Our real rentals series shares pitfalls that can occur if care and attention are not applied when renewing a rental agreement.
Breaking rule 101 of property management
Conducting appropriate, thorough reference checks when there is a significant change to a tenancy is rule 101 of effective property management. This might seem obvious to say, but sadly we still see examples of poor referencing practice when we audit existing paperwork as part of welcoming new landlords to M A S O N S.
Reference checks are vital, as when undertaken properly, the process flags any previous county court judgements (CCJs) and evaluates if a tenant is above the minimum income threshold required to cover rental payments.
What happens when referencing goes wrong?
Recently, we met a landlord who had entrusted a national high street rental agency to manage their property for a number of years. The landlord became concerned as the tenant was suddenly unable to meet rent payments in full. Frustrated by the agency’s failure to resolve this problem, the landlord decided to move the tenancy into our care.
As part of working with all new landlords, we carefully audit existing tenancy agreements and all the associated paperwork. When we did this, it became apparent that there had been a change to the tenant’s circumstances (a partnership had split up) and a new tenancy agreement had been issued without due diligence over referencing.
Two vital facts had been missed. A CCJ against the tenant was in place and when only one tenant remained at the property the income threshold was no longer met. This information should have been shared with the landlord at the outset of the tenancy agreement. The landlord could then have opted to ask for a year’s rent in advance. Or alternatively, they might have requested for a rent guarantor to be in place. These additional steps would have provided better protection from day one.
Our paperwork audit revealed a further issue. The rental agency had sold the landlord a rent guarantee policy, which they were continuing to pay monthly. But, without proper reference checks in place, this policy was actually invalid. If the landlord had placed a claim, it would likely have been refused.
The M A S O N S solution
We worked with the landlord on four key resolutions:
- Supporting the landlord to file a complaint with the previous agency.
- After the previous agency denied any wrongdoing, pursuing a formal complaint with the Property Ombudsman.
- Attempting to secure a guarantor/advance rental payment.
- Providing an alternative insurance provider for rental protection.
As a result of these efforts, the ombudsman ruled that the agency in question had been at fault. The landlord terminated their agency contract, and their insurance payments were refunded in full. They also received compensation for failure to carry out proper referencing during a significant change to a tenancy.
This was a great outcome, but all the time and stress involved could have been avoided … if only the referencing had just been correctly done at the outset. If you’re struggling to resolve an issue with a tenant please do contact M A S O N S – our vast market experience means we can quickly spot issues and advise on the best way to move forward.
