Tenant referencing has become a routine part of letting property, but routine does not mean risk-free.
Landlords and letting agents may collect information about income, employment, previous tenancies, credit history, guarantors and sometimes much more. That information can help assess whether a tenancy is likely to be sustainable, but it also creates legal responsibilities around fairness, discrimination, data protection and record keeping.
The challenge is not simply deciding whether an applicant is suitable.
It is being able to explain what information was requested, why it was needed, how it was used and whether every applicant was treated consistently.
For landlords, that makes referencing part of compliance rather than simply part of marketing a property.
What is tenant referencing actually trying to establish?
A referencing process should have a clear purpose.
Usually, a landlord or agent wants to establish whether an applicant is likely to:
- pay the rent;
- comply with the tenancy;
- have a satisfactory previous tenancy history; and
- provide reliable information about their circumstances.
That does not mean a landlord is entitled to collect unlimited personal information.
A good referencing process gathers information that is relevant to the tenancy decision and avoids collecting information simply because it might be interesting.
Credit checks are only part of the picture
A credit check can provide useful information about an applicant’s financial history, but it should not be treated as a perfect prediction of whether they will make a good tenant.
Someone can have limited credit history for perfectly legitimate reasons.
Examples can include:
- young applicants;
- people recently returning to the UK;
- people who have never borrowed;
- students;
- people who have recently separated;
- people whose income comes from several sources; and
- applicants who have previously lived with family.
Landlords should therefore avoid reducing the entire decision to one credit score.
Affordability, income stability, references and the overall circumstances may provide a more complete picture.
Apply the same criteria consistently
Consistency is one of the strongest protections against unfair treatment.
Before advertising a property, landlords should decide what their normal criteria are.
These might include:
- minimum affordability;
- evidence of income;
- employment or other regular income;
- previous landlord references;
- identity checks;
- Right to Rent checks where applicable in England; and
- a guarantor where objectively justified.
Problems can arise when requirements change depending on who is applying.
For example, asking one applicant for six months of bank statements while asking another for none should have a rational explanation.
A written referencing policy can help.
Avoid assumptions about benefit income
Landlords should assess whether an applicant can afford the rent rather than automatically rejecting them because some or all of their income comes from benefits.
Blanket restrictions based on benefit status can create discrimination risks.
The better approach is to consider:
- total household income;
- affordability;
- reliability of income;
- other financial commitments; and
- any lawful guarantor arrangement.
The question should be:
Can this applicant reasonably afford the tenancy?
Not:
What type of income do they receive?
Do not make assumptions about families
Similar care is needed when dealing with applicants who have children.
A landlord may have legitimate concerns about whether a particular property is suitable for the household size.
Overcrowding rules, licensing conditions and the physical size of the accommodation can all be relevant.
But a blanket policy refusing anyone with children can create legal problems.
Assess the property and the household rather than relying on a general prohibition.
Guarantors need proper assessment too
Guarantors are common, particularly for students, younger applicants and tenants whose income falls outside traditional referencing criteria.
But simply obtaining a name and signature is not enough.
A landlord should consider whether the guarantor is actually capable of meeting the obligation if required.
That may involve checking:
- identity;
- address;
- income;
- financial circumstances; and
- the relationship to the tenant.
A guarantee is only useful if it has been properly created and the guarantor understands what they are agreeing to.
What exactly is the guarantor guaranteeing?
This is where disputes frequently arise.
A guarantee should clearly state whether it covers:
- unpaid rent;
- damage;
- other tenancy liabilities;
- interest;
- legal costs where lawfully recoverable; and
- any continuation or variation of the tenancy.
The guarantor should also understand whether the guarantee relates only to a named tenant or to obligations under a joint tenancy more generally.
Ambiguous guarantees can become difficult to enforce.
Joint tenancies create additional complications
Student and shared-house landlords should be particularly careful.
Where several tenants sign one joint tenancy, they may be jointly responsible for the rent.
A guarantor signing for one individual tenant may believe they are guaranteeing only that person’s share.
If the documentation suggests something broader, disputes can follow.
The wording should be clear before anyone signs.
Do not leave the explanation until arrears occur.
What happens when the rent changes?
Landlords should consider how a guarantee interacts with later tenancy changes.
Questions can arise if:
- the rent increases;
- one joint tenant leaves;
- another tenant replaces them;
- the tenancy continues for a long period;
- significant contractual terms change.
Do not assume an original guarantee will automatically remain effective in every future situation.
Where material changes occur, landlords should consider whether updated documentation is required.
Referencing involves personal data
Tenant referencing necessarily involves collecting personal information.
That means data-protection rules apply.
