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Contract Holder Referencing & Vetting
Thorough referencing and vetting of potential contract-holders are crucial steps for landlords in Wales to mitigate risks, ensure a stable tenancy, and protect your property investment. This guide outlines the key checks and best practices for a robust vetting process.
Why is Referencing Important?
Referencing helps landlords assess a prospective contract-holder's suitability and reliability. It provides insights into their financial stability, their history as a tenant, and their general character. A comprehensive vetting process can help you:
- Minimize the risk of rent arrears.
- Reduce the likelihood of property damage.
- Ensure the contract-holder is respectful of the property and neighbours.
Key Referencing Checks
A robust referencing process typically includes several key checks:
- Identity Verification:
- Confirm the applicant's identity using official documents (e.g., passport, driving license).
- Credit Check:
- Assess the applicant's financial history, including any county court judgments (CCJs), bankruptcies, or insolvencies.
- This helps gauge their ability to manage financial commitments, including rent.
- Affordability Check:
- Verify the applicant's income and employment status to ensure they can comfortably afford the rent.
- Typically, a contract-holder's gross annual income should be at least 2.5 times the annual rent.
- Request recent payslips, employment contracts, or accountant's letters for self-employed individuals.
- Previous Landlord Reference:
- Contact the applicant's previous landlord(s) to inquire about their payment history, how they maintained the property, and whether they caused any disturbances.
- Be wary of references from friends or family members.
- Employer Reference:
- Verify employment details, including job title, length of employment, and salary.
- Confirm the reference directly with the employer's HR department or a verifiable contact.
- Character Reference (Optional):
- While less common for standard tenancies, a character reference can offer additional insight, though it should not be the sole basis for a decision.
Best Practices for Vetting
To ensure a smooth and legally compliant vetting process:
- Consent: Always obtain explicit written consent from the applicant before conducting any referencing checks.
- Fairness and Non-Discrimination: Ensure your vetting process is fair, consistent, and non-discriminatory. Do not discriminate based on protected characteristics (e.g., age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex, sexual orientation).
- Data Protection (GDPR): Handle all personal data collected during referencing in compliance with data protection regulations (GDPR). Store information securely and only for as long as necessary.
- Use a Reputable Referencing Agency: Many landlords opt to use professional referencing agencies. These agencies have expertise in conducting thorough checks and ensuring compliance.
- Meet the Applicant: Wherever possible, meet the prospective contract-holder in person. This can provide valuable insights that written references might not.
- Trust Your Instincts (but back them with evidence): While your gut feeling can be a guide, always base your final decision on objective information gathered during the referencing process.
- Consider Guarantors: If an applicant's referencing results are borderline, or if they are a student or on a low income, consider requesting a guarantor. A guarantor agrees to pay the rent if the contract-holder defaults. The guarantor should also be thoroughly referenced.
What to Do with the Information
Once you have completed the referencing checks, review all the information carefully.
- Assess Risk: Evaluate the overall risk profile of the applicant based on the collected data.
- Make an Informed Decision: Decide whether to proceed with the tenancy, request a guarantor, or decline the application.
- Communicate Clearly: Inform the applicant of your decision promptly and professionally. If declining, you are not legally obliged to give a reason, but it can be helpful to do so if appropriate.
