your property, not paying rent and most likely abusing the property!
You won’t know the full significance of this statement until you have experienced the grief of a really bad tenant for yourself.
In our experience, probably 95% plus of residential tenants (working and professionals) are decent, clean-living individuals who pay their rent on time, follow reasonable rules and look after your property. It’s just the other 5% or less (one in 20 or less) that cause landlords and agents headaches and the sleepless nights.
A detailed and systematic screening process will eliminate most of these problem tenants, but you must be disciplined in the way you apply the rules – follow them to the letter and absolutely no exceptions. The first time you do make an exception for someone, Sod’s Law says you’ll regret it.
Remember, the discrimination laws. You are not allowed to discriminate (and nor would any reasonable landlord want to) on the basis of age, race, religion, gender or disability etc. However, you ARE allowed to discriminate on the merits of the individual/s as qualifying tenants. That’s especially the case if someone is trying to pass themselves off as something they are not!
If a complaint is made against you on discrimination grounds you need evidence to show that you went through a systematic selection process, and everyone went through exactly the same process, giving each applicant a fair chance to qualify and taking on the first one that does fully qualify. Application forms, interview checklists and tenant checks are very good evidence of this. Keep all confidential paperwork safe and secure in your tenant file for future reference.
Transparency and consistency are the keys to avoiding falling foul of the discrimination laws: make sure you put all applicants through the same selection process and have documentary evidence to prove it.
Here is a seven stage letting process designed to make sure you improve your chances of selecting a good tenant.
The first screening process is the advertisement. You may be surprised at this. The advertisement is a device for screening tenants, you may ask? After all the advertisement is designed to attract tenants, not repel them?
Well, there’s absolutely no sense in attracting individuals, and having them view the property, only to reject them as unsuitable, wasting your time and theirs.
Your property and its location will determine where you are in the letting market: (1) upper end (luxury) (2) middle ground (working and professionals) or (3) bottom end, being unemployed and DSS (Housing Benefit), HMOs (Houses in Multiple Occupation) and Student lets. In all three categories it might mean letting to individuals, sharers or families?
Your advertisement should be worded so as to clearly target and attract the clientele that you are looking for, whilst making it very clear to others that they need not apply.
As most landlords and agents use the local press and Internet for their advertising, it's well worth your while developing skills in writing advertising copy – take notice of how others are doing it and pick out the best examples.
You may also consider using a Letting Board. Letting boards can have links to a landlord property web page which gives full details of the property including photographs.
By having a link to a web page you save money when advertising – you can keep the advertisement short, while still giving plenty of information on your web page.
Very often your first contact with the prospective tenant is by telephone. Just like advertising, telephone technique is a skill in its own right, and again, for landlords and agents, well worth developing.
You need some pre-prepared details – an Initial Contact Checklist – ready to quickly but comprehensively describe the property and the letting arrangements: location, amenities, facilities in the property, rent and rent payments, deposit – putting the property in the best possible light as does your advertisement.
You also need a set of qualifying questions for the prospective tenant: Name, address, telephone number (home & mobile) reason for moving, employment, date required and length of stay, number of people, children? pets? smoking? credit checks and other references.
It is unlikely that anyone who struggles to answer your questions, or becomes irritated or annoyed, providing you put the questions in a polite way, will qualify for the property.
A serious tenant will be anxious to answer all your questions correctly and the whole process will save you both time and trouble later.
There are always a few who will go through the process and fail to show for the viewing. You are left waiting and fuming at the property. This is unlikely to happen if you have all the person’s contact details – a mobile number is a bonus if they get lost on the way.
Experienced landlords and agents will develop their own style when doing a viewing with prospective tenants. Be positive about the property and emphasise its good points. But don’t try to oversell, say little and let the tenant’s view.
While you’re selling the property’s merits, now is your opportunity to observe and learn about the prospect.
Tell-tale signs are there for the observing:
Very often if a prospect is genuinely interested, they will be 99% able to make a decision there and then. Depending on the demand you are experiencing and your view on suitability, consider closing the sale there and then, subject to further checks. Prospective tenants won’t want to leave it too long in case they lose the accommodation if they are serious. Are they able to fill out an application form there and then or very soon after? Can they leave a refundable holding deposit?
Often singles will bring along a relative or a friend, especially young people. You will have the opportunity to talk to the relative/friend and observe them as well. You may require a surety agreement from the relative willing to stand as guarantor – point this out to them. More and more landlords are asking for guarantors, but you must have a good guarantor agreement.
Any one of these aspects in itself may not be sufficient to judge, but you will build-up a complete holistic picture from all of them, especially when you do the credit checks and referencing.
Always have an application form with you and a receipt book for any cash holding deposits taken. You need a holding deposit agreement to spell out exactly what happens to the holding deposit if the prospective tenant defaults.
By taking a holding deposit you agree to remove the property from the market pending assessment of the application form and further checks. You can still take details of further enquiries, but the first prospect gets it providing everything is OK.
Don’t take a holding deposit which is too large because the prospect forfeits this if they back-out – one week’s rent is maximum legally. If they are successful the holding deposit is applied to the damage deposit or the first month’s rent.
