Tenant referencing is possibly the most important step in property management, as it’s the only real opportunity to evaluate a potential tenant before they sign a rental agreement. A thorough screening process can help landlords and letting agents avoid future issues by identifying unreliable tenants early on.
Despite its importance, many letting agents outsource tenant referencing to third-party companies, often due to a lack of in-house expertise or resources. Outsourcing can also provide an added layer of protection – if a tenant causes problems in the property, the responsibility falls on the referencing company rather than the letting agent or landlord.
While this sounds like a convenient solution, outsourced referencing often comes with its own set of challenges. That’s why we decided to bring tenant referencing in-house at Purseglove Property as part of our property management service.
Read on to learn more about our experience with third-party referencing companies and why we created a bespoke service that goes above and beyond industry standards.
Our experience with third-party tenant referencing
When we first started Purseglove Property, we trialled several third-party tenant referencing companies. However, we quickly ran into issues that made us rethink our approach.
Administrative headaches
The referencing providers we used bundled their services with extras like nil deposit schemes and rent guarantee insurance. While these sound great on the surface, they came with restrictive terms and conditions that made them difficult to rely on.
For example, the rent guarantee insurance policies had complicated requirements that agents had to follow before making a claim. Some of these were unrealistic – such as proving multiple unsuccessful attempts to contact a tenant or following rigid timelines that didn’t fit real-life situations. If even one step was missed, a claim could be denied, making the protection feel more like a false sense of security than a real safety net.
In practice, these conditions created extra admin work for both our agents and landlords, making the process more complex rather than simplifying it. Instead of reducing risk, they left properties exposed to financial losses when the policies didn’t pay out as expected.
Slow turnaround times and lost opportunities
Another major issue we faced when outsourcing our tenant referencing was the slow processing times. Submitting tenant details and waiting for a response could take several days – sometimes even longer!
In a fast-moving rental market, especially with HMOs, delays like this can be a dealbreaker. Tenants often want to move in immediately after viewing a property, and if referencing drags on, they’ll go elsewhere. This leads to unnecessary void periods and missed opportunities for both landlords and tenants.
Rejecting good tenants (and approving bad ones)
Our biggest frustration with third-party referencing, however, was its rigid, one-size-fits-all approach. These companies relied on automated systems and strict affordability criteria, which left little room to assess individual circumstances.
For example, when referencing tenants for HMOs, they applied financial formulas designed for single-let properties. These calculations didn’t factor in that HMO rents often include bills, meaning tenants were rejected on affordability grounds, even when they could clearly afford the rent.
At the same time, some applicants who had been living with family or friends (rather than renting) were automatically approved without further checks. This meant that tenants who might have been avoiding bad references from previous landlords were slipping through the system unnoticed.
Building a more effective in-house tenant referencing system
After dealing with these issues repeatedly, we realised the system wasn’t working in the best interests of our landlords or our business, so we decided to take matters into our own hands. We developed our own in-house tenant referencing system.
To do this, we analysed what wasn’t working with the third-party providers and then designed a more structured, efficient and flexible approach. We created detailed checklists covering credit checks, employment verification and affordability assessments, but instead of relying on a rigid formula, we now assess every tenant on a case-by-case basis.
If a tenant doesn’t quite meet the affordability criteria, we work with them to find solutions – like securing a guarantor – rather than rejecting them outright. This helps us avoid losing great tenants while still protecting landlords’ interests.
Going beyond standard tenant checks
We’ve also introduced a deeper investigation into tenant history. If an applicant claims to have been living with family or friends instead of renting, we don’t just take their word for it. Instead, we ask for proof, such as a copy of their friend’s tenancy agreement or evidence of property ownership. This extra step ensures that we’re not missing any red flags.
We also go beyond standard background checks by reviewing social media profiles and local court records to gain a more complete picture of prospective tenants. While no referencing system can be 100% foolproof, this extra scrutiny helps us spot potential issues before they become a problem.
Why in-house referencing works better
Since bringing our referencing process in-house, we’ve seen a noticeable improvement in tenant quality. Issues with tenants have become much rarer, and when problems do arise, they’re usually linked to changes in circumstances mid-tenancy rather than an oversight during referencing.
With our refined approach, we’re confident that we’re now placing tenants who are a strong fit for the properties they rent. Our landlords also have greater peace of mind because their tenants have been thoroughly vetted rather than just run through an automated system.
Purseglove’s Rent Protection Scheme
Because we believe so strongly in our referencing process, we’ve also introduced a Rent Protection Scheme as part of our property management service. This scheme provides landlords with added security while making renting more accessible for tenants.
Instead of paying a full 5-week deposit upfront, which can be prohibitive for some people, tenants can opt into our Rent Protection Scheme and move in with a smaller deposit. If they default and leave with arrears, we pay out the equivalent of a 5-week deposit immediately to the landlord and recover the full amount from the tenant later. We don’t use third-party nil-deposit schemes (which are looking for reasons to not pay out), but our landlords are financially protected and tenants still have the option of a more affordable way to move in.
By offering this flexibility, we can attract a wider range of tenants. This helps to fill properties faster, reducing void periods for landlords while making things easier for tenants. It’s a win-win solution that aligns with our commitment to creating a more efficient and inclusive rental market.
Choose Purseglove for property management in Nottinghamshire
Tenant referencing is too important to be left in the hands of rigid third-party providers. Our experience has shown that a personalised, in-house approach leads to better tenant selection, faster turnaround times and fewer long-term issues.
By taking the time to properly assess each applicant, we’ve created a system that works better for both landlords and tenants. And with the added security of our Rent Protection Scheme, we’re confident that we’re setting a new standard for tenant referencing in the property industry.
If you’re a landlord or investor in Nottinghamshire, or a tenant in search of your next rental home, contact Purserglove Property today to find out how we can help you to find where you fit.