How landlords can avoid bad tenants

Being a good landlord is all about finding the right tenant, and avoiding the rogues…

Landlord Advice

16 June 2017

There’s nothing more stressful for a landlord than a bad tenant living in their property. Landlords can be left with large rent arrears, long-term legal battles and damage to their property. It’s really no surprise then that finding the right tenant is usually a landlord’s top priority. Not only do landlords need to carry out proper tenant reference checks, they also need to maintain the property to a high standard and keep an open line of communication to avoid a disgruntled relationship turning sour.

Here, AXA looks at what landlords can do to avoid bad tenants.    

 

How to avoid bad tenants: Top 10 tips 

  1. Consider using a licensed letting agent
  2. Do your tenant background checks
  3. Make sure you have a good tenancy agreement in place
  4. Put the deposit in an authorised tenancy deposit protection (TDP) scheme
  5. Start off with a 6-month tenancy
  6. Perform routine inspections
  7. Don't accept cash payments
  8. Communicate regularly with tenants
  9. Create a detailed inventory list
  10. Have the right landlord insurance cover in place

 

 Consider using a licenced letting agency

Using a professional and reputable letting agent can save you time and give you peace of mind knowing that they’ll carry out the appropriate checks and deal with bad tenants if one slips through the net. There are plenty of letting agencies out there offering various services at different price points, so it’s important to do your homework before you part with any money.  

There are pros and cons to using a letting agency so ultimately it comes down to your own personal preference. Some landlords choose to be more hands-on with their approach so they can get to know their tenants and create long-lasting relationships with them. Whereas other landlords feel more comfortable leaving it to the professionals.

 For more help on deciding whether to use a letting agent or go it alone, check out AXA’s online guide here.

 

 Carry out proper tenant referencing checks

The tenant referencing process helps landlords decide whether a tenant is suitable for their property. A tenant reference usually involves several checks and verifications to ensure the applicant is who they say they are, can afford the rental payments and can be trusted to look after your property.

A basic tenant reference check usually involves obtaining a reference from a previous at least and a credit check. More comprehensive references involve things like employment checks, affordability calculators and other background screening measures.

 

Tenant reference checklist

You don’t necessarily need to tick off everything on this list, but’s it’s a good place to start before you develop your own tenant referencing process.

✔ Bank statements

Seeing the applicant’s bank statements will paint a clearer picture of their financial situation.

✔ Credit check

There are plenty of sites you can use and they’re often free or inexpensive.

✔ Employer reference

Evidence of employment history means you can assess reliability and whether their income will cover the rental payments.

✔ Proof of address and identity

A recent utility or council tax bill, a UK driving licence, or a bank statement are the most commonly-accepted proof of address documents. A driving licence or passport is the easiest way to check someone’s identity.

Previous landlord reference

If the tenant has lived in rental properties before, speaking to their previous landlords can be an invaluable insight.   

Right to rent certification

Every landlord in England must conduct ‘right to rent’ checks. If you don’t carry out these checks or your tenant doesn’t meet the criteria, you could face a £3,000 fine. 

A checklist like this will help you determine a potential tenant’s reliability. However, you also need to use your own judgement and trust your gut instincts. If something doesn’t feel right, or they’re reluctant to provide information for a reference, it’s worthwhile investigating further.

 

Use a tenancy deposit protection scheme

Since 2007, landlords must place deposits in a tenancy deposit protection (TDP) scheme if they rent their property on an assurance shorthold tenancy. Services like the Deposit Protection Servicemydeposits and the Tenancy Deposit Scheme have all been set up to make sure money isn't kept back illegally. However, you can access the money if your tenant has breached the rules of their contract.

It’s the landlord’s responsibility to provide tenants with a copy of the deposit protection certificate and information about the chosen TDP scheme and what to do if there’s a dispute over the money.

There are different TDP schemes for landlords in Scotland and Northern Ireland, so it’s important to read the legislation from the devolved administrations.

To find out more about the ins and out of tenancy deposit protection (TDP) schemes, check out AXA’s article here.

 

Have a good tenancy agreement in place

Setting out the rights and responsibilities of tenants and landlords in a tenancy agreement means both parties know what’s expected of them which means there’s less likely to be conflict. A good tenancy agreement will also attract responsible tenants who appreciate landlords who take this kind of thing seriously.

What’s a tenancy agreement?

