Due Diligence for Live in Landlords, including the Immigration Bill.
The biggest worry facing a live in landlord is the kind of person their lodger might be (aside from whether they’re simply compatible) – are they a criminal, likely to be violent or damage your home? Will they pay the rent on time? Will they respect you and your home?
It’s a staggering fact that most live in landlords fail to carry out the background checks that landlords who don’t live with the people they rent to do (or should do) as part of their normal due diligence. This is in part because the profit margins of room renting are much less than whole property lets – also, a live in landlord is more likely to be in a situation where they might urgently need to raise funds – thus the need to let out their spare room.
While a live in landlord is therefore typically less able to afford to run background checks, it is much more imperative that they do – they will be living with the person, as well as depending on them to pay rent. While it’s much easier to get rid of a rogue lodger than a rogue tenant in England and Wales at least, this still isn’t a situation anyone wants to be in – especially not in your own home!
Therefore, background checks must be carried out, not only with less money than other types of landlord have at their disposal for the purpose, but it’s also necessary to carry out even more rigorous checks.
While you might want to carry out some of the checks yourself, you will require a credit check, as well as checking with any previous landlords.
I recommend that landlords of all sorts use LRS – they provide a detailed Finance Background check (a credit and affordability check), in conjunction with Equifax for only £12, as well as verifying up to nine of the lodger’s addresses with the electoral roll, and providing an overall risk assessment for letting to the individual. In addition to this, they offer Tenant Lifestyle checks for £5 – or less, look out for offers – it’s often possible to get this for free.
The Tenant Lifestyle check is unique to LRS – it’s a simple enough concept – landlords download details of their tenants – with their permission. LRS currently has more than 20,000 members, most of whom have uploaded tenant details to the database. When a lifestyle search is conducted, only if all the details entered match, i.e. name, DOB and national insurance number, the following details are returned:
- The tenant’s name.
- Any previous or current rent default and/or property damage amount.
- The previous landlord or letting agent’s contact details. (Name/Email Address/Telephone number)
Ensure you follow up with any previous landlords, by phone and email or post – someone might tell you something verbally that they wouldn’t commit to writing, and/or they might sound stilted, or there might be a pause before they answer – pay close attention not just to what they say, but how they say it. Ask them to send you an email or letter so you have a record.
To carry out a Finance Background check, you will need your prospective lodger’s full name, date of birth and all of the FULL addresses they’ve officially lived at over the previous three years.
Although it isn’t required for the background check, I would also ask for both proof of ID – such as a passport (if it’s a UK passport, this can be an expired passport but NOT by more than two years), driver’s licence, or benefit document AND at least two separate proofs of address – recent bank or credit card statement, and a utility or council tax bill, or failing that, another official document such as a letter from HMRC, Department of Work and Pensions or local authority.
If the lodger is having a guarantor (someone who guarantees to pay the rent if the lodger can’t), get a Finance Background check run against both parties: why? The general advice is simply to run this against the guarantor, but while the lodger will fail on affordability, it will still tell you a lot about how responsible and reliable they are as a person – are they on the electoral roll at all the addresses they’ve lived at? Do the details they’ve provided match? Have they had an excessive amount of financial trouble – lots of late payments or county court judgments (CCJs)? Is there a gap in their address history? Or another possible red flag, is there little or nothing coming up about them – unless they’re very young or from abroad, in which case, see below.
If they’re very young, get details of their secondary school, as well their current university, college or employer and ensure you verify the details on the internet – they could simply be giving you a friend’s phone number or email. Also ensure you follow up, by phone and email/post – someone might tell you something verbally that they wouldn’t commit to writing, and/or they might sound stilted, or there might be a pause before they answer – pay close attention not just to what they say, but how they say it. Ask them to send you an email so you have a record.
