to ask if anybody is knowledgeable on tenant reference checks?

[doubleshotespresso]

Posting here as I thought there would be more traffic

If prospective tenants have some debt, a default on a credit card, a payday loan all with payment arrangements in place would they pass estate agent credit referencing checks?

They have no CCJ'S or bankruptcy...

I would be very grateful if anybody could give me some honest answers please...

Do your own credit check it costs under 50 quid to see. Gamble removed

I'm a LL I do my own thorough credit checks. Agencies miss stuff. They tried to give me a bankrupt once.

Use Experian

They shouldn't fail referencing for that but the landlord may want a guarantor or rent upfront.
Only the referencing fee would be non refundable. The deposit and rent would be,

My job is to do with tenancy law so pm me if needed.

Don't do it - if they haven't even been able to save a couple of months rent they're obviously not very good at financial control and discipline. I wouldn't be surprised if they fail the check and you lose your money.

And DEFINITELY don't be a guarantor for them!

Absolutely no way should they be paying any rent or deposit until all checks have been done and they've signed a tenancy agreement. This sounds dodgy in the extreme...

I agree that this sounds dodgy. Their holding deposit should be taken off their rent. The six weeks' deposit should be held with a third party and is to cover possible damage during the tenancy. That deposit and the balance of the rent aren't even due until the tenancy starts, which it won't do until they pass the credit checks. So if you decided to lend them the money; that's when they'd need it.

Yes you will pass

It appears I would lose the holding deposit and the 6 weeks which is a shedload of money if they do fail....

Either there's been a misunderstanding, or something very dodgy is going on here.

A holding deposit is to keep the property off the market while the tenants are checked out: credit checks, employment references, past landlord refences. Amounts vary, but this should NOT be thousands of pounds, or anything approaching a month's rent. I'm in SW London and we have paid holding deposits varying from £90 to £500. (And the £500 seemed like a rip-off, but it was counted towards our security deposit when we passed the checks; we also had frank conversations with the letting agent about what the checks required, since we would've lost the £500 if we'd failed.)

A security/damage deposit of six weeks' rent, plus the first month's rent, are payable when you have passed the credit checks and signed the tenancy agreement.

AT NO POINT should you be handing over 6 weeks + 4 weeks rent if you're not even sure the property will be yours. Not even in the most cut-throat school catchment area in London! As others have said, the security deposit has to be registered with a deposit protection scheme, and the rent forms part of your tenancy agreement. None of this gets paid before you're accepted as a tenant.

I understand it's a huge financial outlay to start renting somewhere, with the holding deposit plus security deposit plus first month's rent, so it's really nice that you're helping your niece, but something is seriously off here. Be very wary.

I've been renting for years and have just been through the referencing process again.

When tenants apply for a property they pay a non refundable application fee which covers credit/reference checks.

Once that is done and you've passed then you pay the deposit and rent upfront.

They can't charge you deposit and rent before you even pass the checks.

If they can comfortably afford the rent, they should wait until they have saved a deposit themselves after clearing debt. This does not seem right to me as arum says. If you do stand the deposit, formalise the repayment plan in writing. No one should be paying security deposit until tenancy agreed.

OP please please be careful. It really doesn't sound kosher at all.

As others have said, your relatives just need the holding deposit while they pass the credit check.

If they don't pass it they can't rent and the holding deposit goes.

If they do pass it then they will need a security deposit against damages but this should be in your name, not in theirs - so don't just hand money over to them. And remember if they damage things or leave the flat in bad repair that will come off your deposit and you will have to claim it back from them. On top of which that security deposit money will be dead to you and earning no interest until they leave.

On top of which you are loaning them the first month's rent? When they have some debt, a payday loan and a credit card problem? I understand you have said you won't be their guarantor, but if it's thousands which you can't afford to lose then don't do this.

They can comfortably afford to meet the rent? How do you know? Are they prepared to sign a contract to pay their loan to you down along with the debt, payday loan and credit card debt?

i have been in various rentals over last 10 years! it has never ever cost us 4k to get into a new property. we live in an expensive area. yeah theres a cost to getting it all set up but no where near that. theres deposit and 1st month rent plus checks but still that sounds way too high. i'd be very suspicious. especially as they have already put down £400. and only way you don't get deposit back is if you leave the place in an awful mess. so as long as its clean and no damage caused then likely to get at least a good percentage of deposit back, landlords do always try to keep some of it IME but gotta prove its justifiable.

it has never ever cost us 4k to get into a new property.

I don't think that's an unusual sum for what the OP describes as a 'reasonable but not swish area of south London', in a school catchment area. £4k for six weeks' deposit plus a month's rent, plus agency fees - so perhaps the rent is £1500-£1650 a month? I live in the same 'reasonable but not swish' kind of area, and that would be standard for a 2-bdr flat. It cost us a similar initial outlay to move into our first flat here a few years ago, and more than £5k to move into a 3-bdr.