A tenancy agreement is a written or verbal contract between a landlord and a tenant that sets out the terms and conditions of a tenancy. A written tenancy agreement ensures the rental conditions agreed between landlord and tenants are fully understood and fair for everyone involved.

Express and implied terms

A tenancy agreement can be made up of: 

  • Express terms:  What’s included in the written tenancy agreement and what was verbally agreed.
  • Implied terms: Rights given by law or arrangements established by custom and good practice. (They don’t need to be written in your tenancy agreement.)

For a complete breakdown of the difference between express and implied terms, read AXA’s article on tenancy agreements here.  

Types of tenancy agreement

To make sure your tenancy agreement works for you, here’s a quick guide.

·        Assured shorthold tenancy

An assured shorthold tenancy is the most popular tenancy agreement for residential properties in the UK. It means landlords can take back their property when the tenancy ends without needing to provide a legal reason. They must, however, give tenants at least two months’ notice if they want to repossess or evict tenants. Under assured shorthold tenancies, landlords must use a government-approved deposit scheme and they can’t increase the rent unless the tenant agrees or there’s a review clause in the contract.

·        Non-assured shorthold tenancy

Non-assured shorthold tenancies are used when the: property isn’t the tenant’s main residenct, rent is less than £250 per year, or the landlord lives in the property but doesn’t share facilities

Landlords who opt for an assured shorthold tenancy don’t need to pay into the government deposit scheme or provide a Section 21 or Section 8 Notice to bring a tenancy to an end.

·        Excluded tenancy

Excluded tenancies can be used by landlords who live in the same property and share facilities with their tenants. Under an excluded tenancy, landlords aren’t tied in to government-approved deposit schemes, but they must provide tenants with reasonable notice to quit. A ‘reasonable’ notice period tends to be the length of the rental period – so if your tenant pays weekly, landlords should give one week’s notice.

·        Assured tenancy

Unlike assured shorthold tenancies, assured tenancies don’t provide landlords with security of tenure and instead equip tenants with more protection against eviction. So, landlords must wait for tenants to breach specific terms, such as failing to pay rent consecutively, before they can apply for a possession order to reclaim their property.

 

Communicate frequently before a minor issue becomes a serious problem

A positive and proactive approach can help you maintain a good relationship and squash any issues before they get out of hand. ‘Bad’ tenants can often start out as tenants who feel annoyed because they think their landlords don’t care about them. To avoid a build-up of tension or problems going unnoticed, you might want to arrange regular catch-ups with your tenants and make it easy for them to contact you. It’s important to be flexible with your approach and consider your tenant’s preferences. Some of your tenants might work long night shifts and therefore might prefer you communicate with them via text message. Other tenants might feel more comfortable with a phone call or a face-to-face meeting.

 However you communicate with your tenants, regular contact will ensure problems are dealt with quickly before they escalate and become more of an issue than it needs to be.

 Top tip: It’s important to set communication boundaries from the offset. The landlord and tenant should understand when it’s appropriate to contact each other. You don’t want to end up having an awkward conversation when your tenant calls you in the middle of the night!

 

Routine inspections, property maintenance and inventory checklists

As a responsible landlord, you’ll want to make sure your property is well-maintained and nicely decorated. It will attract good tenants who want somewhere comfortable to live and they’ll be more likely to look after your property.  However, having a well-maintained property also acts as a deterrent for bad tenants who can use property defects as a ‘get-out-of-jail-free card. For example, if you unfortunately end up with a bad tenant and you try to take legal action to claim rent arrears, the tenant can claim there’s a fault with the property which means them can live rent-free during investigations.

Inventory is another vital thing that’s easy for landlords to overlook. Furniture and other household contents you’ve provided should be listed and described in an inventory. Once this document is signed by you and your tenant, it will provide a quick resolution to any future disagreements over these items. When you’re writing the inventory list, it’s important to be as specific as possible and include details like the age and condition your items.

 

Make sure you have the right landlord insurance cover

Even if you carry out comprehensive tenant reference checks, use a TDP scheme, make sure the property is well-maintained, communicate regularly, and have a good tenancy agreement in place, sometimes a bad tenant can still slip through the net. This is where landlord insurance comes in.

AXA can help protect you from the unforeseen circumstances landlords can encounter by providing landlord insurance to protect you, your property and your rental investment.

 

AXA landlord insurance from £120*

Insure your rental property with AXA today and join the two thirds of UK landlords who have the right cover in place1.  That’s one less thing to worry about, so you can get back to spending your time on what matters most to you.

*Personal Finance Awards 2017/18