Landlords should know:
- what information they collect;
- why they collect it;
- who receives it;
- how long it is retained;
- where it is stored; and
- when it will be deleted.
This builds directly on an earlier Landlord Legal Update in this series covering tenant data, privacy notices and record retention.
Referencing documents should not simply remain indefinitely in an old email inbox.
Bank statements require particular care
Bank statements can reveal far more than whether someone can afford the rent.
They may show:
- medical payments;
- religious donations;
- political subscriptions;
- personal relationships;
- gambling activity;
- benefit payments; and
- other highly private information.
That does not mean bank statements can never be requested.
It means landlords should think carefully about what information is genuinely required and avoid retaining unnecessary material.
If the purpose is simply to verify income, consider whether less intrusive evidence can achieve the same result.
References need to be handled fairly
Previous landlord references can be useful, but they are not infallible.
A former landlord may provide:
- incomplete information;
- subjective opinions;
- inaccurate allegations; or
- a reference influenced by a previous dispute.
Where a negative reference materially affects the decision, landlords should consider the reliability of the information rather than accepting every statement automatically.
A factual question such as:
“Was the rent paid on time?”
is generally more useful than:
“Was this person a good tenant?”
Employment references can also mislead
Employment has traditionally been seen as an indicator of affordability.
But many tenants now have income from:
- self-employment;
- pensions;
- investments;
- benefits;
- multiple part-time jobs;
- contract work; or
- other sources.
A referencing process designed only around conventional salaried employment may therefore exclude perfectly viable applicants.
Landlords should assess sustainable income rather than simply whether an applicant has a permanent employment contract.
Be careful with automated decisions
Some referencing systems produce an automatic pass or fail result.
That can be convenient, but landlords should understand what is behind the decision.
If software rejects an applicant, ask whether there is a reasonable way to consider additional evidence.
A person should not automatically lose access to a tenancy simply because an automated system cannot understand an unusual but legitimate financial situation.
Landlords do not need to abandon referencing technology.
They should avoid treating it as unquestionable.
How long should unsuccessful applicant data be kept?
Once a tenancy has been granted, landlords may have information relating to several unsuccessful applicants.
There is rarely a good reason to keep all of that information indefinitely.
Retention should be linked to a legitimate purpose.
A landlord may reasonably need to retain some records for a period where there could be a dispute about the letting decision, but unnecessary personal information should ultimately be securely deleted.
The same principle applies to guarantor information.
Referencing agents do not remove landlord responsibility
Many landlords outsource referencing.
That can make the process faster and more consistent, but landlords should still understand what information is being collected on their behalf.
Ask:
- what checks are performed;
- what data is collected;
- whether applicants receive appropriate privacy information;
- how decisions are reached;
- how long information is retained; and
- what happens if an applicant disputes the result.
Outsourcing the process should not mean losing sight of it.
Keep a record of why the tenant was selected
Landlords frequently receive several applications for the same property.
Since rental bidding is now banned in England, the successful applicant should not simply be the person offering the highest rent.
A sensible decision record might note factors such as:
- affordability satisfied;
- references satisfactory;
- proposed household suitable for the property;
- required checks completed; and
- tenancy start date compatible with the property becoming available.
There is no need to write an essay about every applicant.
But a simple objective record can be invaluable if the decision is later challenged.
What should landlords avoid asking?
Landlords should be cautious about questions that have no genuine connection with the tenancy.
Examples could include unnecessary questions about:
- religion;
- political views;
- ethnicity;
- sexuality;
- plans to become pregnant; or
- medical information unrelated to a legitimate housing issue.
The more sensitive the information, the stronger the reason should be for collecting it.
Referencing should be focused on the tenancy, not the applicant’s private life.
Build a referencing checklist
A consistent process might include:
- define affordability criteria before applications are considered;
- use the same core checks for comparable applicants;
- verify identity and relevant tenancy requirements;
- assess income fairly;
- obtain factual references where appropriate;
- use credit information as one part of the decision;
- consider guarantors only where genuinely required;
- explain clearly what any guarantee covers;
- give applicants appropriate privacy information;
- record the reason for the final decision; and
- securely delete data when it is no longer required.
This protects both the landlord and the applicant.
Fairness and good business point in the same direction
Good referencing is not about finding reasons to reject people.
It is about identifying applicants who are likely to sustain the tenancy while treating everyone fairly and lawfully.
A landlord who uses consistent criteria, understands the information being collected and keeps proportionate records is less likely to face disputes and more likely to establish a stable tenancy.
Throughout this Landlord Legal Updates series, a recurring principle has emerged:
Good property management increasingly depends on being able to explain and evidence your decisions.
Referencing is no exception.
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Important information
NetRent does not provide legal advice. The articles represent our understanding of rental property law and are for general information only.