Understanding tenant reference check costs

Finding the right tenant for your property is super helpful because it can save some pretty frustrating headaches during the tenancy. Tenant referencing is vital in reducing the chances of problems occurring, but how much does a tenant reference check cost?

This advice article will breakdown the costs associated with comprehensive tenant referencing by explaining what landlords can expect to pay, what services are included and whether or not the tenant reference check costs can be passed to tenants. We’ll also touch upon DIY referencing with third-party service providers.

What is tenant referencing?

Tenant referencing is very similar to the kind of reference you’ll experience when applying for a new job. Although not mandatory, landlords will likely want to initiate a tenant screening process to try to minimise problems later down the line. Part of that process includes getting a reference from a previous landlord.

It will help the new landlord understand what to expect from the tenant. This will include various categories, including tenant behaviour, right to rent, and whether the tenant is likely to pay their monthly rent on time.

How much does a tenant reference check cost? 

A tenant reference check costs anywhere from £15-50, depending on the level of detail you request and the type of company you opt for. You should shop around and get quotes from at least three companies to check the various packages. This will allow you to make sure you’re getting the best deal for you.

Different packages are available, primarily based on the level of detail you want. They are usually split into three different types: basic tenant referencing, comprehensive tenant referencing and fast comprehensive tenant referencing.

Different options are available if you need to reference an international tenant or are working as a commercial landlord and want to find information on a business. The tenant reference check costs are usually slightly higher for those options. The descriptions below are based on TenantVERIFY, with other companies offering similar options.

Basic tenant referencing

A basic tenant reference check costs around £15-20 and creates a profile of the tenant’s financial and residential history. The service includes the right to rent check to ensure you comply with the immigration act of 2014.

The package usually includes debts, defaults, rent arrears & repossession checks, as well as providing a six-year credit history check. This should be enough to paint a picture of the potential tenant, but you may wish to go further to get some additional details from the tenant’s old landlords.

Comprehensive tenant referencing

Comprehensive tenant reference checks cost around £30-50, often depending on the service speed you opt for. It will include everything in the basic package and then add a significant layer of detail. For example, TenantVERIFY includes two reference checks with an employer and a previous landlord. 

Speaking to a previous landlord (if possible) is very helpful. This part of the comprehensive tenant referencing allows you to get an insight into how they have behaved previously as a tenant, if they paid their rent on time, and whether they treated past properties with respect. 

Getting this information will give you an idea as to how much maintenance work will be required, whether you have a guaranteed source of income from the monthly rent to cover your outgoings, such as mortgage repayments, and if you will have to deal with problems affecting the neighbours.

Knowing a tenant hasn’t caused problems in the past doesn’t prevent it from happening to you, but the comprehensive tenant referencing will give you peace of mind at the start of the tenancy.

Can landlords pass tenant referencing costs onto the tenant?

No, landlords are not allowed to charge tenants for the tenant reference check costs. The Tenant Fees Act 2019 made this illegal to help reduce tenants’ costs when looking for a property. If landlords are found charging tenants, they can face a penalty fine of up to £5,000.

How to save on tenant referencing costs

Landlords may wish to save money themselves, especially with the prospect of a void period. Landlords can save money on tenant referencing costs by simply cutting out the third-party and doing it themselves.

Advantages of DIY tenant referencing

• Cost saving: you will not need to include a third-party service provider
• Getting a feeling of the tenant yourself
• It could help build the foundations of a positive tenant-landlord relationship

Disadvantages of DIY tenant referencing

• It will probably take you longer
• You might miss important details, especially if you are new to property investment or are really busy
• This could lead to financial losses if details are missed

Even if you have a detailed tenant reference check, things can go wrong. Get as much coverage and protection as possible with landlord insurance. We have the expertise to find the best landlord insurance deals that are suitable for your needs as a landlord. Contact us today at 01788 818 670 for a quote, and don’t forget to visit our resource centre for more information on how to be a successful landlord.