Both parties will appreciate quick action particularly if the property is vacant – don’t waste days waiting for mail to arrive. If your initial reaction to the prospect is positive, take a holding deposit and pursue your checks quickly.
You must use a comprehensive application form. Inform the prospect that it is very important that all sections of the form are completed and that one form is needed for each adult occupant.
A Tenant’s Application Form (Tenancy Proposal Form) is crucial and the most important document after the lease agreement. The application form records permanently the tenant’s declaration as to identity, accommodation and employment histories, income status, references, and personal details – Smoker? Pets? Other Occupants, Children etc.
It also confirms the tenant’s understanding of the property to be let, the type and length of tenancy and basic terms, the costs and expenses to be paid and the rent and deposit required. This form is an important document which forms the basis of the tenant screening process and contract.
It should provide sufficient information to enable the landlord to contact the tenant, or his relatives, in an emergency or even if he/she absconds.
The Application Form is also very important should you have problems with the tenant later: if any information provided on the form turns out to be false the tenancy can be legally terminated under Ground 17 (Housing Act 1988 /1996) – obtaining a tenancy based on False Information.
It also clearly informs the tenant that credit checks and references checks will be made in accordance with the 1988 Data Protection Act, that data may be shared with relevant third parties, and your prospect agrees to this by signing the form.
Inform the prospect that the form should be returned as soon as possible so that references can be taken up quickly and a Credit Check carried out.
It is recommended that Credit Checks are always carried out: remember, you cannot charge the tenant any fees for this process.
The credit reference agency will have the facility to thoroughly check documents for signs of alteration and validate them through other data sources and employer, landlord referencing.
Tell your prospects that their application will be considered along with others so it’s very important that the information is complete, in order to speed up the process.
Carry out a pre-tenancy interview before you make a decision and it’s recommended that you seek three three-month’s bank statements and one utility bill. Examine the bank statements carefully for regular income and not too much in the way of payment commitments. The utility bill will confirm current residency.
Look for warning signs and inconsistencies in the information given at various stages: from initial contact, through viewing, to the application form and the pre-tenancy interview – does it all add up?
Take up references either yourself or use the credit referencing agency: Employers and Previous Landlords or Agents if possible. Always cross check telephone numbers with company details and personal referee contacts and then verify the references by telephone – you are warned here, fake references and documents do appear.
Be aware that the current landlord could want to be rid of your prospect and may give a glowing reference regardless. Employers should be more straightforward.
Make a decision. This, in the end, comes down to your own judgement of all the factors and your gut feeling about the individual. Are you a good judge of character? You’ll soon find out!
Try not to waste too much time in this process – you may lose a good prospect. Try to do as much as possible over the telephone rather than wasting days waiting for letters to arrive.
Once you have decided, inform the prospect that they have been successful in meeting your requirements ahead of the other prospects – most people will be happy and relieved that they have qualified and will want to go through with it quickly.
Don’t relax too soon though – you should still be taking enquiries until your first qualified tenant actually signs the agreement – keep your eyes and ears open!
Remind the prospect to bring along the necessary documents, identification and a Surety (Guarantor), if appropriate, to the agreement signing and the Check-in – normally done at the property, so that the inventory and meter readings can be taken. Use a good Check-in Check List.
Remind the prospect about the rent and deposit required and if you require cash – most landlords and agents would wait for cheques to clear before handing over the keys.
NEVER, under any circumstances, bow to pressure from prospects to go into the property early or without completing the check-in process, signing the agreement and paying the first month’s rent – if you do you’re guaranteed you will regret it.
Remember to inform those prospects you have turned down – be prepared to justify on factual grounds why you turned them down, first come first served. Remember to keep all your records as evidence, should you subsequently be accused of discrimination.
Use an up-to-date quality letting agreement – not a newsagent’s off the shelf one or a free download off the internet, though the government’s model agreement for a shorthold assured tenancy is available in England.
Alternatively, you can have a custom agreement prepared by a solicitor – preferably one who has some expertise in Landlord and Tenant matters. This is not really necessary with straightforward residential lettings, but it is important for commercial lettings and also when combined with a guarantor agreement.
Finally, having completed the inventory (schedule of condition which could ideally include photographic evidence) go through the contents of the agreement with the prospect. It’s a good idea to send the prospect a copy of the agreement so they can study it beforehand.
Both parties need to be clear about their respective obligations and rights.
All being well the prospect will be happy with what you have said and the agreement terms, but be prepared to pull out, even at the eleventh hour.
Make absolutely sure your paperwork is in order before signing the agreement, one tiny error on a date or other details can be disastrous where legal documents are concerned.
Verify the prospect’s identification and have an independent witness present to sign the document if you can, though this is not absolutely necessary for an assured shorthold tenancy (AST) letting under 3-years. However, it is important to have a guarantor agreement witnessed as a Deed.
The agreement should state the methods of formal communication acceptable to both parties, and these days should state by electronic means, email and SMS texts.
Finally, signing the lease and completing an inventory are not the only considerations on check-in. It’s a really good idea to have a Check-In Check-Out Checklist to do all the other checks and so you don’t forget anything.
Tags:
Comments