GL #2: How to select good tenants


These are the show notes for Episode 2 of Good Landlording. This week, Richard and Suzanne discuss the important topic for landlords of how to select good tenants.

In this episode, they go through the processes that they both use to select good tenants, sharing practical tips about how they go about selecting good tenants the right way, without falling foul of the law. This includes the tenant application forms they use, the rules on holding deposits, what selection criteria you can and can’t use for tenants from a legal perspective, and how to vet tenants. 

Next week, Richard and Suzanne broach the big subject of letting agents in the first of three episodes on letting agents: GL #3: Guide to selecting good letting agents.

>> Submit a question: Click here for question form

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Tips to select the right tenants

Suzanne and Richard discussed affordability and red and green flags in Episode 1 – What makes a good tenant?

The next step is to select the right tenants from your shortlist of applicants who have all qualified as good tenants on paper. If you are looking for tenants yourself using an online platform, you should pre-screen tenants for suitability before arranging viewings, so you can weed out time-wasters.

Here are 5 practical tips to help you choose the right tenants.

1. Are the tenants right for your property?

Tenants might be good on paper, but they need to be right for the property. For instance, a family for a family sized house and a single person or a couple for a bedsit.

2. Choose long-term tenants

Long-term tenants are great for landlords as they help reduce void periods, the cost and hassle of preparing the property for letting and the process of finding new tenants.

Offering 2-3 year fixed terms with rent review clauses is a good option. However, be aware that landlords can’t use section 21 during a fixed term, unless there is a break clause, which means that if there is a problem with the tenants during the fixed term, the landlord would need to use section 8 to evict the tenants.

3. When is it reasonable to accept or refuse pets?

The question of whether to allow pets is tricky in flats. It comes down to reasonableness. Whereas it might be reasonable to allow a dog in family house (not an HMO) with a garden, it’s riskier in a small flat.

4. Are the applicants reasonable with good communication skills?

Good tenants aren’t just tenants who can afford the rent. The relationship will be more harmonious if they are reasonable and have good communication skills. For instance, they won’t call up asking for the landlord to change a lightbulb (that’s their responsibility anyway), and are more likely to report maintenance issues such as slow water leaks before they escalate into a major repair because of the damage from the leak.

5. Why landlords should be involved in tenant selection

Even if landlords use letting agents, we both recommend being involved in tenant selection, by meeting the shortlisted candidates either in person, or via Zoom. This helps landlords get the measure of the applicants, to see whether they’ll be good tenants in practice.

Why it’s important to have a tenant application form

uzanne asks tenants pre-screening questions before agreeing to book viewings, which enables her to weed out unsuitable applicants and time wasters. It’s easy to do this on the OpenRent platform. (Click here for the screening questions Suzanne uses for an example).

Once you have a preferred candidate that you’d like to ask for a holding deposit and take through to referencing, ask them to fill in, sign and date a tenancy application form before moving forward.

This enables landlords to obtain the information they (or their agent) need to assess their application and carry out full referencing checks. If there will be more than one person living at the property, you should ask each of them to complete the form, even if they’re not contributing to the rent.

The completed form serves as a written record to help you check their credentials before proceeding to credit checks. As they are making representations and signing the form, if it turns out the information was untruthful, you will have grounds to withhold their holding deposit.

As the application form that Suzanne uses is very detailed, she waits until she has decided who she would like to ask for a holding deposit and take them through to referencing before asking them to fill in the form, as this means she avoids having people’s personal data unnecessarily.

Once you receive the completed application form from the applicant, go through it closely to see if there is anything that makes you conclude you don’t want to rent to them after all. Doing it at this stage means you can reject the applicant before you ask for a holding deposit or spend money on referencing. It also means you won’t waste time and can go straight to the next applicant on the list.

Application forms can also be useful in proving to your insurer that you carried out proper checks in the event of a claim for damage to the property by the tenants.

Letting agents should ask applicants to complete an application form if you use them to find tenants. As agents work on behalf of landlords, you are entitled to have a copy of the application forms for your records, so long as you’ve registered with the Information Commissioner’s Office.

Some landlords ask all applicants to fill in the form before they view a property. Suzanne doesn’t recommend this as the landlord will receive personal data they don’t strictly need. She therefore only asks applicants to fill in her comprehensive application form once she has made a preliminary decision to go forward with an application, as this avoids receiving personal information about applicants who, for whatever reason, don’t proceed to the next stage. You can download Suzanne’s comprehensive tenancy application form here.