It's the whole mode of paying rent and deposit before being granted the property which is really strange and dodgy.

Although Millie also has a point that it's a risk to lend any sum to someone who is facing a high monthly rent whilst already struggling with debt (and I'd assume anyone who's taken out a payday loan has done so because they had no other options), and also that you're relying on them keeping the place in good condition or you won't see your security deposit back - unless they're promising to repay you before the end of the tenancy, which would be better. But that's a personal decision.

Apologies yesterday was a busy day....

ARumwithaview is quite right. The property was advertised at £1500 per month, my niece and her partner have agreed a deal based on them staying for a minimum of two years, at £1450 per month. From a quick bit of gaoling this seems to be the current market rate for a two bed house with a garden.

My niece has just begun (in the last two months) a new and fairly well paid job following a serious illness and then retraining, so their household income significantly increased.
They both arrived here on Friday night with clear plans as to how they can afford all going forward, so on this basis I would happily assist. They have offered to arrange a direct debit with me on a monthly basis.

I have been on the website for the estate agent and it seems to me that they were mistaken as to what is or is not refundable. I think it ought to be the holding deposit and referencing fees which is non-refundable, but will absolutely not be handing over any money until I have this confirmed by the agent. I am really very grateful to all of you who have advised on here, it seems such a minefield to rent these days!

So she has only had her job for 2 months and won't have passed her probation so her job is not secure. Taking on further liability's such as a new property when your income increases rather than getting your finances in order is the type of behavior which causes people to get into financial problems so wouldn't advise lending them the money.

Yes two months, this move assists greatly as its location fits far better with childcare arrangements and no need for train travel. Her partner has a salary which more than satisfies the (x3) requirement for the rent payments. Her job therefore covers household bills, childcare and repayment obligations... as far as I can see they seem to have considered this move well. Their affordability on a monthly basis seems ok, it is their lack of any savings that is the big hurdle.
I think the probation period for her job is six months, within education.

If they have agreed a two year deal then please make sure they have a break clause in the tenancy agreement after 6/12/18 months. 2 years is a long time!

Their affordability on a monthly basis seems ok, it is their lack of any savings that is the big hurdle.

This sums up the situation of many people needing to rent in London, and also why many put up with badly-maintained rental homes here: it's simply too expensive, up-front, to move.

When we moved here, DH was starting a well-paid job but we didn't have £4k saved for the month up-front, 6-week deposit and agent fees, as well as moving costs. We were very lucky to have family who lent us the money, and we paid some of it back when our previous rental's security deposit was returned, and the rest in installments.

You are really kind to help your niece and her partner, doubleshot. I hope it all works out.

WickMum there is a break clause at 12 months yes

ARumwithaView I have to say I have been stunned at not only the costs (& frankly inexplicably high fees!) but from the research i have done this does all seem very much standard rates and costs in the area they are in. I received confirmation this morning that the non-refundable bit is the referencing and holding deposit which is £680.

The month up front and 6 x weeks big chunk is not required until 48 hours before their move-in date. I just pray that the referencing is ok, as on this basis I would be prepared to loan the money to them. I was thinking of giving them two months before asking them to set-up a direct debit to me in order they can settle in and buy the bits they need as it is unfurnished unlike their current place.

Fingers crossed!

I received confirmation this morning that the non-refundable bit is the referencing and holding deposit which is £680.

Wow - £680 is definitely towards the upper end of the scale, even here. Do you know how much is referencing fee, and how much is holding deposit? The new restrictions on letting agents' ability to charge all and any fees to tenants can't come too soon.

With that amount at stake, I would hope they've had a pretty frank chat with the letting agent about their chances of passing the credit check. Ideally, in email, so if they do completely fail it and lose the money they have some small possibility of a complaint, ie proof that the agent has falsely assured them that they're a shoo-in.

But the holding deposit, if they pass the credit checks, will then be refunded or applied towards the first month's rent or security deposit - right? Tenants lose the HD if they fail the checks (so it does dissuade speculative applications), but otherwise it's a deposit, not a fee, and so should either be returned when their tenancy begins or counted towards other outstanding amounts.

Just checking... I was very keen to establish this point when we got asked for a £500 holding deposit on our current rental!

So holding deposit was £400, which yes is deductible from the final figure.

Referencing for both of them was £280

They did ask the estate agent if they believed that they would pass and shared a brief description of their joint debts, though I believe this was done verbally. The company carrying out the checks appear to be an external agency, so the agent thought that the chances were good, but was not willing to commit clearly.

Apparently all should become clear by Weds/Thurs this week.

I will be so glad to know one way or the other, this is an insane process, I don't know when or how it all became this stressful`!

So.... they both passed!

Moving date confirmed and all okay, thanks wise MN'ers

That's great news, doubleshot. It would have been so crap to lose the flat AND lose the money, whether it was £400 or £4000.