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Tenant Referencing

Tenant quality has always been a concern for prudent landlords. But it is perhaps especially crucial in todays difficult economic times. So lets look at the increased relevance of tenant referencing today, together with some of the services that are available in the market to assist with the process.

Firstly, the list of good reasons for referencing prospective tenants thoroughly seems to be growing by the month now. Difficult economic times, rising unemployment and soaring household bills leave more tenants struggling to pay the rent and more likely to accrue arrears. This is even before generally rising annual rents and, where relevant, housing benefit restrictions are taken into account. Tenants on limited incomes may also be less inclined, as well as less able, to look after the property. While the costs of removing bad tenants, and repairing any damage they might cause, continue to rise. Also worth considering is the fact that while landlords have been able to afford to be choosy in recent years, this wont necessarily be the case if the rental market softens and demand falls in relation to supply.

Indeed, facts and figures from various sources tend to suggest the situation could well deteriorate. Recent research from ARLA says that in Q4 2011 39.2% of members reported an increase in tenants struggling to pay their rent - up from 36.7% in the previous quarter. Fifty five percent of members reported more tenants than properties available - representing a significant fall in demand compared to the 74% figure in the third quarter. LSL Property Services Plcs Buy to Let Index for December 2011 says that tenant finances deteriorated slightly in December, with 10.7% of all rent late or unpaid at the end of the month, compared to 9.3% in November (December 2010 11.7%) and totalling £300m of unpaid rent. This was despite a small monthly fall in average rents (though a 4% rise over the year). These figures may have been distorted somewhat by the festive period of course.

Now let us take in some comment from those in the business of providing referencing products for landlords.

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