Alphaletz has a shorter tenancy application form, which Richard uses as a checklist when interviewing prospective tenants. He asks all applicants to complete it (or uses it as a checklist when speaking to applicants).

As you can see from the slightly different approaches that Suzanne and Richard take, there no definitive application form for tenants. Here are the forms they each use. Usual disclaimer – use at your own risk.

>> Useful Resource: The Independent Landlord tenant application form

>> Useful Resource: The Alphaletz tenant application form

Holding deposit rules 

A holding deposit is a refundable payment which applicants make to show their serious intent to rent a property while referencing takes place and the tenancy agreement is prepared. In return, the landlord or agent reserves the property for them. Landlords and letting agents can’t take more than one holding deposit at a time, and must not show any further applicants the property unless the application is unsuccessful.

Once an applicant pays a holding deposit, landlords and agents have two weeks to enter a tenancy agreement with the applicant (the “deadline for agreement”, unless they agree an extension deposit with the tenant in writing. If not, they must return the holding deposit.

The Tenant Fees Act 2019 prohibits holding deposits from being more than one week’s rent.

The landlord or agent can keep the holding deposit if the applicant provides false or misleading information and this materially affects their suitability as a tenant. This means that the landlord or agent must be able to prove that the applicant actively lied. For instance, if they state on the tenant application form they’ve never had CCJs, but a credit check shows they did.

The holding deposit can also be withheld if the applicant decides not to go ahead with the tenancy of if they fail the right to rent check. It can’t be withheld if the applicant “fails” referencing; only if they provided material false or misleading information. 

The letting agent can only keep the holding deposit if this is clearly stated in their terms and conditions. Otherwise it should be remitted to the landlord.

How to vet tenants 

It’s really important not to cut corners on vetting applicants, as applicants often don’t tell the whole truth, and some actively lie.

Suzanne and Richard both use the OpenRent comprehensive referencing for £20 per person (affiliate link), although Richard also uses the Alphaletz credit checks platform which has a dashboard. The OpenRent referencing includes a credit report with previous addresses, any previous CCJs or IVAs, an employer reference and a landlord reference.

It’s advisable to speak to the current and previous landlord to cross check. Social media and Google can be a very useful resource to verify information, and to see what information applicants have shared online that may shed light on whether they are likely to be able to afford the rent. If there are concerns about the applicant’s employment, landlords can ask for the HR department to send the employment contract. Likewise, the last 6 months’ of bank statements can be very useful to determine whether someone is living within their means or is in debt.

Landlords should meet the tenants, even if they use agents, to get a feel for what the tenants are like. Whilst it’s best in person, a call on Zoom or WhatsApp is a good alternative.

What the law says about selection criteria for choosing tenants

Landlords don’t have complete freedom to choose or reject whoever they like. It is illegal for landlords to discriminate against applicants because of their nationality, race, religion or disability. It is also illegal for landlords to reject applicants based on their sex, sexual orientation, or “gender reassignment”.

The Renters Reform Bill includes provisions that will make it illegal to discriminate against applicants who have children or who are benefit claimants. 

Don’t base your selection on discriminatory criteria. Not only will they have no bearing over whether the person will be a good tenant, but it’s against the law.

Golden nugget

What should landlords do if they have more than one set of applicants who tick all the boxes?

Suzanne chooses the applicants with the greatest need, for instance a young family who have been served a Section 21 notice. Richard will choose the applicants who are likely to stay the longest.

Credits

Music: Kevin MacLeod of Incompetech. Licensed under Creative Commons.

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2 thoughts on “GL #2: How to select good tenants”

  1. Like the selection process tips. BUT what would you do if you two equally strong tenants wanting to rent the property at marketed price for similar tenure and were similar in profile?

    Would you apply a ‘best and final’ offer on the property i.e Similar to what happens in the property sales environment where two buyers offer the same asking price?

    1. Personally (and this is Suzanne speaking), I would give it to the candidates who had the most need of the property, and wouldn’t get them to effectively provide sealed bids. I want my tenants to stay a long time, and part of that is them being able to afford the rent. I offer my properties for what I think is a fair rent, and don’t accept higher bids.

      If they both had equal need, I would go for the ones I think have the stronger local links and who I think will stay longer.

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