Tenant employment verification best practices for landlords

If you are the kind of landlord who manages your own properties, you’ll know that there are many different responsibilities you’ll have to ensure that the right tenant moves into your property. Tenant employment verification is one of the many tasks you’ll need to undertake to ensure this. 

While there are many important hats to wear as a landlord, one vital element to this is that employment verification for tenants is arguably the most important one. If you skip this step or rush into it, you may cost yourself monthly rent, which could easily lead to an eviction process needing to be started.

What is the aim of tenant employment verification?

There are two main elements to employment verification for tenants: 

1. Confirm the stated income is accurate: Does the tenant’s income match what they claimed it was in the application?
2. Ensure income stability and affordability: Is their job secure, and can they comfortably afford the rent after other living costs? 

A good way of being able to work out of a tenant can afford to pay your rent is if their gross annual income is at least 2.5-3 times the annual rent. For example, if you’re charging £1,000 pcm for your rental property, the applicant should ideally be earning £30,000-£36,000per annum. 

How to verify tenant income

As a landlord, you need to remember to conduct due diligence at each stage of the employment verification for tenants process. Here’s how: 

Documents to request from the tenant

There are certain documents you should make sure to request from your tenants as part of the tenant employment verification process. 

• Payslips: ask for 3-6 months of original payslips and look for consistency in income and deductions, as well as employee details. 
• Employment contract: a copy of the applicant’s employment contract can also confirm their job title, start date and if their position is permanent. 
• Bank statements: Request the last 3 to 6 months of bank statements showing regular salary credits that align with the payslips. This will verify the actual money being paid into their account.

How to verify legitimacy (from the employer)

• Contact HR/payroll directly: Always push to speak with the HR department directly. 
• Use official contact details: Look on the website of the company to get their official contact details. 
• Obtain tenant consent: Make sure that you have written consent from the tenant allowing you to contact their employer. 

What to confirm:

• Tenant’s full name.
• Employment status (full-time/part-time, permanent/fixed-term).
• Job title.
• Start date of employment.
• Gross annual salary.
• Confirmation that the tenant is not currently under notice of termination.

How to verify tenant income for self-employed tenants

This may be a little trickier due to potential fluctuating income and a lack of standard payslips, but there are still documents you need to request, such as: 

• Tax returns (SA302 or tax year overviews): Request copies of their SA302 forms or tax year overviews from HMRC for the past 2-3 tax years. 
• Accountant’s letter: A formal letter from a certified or chartered accountant that confirms the tenant’s gross and net income for the past 2-3 years. 
• Business bank statements: The last 6-12 months of their official business bank statements to show consistent income and outgoings.
• Business accounts: Copies of their formal business accounts for the last 2-3 years if they operate as a limited company. 

There are a few things you should look out for when you’re undergoing tenant employment verification, such as patterns of stable income over several years. Be sure to also focus on their net income when assessing affordability, and make sure you assess the nature of their business, too. You can also request a guarantor for self-employed tenants. 

Verifying overseas tenants

As you may already know, overseas tenants will pose unique challenges when it comes to documentation and communication, so here’s what you can request: 

• Overseas employment contract/payslips: templates and formats may differ, but this is still crucial to request
• International bank statements: The last 6-12 months of bank statements showing income credits.
• Visa/Right to Rent: You must verify their Right to Rent documentation in person before the tenancy begins. This includes their visa, biometric residence permit, or passport. Failing this is a serious legal breach.
• Proof of UK bank account: Applicants need to be in the process of, or already have, a UK bank account to pay for rent.

There are a few ways in which you can safeguard yourself as a landlord taking on an international tenant: 

• In-country guarantor: Speak to the applicant about an in-country guarantor who can easily be referenced and contacted if necessary.
• Upfront rent: Consider requesting a larger amount of rent upfront for international tenants. 
• Video calls: Use video calls for initial interviews to get a better sense of the applicant.

Addressing red flags

There are a few things you’ll need to look out for when taking on international tenants. For example, if they are reluctant to provide you with any documents, this can prove as an issue. Also, if there are documents that you notice have been tampered with, this is seen as a major red flag. 

Similarly, international tenants who only provide you with generic email addresses or mobile numbers can also pose a risk, and if you notice that there are discrepancies in the information that has been provided to you, you’ll need to proceed with caution. 

What if the income isn’t enough?

If a tenant’s income doesn’t quite meet your affordability criteria, you have options:

• Guarantors: A guarantor is an individual who contractually agrees to pay the rent and cover any damages if the tenant defaults. You must reference the guarantor just as thoroughly as the tenant, assessing their income, credit history, and identity.
• Upfront Rent: As mentioned for overseas tenants, you can request several months’ rent upfront. Be mindful of regulations around maximum deposits and any specific rules about advance rent payments.

It may seem pedantic or time-consuming to make sure these tenant employment verification processes are implemented; however, this is your safeguard against losing your rental income and screening for tenants who are reliable and trustworthy. Now, you’re able to make informed decisions. 

For more information on how to protect your property as a landlord, be sure to visit our resource centre.  At CIA Landlords, we have the expertise to find the best landlord insurance deals that are suitable for your needs. Contact us today at 01788 818 670 for a quote!