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TL;DR - If a tenant offers to pay for their own referencing, can you accept without repercussions?Background
So post 1st June, the tenant fee ban is now in full effect and so far, I am £40 out of pocket.
I shortlisted a potential tenant and it was clear from the outset that she required a guarantor, so I thought ok, I will only reference the guarantor and do some basic checks on the tenant myself.
However in order to take out RGI, OpenRent require that I reference both the tenant and the guarantor, knowing full well the tenant would fail.
So, after referencing, we found the guarantor has also failed on affordability checks!
The tenant has suggested another guarantor however I am reluctant to spend a further £20, so the tenant has offered to cover this cost. If I accept, am I at risk of being fined?
You can't deduct the cost from the holding deposit (unless the tenant has given you false or misleading information - and they probably wouldn't have failed if they had!)
The possible fine isn't the significant issue, not being able to use s21 is the main problem.
If you ask the tenant categorically if they have any CCJ's, IVA's, bad debts, bad credit history or any other reasons why they would fail a credit check and if they reply with a no and you get this in writing, for example via email, and if then the credit check fails there would be an argument that the tenant has provided false or misleading information and is therefore liable to a deduction from the withholding fee to cover the referencing costs.
Would you agree?
Tenants on benefits always fail credit referencing due to affordability criteria. It's nothing to do with how honest they are. In the past, the very fact that they were prepared to pay for referencing was evidence that they thought they had nothing to hide and I've accepted tenants on benefits who have only failed referencing on affordability. However, if they are not paying for referencing the less honest candidates are more likely to take a gamble on something dodgy in their records, which means landlords have to be altogether more cautious or spend a fortune paying for multple references. It's the poor-but-honest tenants who will lose out the most from this ludicrous policy.
I believe my previous comment is still applicable with regards to charging the tenant for failed referencing.
This only applies though after recording the right questions and answers in an email. Its no excuse for a tenant not to provide honest answer simply because they might be using social welfare and If your referencing process is strict and you don't allow those who cannot pass the affordability check then you wouldn't reference those people in the first place unless you accept social welfare tenants. So, rightly so you place the responsibility of passing the credit reference and affordability check back to the tenant.
Of course if this step is skipped and you overlook the affordability risk question and the tenant fails the reference then the landlord is taking the risk and in my opion according to the new regs must pay the referencing costs.
I think many of the new regulations are going to hit the people who have the least money and fewer resources available which will inevitably force those people into the lower cost converted shoe box type studios that are being converted from old office buildings in town centers. I can just see the headline in a few years down the road.. 'Tenants forced into inner town slums by unscrupulous Landlords?'
Surely as the rents inevitably rise the houses will be reserved for those who can afford it. Yes, all this is very counter intuitive by the government with unintended consequences.
As for the original question I believe you still can charge the tenant for failed referencing if you word things correctly, record everything and follow strict referencing processes.
A question springs to mind here.
Why are continuing to pursue putting this tenant into your property, when, by the sounds of it they are a quite a high risk ?
1) They need a guarantor
2) They've provided one that can't afford it
It's good that you're looking to get Rent Guarantee Insurance which is sensible though.
I am not pursuing, I am just asking a question. The tenant has proposed an offer to me and I am investigating any potential repercussions.
Yeh makes sense. Thanks for clarifying.
This now becomes another consideration for me when shortlisting a tenant.
In the past if I knew a tenant's record wasn't 100%, I could always request a home owner guarantor. They would pay for the referencing so it doesn't bother me.
However now, it will cost me £40 (tenant plus guarantor).
Another reason against accepting a tenant on benefits, bad credit, low income, etc.