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Here is a fully comprehensive document outlining the rules for the tenant fee ban.
I think it's bad enough that you have to pay for tenant's referencing but even worse to have to pay for the guarantor to be referenced.
Instead of paying £20 to reference a potential tenant, I will now have to fork out £40 to cover the guarantor too. It could get worse if you are renting to joint tenants who both could require a guarantor. As a result I'd be more inclined to decline the tenant altogether in favour of someone who doesn't require a guarantor.
However I came across this section in the article above....
- - -
Q. Can a tenant opt to pay for a third-party service?
A tenant can use the services of a third party if they choose to do so. For example, a tenant may use a reference checking company, a deposit replacement product or an inventory service. However, a tenant cannot be required to do so by a landlord or agent in connection with a tenancy.
You cannot require a tenant to meet any conditions that could only be met by paying a fee for a third-party service (e.g. requiring a professional clean at the end of the tenancy). However, you may ask a tenant or give them the option to do something as an alternative to complying with a different requirement which is permitted under the ban. For example, if the tenant is required to pay a default fee under a tenancy agreement to cover the reasonable costs of a replacement key, you could give them the option to replace the lost key at their own cost and time through a third-party. Alternatively, you may give a tenant the option of using a deposit replacement product instead of paying a tenancy deposit. Where possible, we encourage landlords and agents to be flexible.
Based on the above, could it be argued that I could give the tenant an option to reference the guarantor themselves if they really want the tenancy? I may be clutching at straws here but interested to see if there is a creative way around it based on the above.
Referencing is very important to me therefore I like to carry out my own checks which I have learnt over the years At least then I know if things go pair shaped then I did all that I could.
So let's say you had two potential tenants that both required guarantors. That would set you £80. Would you be happy to absorb that cost?
Would rather that than loosing £1,000's. This is just another reason that rents will keep rising, add £20 to your rent
Disclaimer: I have no legal expertise nor am I a qualified advisor on any subject. A humble landlord using an open forum to exchange ideas and experiences.
We have so much working against us landlords at the moment that you cant afford to take on a new tenant without gathering as much info as you can . This has always been the case but even more so now with all the changes and loss of section 21. I also pay a clerk to carry out inventories with each new tenant . £80 is peanuts . The amount you could loose can easily mount up with the wrong tenant .You can never be absolutely sure but you must try and do your best .
Why would you be referencing 2 tenants? Would you be doing this if the tenant could still be charged for the reference?
You can only take a holding deposit from one tenant so you should pick the best prospective tenant take the HD and get them to fill in a detailed questionnaire so you can retain the cost of referencing (both the tenant and the guarantor) from the HD if they don't give accurate information.
"Why would you be referencing 2 tenants?" - Joint tenancy.
Yes your second paragraph is what I do. Seems to the only way to cover yourself from losses.
Tenant referencing is the start of you pairing a tenant up with your property.
It's your first chance to see if this tenant will look after your investment and give you the income yield you are looking for. It's not the bible - it's a snapshot in time and it will give you an idea as to whether the tenant looks like they will be able to afford the rent, has had any historic credit issues and also whether they can properly validate the income they say they are earning, are employed etc and if there are any Red Flags to give you concern from previous landlords / agents. Providing you do a full reference.
It looks like to me that you are trying to save what - £50 ? for the sake of paying for references on a property that is worth what £50k / £100k / £200k.
It's a very small price to pay.
Let's look at this another way - you don't pay the reference fee, put the tenant in the property, they pay the first months rent and then don't pay any more - at best it takes 3 months to evict them, they have trashed the house, you have a bill of £5000 for repairs before you can re-rent which take another 3 months to sort.
Oh and you didn't take Rent Guarantee Insurance out (just in case).
Can you go 6 months with no rent and cover a £5000 bill in this example ??
How's your £50 saving feeling right now ??
Pay the money - do a proper reference through a reputable referencing company and if you can, buy Rent Guarantee insurance. And stop worrying about £50 as the alternative is a lot lot worse !
Hi MarkYou’ve missed my point. The tone of your post alludes to me being reluctant to pay for referencing as a whole. Either you’ve misread my post or i’ve miscommunicated. I accept that I have to pay to reference regular tenants (not happy about it but it’s acceptable). I’m simply trying to see if there is a way to avoid having to pay to reference guarantors too. In my example I would have to reference 4 individuals (2 joint tenants plus 2 guarantors). That can add up quickly and I may in future simply avoid tenants that require guarantors if I have the option to.
It would be prudent to gain some legal advice if you want to look to give the tenant the option.
However, based on your post you state the legislation as :
"However, a tenant cannot be required to do so by a landlord or agent in connection with a tenancy." you then go on to say
"Based on the above, could it be argued that I could give the tenant an option to reference the guarantor themselves if they really want the tenancy?"
What are you going to do if the tenant says "No I wont pay to reference the guarantor" - it's not really an option is it as your asking the tenant to make a payment to pay for the guarantor "if they really want the tenancy".
I'm pretty sure this could be construed as a prohibitive payment, you're linking the Guarantor to the ability to gain the tenancy and what is this option you say the tenant has ??
If they "really want the tenancy" - they pay it
If they "really don't want the tenancy" what are they doing speaking to you ??
Do you see my point ?