What is the referencing process when renting a London flat?
We have prepared this guide for you to de-mystify the referencing and credit check process when renting. Read on below to find out more!
We have prepared this guide for you to de-mystify the referencing and credit check process when renting. Read on below to find out more!
Unlike a short-term rental booking, where the whole amount can be paid in advance, renting a London flat for the long-term (> 90 days) most often requires a commitment to pay rent according to a schedule during the period of occupation. There will be multiple payments of rent.
As a renter, your financial status will be checked to ensure that you can meet the financial commitments of the rental contract. That process is called referencing.
The 3 main checks are for affordability, background history, and a right to rent check in the UK, which is a legal requirement.
Reference checks are carried out by 3rd party financially regulated credit reference companies, licensed to handle your personal information. These checks are carried out independent of RentLondonFlat, and also independent of the Owner, we do not control their referencing criteria.
The referencing check will produce a report, which will be presented to the Owner for approval.
In order to start your referencing application and secure your offer to rent a London flat, a refundable holding deposit equal to 1 week’s worth of rent should be paid first.
The referencing process cannot begin until the holding deposit is paid.
As an indication of the genuineness of your application and rental offer, you must make an advance payment before starting the referencing process. This advance payment is called a “holding deposit”.
(Note: the holding deposit should not be confused with the tenancy deposit, which is a separate payment made later in the rental process.)
During this time, the property may still have other applicants interested in the property, and who may rent the property. Just because you have paid a holding deposit does not mean you will end up renting the property.
If your application is ultimately successful, the holding deposit can be deducted from the first month’s rent that you will owe. Your holding deposit is paid into a dedicated client monies account and is protected.
If your application is not successful – and it is due to a failure to provide relevant information when requested to the referencing company, or other similar let-downs on your part where you have not acted reasonably, the holding deposit amount will not be refunded. This is in line with rental industry regulations and best practice.
A holding deposit can only be retained by us/the Owner if any one of the following happens:
• you provide false or misleading information which one can reasonably
consider when deciding to let a property – this can include your conduct and communication when providing information to us and if that can be seen to be concerning.
• you fail a Right to Rent check
• you withdraw from wanting to rent the property without reasonable excuse
• you fail to take all reasonable steps to enter into a tenancy agreement and the
we takes all reasonable steps to do so
All prospective tenants are asked to undergo the same referencing process, we do not as an agency discriminate between applicants based on their universal credit, or housing benefit status. We do not have any rule that applies specifically to people receiving welfare.
We follow industry-standard advice regarding rent affordability, and also delegate the checks on financial status of applicants to an independent referencing company.
It is ultimately the proeprty Owner’s decision, after having reviewed the referencing report, as to whether to accept and proceed with the rental application.
Depending on the credit referencing company they will typically request some if not all of the following types of documents from each Guest:
1. Photo Identification (Usually Passport)
2. Proof of Income (Bank Statement or Salary Slips)
3. Access to your Banking records if you have Open Banking
4. Reference letter from your Employer or University
5. Reference letter from a previous Landlord or Letting Agent
6. Proof of previous or current address (e.g. Utility bill)
The affordability criteria used by most credit reference agencies is the total household income should exceed 2.5 times the rent. So if the rent is £1,000 per month then total household income should exceed £2,500. If there are 2 people renting the flat (household) and they both earn more than £1,250 then they will pass the affordability criteria. Proof of income should usually be in the form of the last 3 months salary slips.
If your provable combined household income is not 2.5 x more than the rent amount, you may still be able to rent the property if you have a UK-based guarantor who will guarantee the rent payment if you fail to pay the rent.
The UK guarantor will need to provide the same respective referencing documents as you the renter. Once the guarantor has passed referencing checks, they will need to sign a separate letter of guarantee, formalising their role as guarantor.
You should provide the contact details of your manager or department that the referencing company should contact in order to obtain your employment or university reference form. The referencing company will then contact them accordingly to confirm you are in employment or enrolled into the university or college as a student.
If you have rented a property in the UK before, you can provide us with the contact details of your previous landlord or the letting agency that you rented the property from. The referencing company will then contact them to confirm that you stayed at that property previously and ask for a reference. This will ask if there were any damages at the property, if it was kept in good condition and if rent payments were made on time. If you have one and have a good rental history you should provide this previous reference, as it will help your application for the new property. If you do not have a previous rental history then you can still apply to rent the property and this will be taken into account with your overall application.
It usually takes between 5-10 working days as the referencing company will need need to contact your references for responses and this may get delayed. You can expedite the process by asking your references to submit replies as soon as they are able to. The tenancy can not proceed until all Guests at the property have completed their reference checks and application. So it is a good idea to start this as soon as possible and get answers and documents in as quickly as possible in order to avoid any delays.
It depends on the reason for a referencing failing as sometimes this can just be administrative errors that can easily be fixed or just providing more answers or clarification of any questions raised by the referencing company. However, if there are issues that we were not made aware off in advance that you did not declare, like a County Court Judgement, a criminal record or a poor credit history, then this could adversely affect your application and referencing. It is best to provide full disclosure from the start if you are aware of anything that may affect your credit rating, to avoid disappointment and potential risk of losing your holding deposit if you fail referencing. If you are at all un-sure you should contact our Guest Services team to discuss your application before hand.