To carry out a Lifestyle Reference check, you will need your prospective lodger’s full name, date of birth and national insurance number – this is to verify for certain that you have the right person – whereas someone else could have the same name and date of birth, a national insurance number is unique. With the exception of someone being known by an alias (e.g. different names because of marriage), the only other way a national insurance number can be associated with another name is through fraud.
LRS is a not for profit organisation, fully regulated by the Information Commissioner’s Office (ICO).
Unlike other types of landlord, you will actually be living with this person – they won’t simply be a tenant (or lodger) – they’ll be your housemate. Therefore, if you have children living with you, or staying overnight, or other vulnerable people, I recommend asking the prospective lodger to do a a subject access request under the Data Protection Act with the police in the district where they’ve previously lived. This costs around £10. Although this might seem over the top, if you politely explain your concerns for your children, most decent people shouldn’t object. Obviously, anyone who does shouldn’t be considered! Ask for this after you’ve run the background check, so you’re aware of any aliases the lodger has been known by.
In addition to the LRS finance and lifestyle checks, I would also be inclined to check their income source. While someone might pass an affordability check, and seem to be an overall good risk financially, how do you know where this money is coming from, and if this source of income is likely to continue? For example, aside from the worst case scenario, where someone is living off the proceeds of crime, their income might simply be a short term supplement provided by a friend or relative – unless this person will be happy to act as the lodger’s guarantor – in which case, you need to run a Finance Background check against them too.
Ask the lodger to provide:
- If employed, details of employer, the lodger’s job title and dates of employment
- If on benefits, documentary proof of the claim (e.g. ES40 Jobseeker’s Allowance card or letter awarding claim) including dates, the address of the office handling, type of benefit and amount. Also ask the lodger to give you a letter of authority, which they’ve signed for the local authority or DWP to release information about the claim, otherwise the DWP or local authority will cite the Data Protection Act.. Some local authorities produce a pro forma tenant consent form for ease.
- If self employed, ask them to request form SA032 HMRC tax assessments for each tax year they claim to have been self employed, going back up to three years.
If your prospective lodger comes from outside the UK, there are still plenty of specialised tenant checking companies that can screen them, the best of these being Tenant Verify. The Tenant Verify website provides detailed instructions on how to carry this out.
In addition to this, at the time of writing (April 2014) the Immigration Bill will become law some time this year. As the Bill currently stands, it will require all private landlords (including live in landlords) to check that any new tenant (or lodger) from outside the European Economic Area (EEA) or Switzerland has the right to remain in the UK.
It is therefore best practice for all landlords to ask all their prospective tenants or lodgers for their passport, national insurance number or UK driver’s licence. If they’re from outside the EEA or Switzerland, they need to able to show you a valid biometric residence permit (BRP).
NB obtain your own copy of the BRP, or ask the lodger to give you a certified copy or at the very least, carefully record the details, in particular the document number, holder’s full name and valid until date. The valid until date particularly concerns you, the landlord, as you should only grant a tenancy or licence up to that date. If you want to extend the tenancy or licence beyond the valid date, under the proposed new law, you must ask the tenant or lodger to provide a currently valid BRP or otherwise show they have right to remain (e.g. they’ve become a British citizen and can show you a naturalisation certificate or UK passport).
As well as being good practice, if you only request ID from some prospective lodgers, but not others, you could be liable to discrimination charges. If a prospective lodger or tenant is unable to provide valid proof (such as above) that they are allowed to remain in the UK, under the Bill anyone offering any kind of tenancy or even just the right to occupy accommodation will be liable to a fine of £3,000 for each adult illegal occupant – not just a tenant or licensee.
Landlords are liable for checking that any permanent occupier a tenant allows to live at the rented accommodation is allowed to remain in the country – the easiest way is to ask before granting the tenancy agreement and to carry out the normal checks all (live out) landlords should do in any case. However, this wouldn’t normally affect a live in landlord – overnight guests are not affected by this requirement.
Click HERE to comment on this article.
Previous topics from Lodgersite.com:
Related LRS topic:Do you take DSS tenants?