How to Avoid a Terrible Lodger

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?

Firstly, listen to your gut instinct. Your subconscious will often pick up on small gestures, speech patterns and body language that may indicate someone is lying. However, beware of trusting this alone, as an accomplished liar will know how to gain your trust. This is because hardened conmen often don't feel any remorse or awkwardness about conning or deceiving people, so their body language and gestures can't betray this! On the other hand, if someone is very nervous or not very confident under interview, they may give the impression they're lying when they're not!

A slightly less conventional route, but something a lot of employers do now is to check the internet, especially social media sites such as Facebook and Twitter. What does your lodger have to say? What kind of person do they come across as being? Does this information tally with what they've told you (especially on Linked In)? I once googled a prospective tenant's name (which was very unusual) only to find out that someone with the same name and living in the same area was a convicted criminal!

Last but not least, once you've decided on a particular lodger, contact them and advise them that you're offering them the room subject to checks being carried out.

If, as a live in landlord, you spend a lot of time away from home, please read this.

I have come across situations where live in landlords have been away long term with work, only to come back to find their lodger has taken over their home and locked them out, claiming that as the landlord has moved out, they now have a full tenancy, with exclusive rights of occupation!

It’s a staggering fact that a large proportion of 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. There are several possible reasons for this: a newbie live out landlord will often have a letting agent to guide and assist them, who will include this as part of the service, whereas while inexperienced live in landlords still have the same plentiful choice of referencing services (referencing is no different for a lodger than a tenant), they need to be pro-active in choosing one and carrying out the check themselves (however, most high street letting agents will be happy to reference a lodger, for any resident landlord prepared to pay additional fees). Another possible reason is because the profit margins of room renting are less than whole property lets and 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 less likely to run background checks, in one important way, 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! In addition, while other types of landlord can often rely on rent guarantee insurance (RGI) against a tenant or guarantor being unable to pay rent, I’m not presently aware (May 2014) of any company that will provide this for a lodger – so even more reason to carry out a thorough check.

Therefore, background checks must be carried out, not only with possibly less money than other types of landlord have at their disposal for the purpose, but it’s also often necessary to carry out even more rigorous checks – for example, for the safety of your children, if you have them.

You should have previously told each applicant that you would be running a full tenant check against them and anyone who objects to this should not be considered further - however good a candidate might seem otherwise (especially the seemingly good ones!). For SOME tenant check services, or if the applicant doesn't want to be approached by email or phone by the referencing company, you should also ask the lodger/tenant to complete a form downloaded from the service you are using, in which the they grant authority for you to carry out reference checks against them, in accordance with the Data Protection Act 1998. Some companies, such as Rent Direct put the onus on the tenant or lodger to make the application and even pay – most others, such as LRS send the lodger an email which is initiated online by the landlord. With this kind of system, the lodger/tenant will normally give their consent for data protection purposes as part of the online application. Naturally, the landlord will need the lodger’s email address or at least a mobile number.

A Definitive Guide to Lodger (and Tenant) Referencing

Set out below are the tenant checks that most companies offering tenant referencing do. These are often divided on a modular basis (it's up to the customer to decide which they do) and there are generally four separate checks (although different companies have different names for them). For ease, I’ve numbered them from 1 to 4:

1. Credit and Affordability Check – the most basic and essential element:

  • 6 year credit history, CCJs, IVAs, defaults, late payments bankruptcies
  • All registered addresses over that time and whether on electoral roll at those addresses
  • 2. Employment Reference - even if someone can apparently afford the rent, how can you be sure where they’re getting their money from and whether it’s a stable income that’s likely to continue?

  • A check is made with their employer to confirm employment contract, salary and length of employment. If the employment contract is casual, or very temporary, they may need a guarantor.
  • If self employed (in whatever capacity), a check will be done with their accountant – if they don’t have an accountant (or a solicitor), or the accountant has been acting for them for less than a year, the lodger may need a guarantor.
  • If they’re unemployed, dependent on benefits or a student, or have a low income for any other reason, again they are likely to need a guarantor.
  • 3. Previous landlord history or a character reference (if they haven’t rented within the previous 3 years)

  • To confirm their conduct with their previous landlord – did they pay rent on time? Did they cause damage? Did they respect the property? However, if they're still with their last landlord, that person might be so desperate to get rid of them that they give them a good reference - therefore, it's important to check further back still (see item 4 below) or also get a character reference
  • If they don’t have a recent rental history (as a tenant or lodger in residential property), a character reference from a responsible individual who knows them well in a professional capacity (such as a teacher, university lecturer, doctor etc) but BEWARE – most referencing services will accept a reference from anyone unrelated (such as a friend or neighbour) who knows the person – I therefore recommend very strongly that if they haven’t got a recent rental history that you approach the lodger directly to request a character reference from a professional and follow up yourself – after verifying the details of the referee and their organisation online!
  • 4. Check delinquent tenant databases

  • Unfortunately, because there are so many bad tenants (and lodgers) around, with increasing numbers of both private tenancies and house shares, a new trend has emerged over the last 10 years or so – delinquent tenant or tenant history databases – these work by asking landlords to upload their tenant’s details, together with any rent arrears, criminal damage or anti social behaviour. These are usually free to search yourself, or for a nominal amount (under £5) or several referencing companies will include this in the tenant check.
  • 5. Last but not least - follow up with Bank Statements!

  • I used to think it was extremely rude and invasive to demand sight of an applicant's bank statements. However, after reading a cautionary tale from landlord and tenant referencing expert, Paul Routledge, I changed my mind. The very first prospective tenant I asked for bank statements turned out to have a history of financial trouble, and also only gave me half the three months bank statements I asked for (so I can only assume the ones withheld told an even worse story!). I had a bad feeling about another couple, who had a very high joint income, so I requested six months of statements from them both. While they were very keen and were the ones chasing me before, to my relief, after I requested the bank statements, I never heard from them again! A good prospective lodger or tenant will have no problem providing their last 3 months bank statements; if you feel bad requesting this, just remember the number of times you might have been required to provide the same as part of a mortgage or tenancy application!
  • In addition, although you will have already had the results from the basic financial check by this point, the 3 major credit agencies don't all have complete access to the applicant's full financial records. I therefore recommend running your own check for county court judgements etc on Trust Online.

    But supposing it's just a casual, short term let, but you don't know the person, or at least, not that well, so you might not want to go through a full tenant check? Does the person live locally? Therefore, ask to meet them where they live at the moment - this will show you how they keep their home. Also, if you don't know them, I would still strongly advise running a check against delinquent tenant databases, or getting character references (from responsible people who know them in a professional capacity). In addition, it doesn't take much to ask for and provide copies of an applicant's last 3 months bank statements.

    They may only be living with you for a short time, but they're still going to have custody of your home, possessions, children and pets!

    A fully comprehensive tenant check (i.e. containing elements 1 – 3 at least) will give an overall assessment as to whether to accept the lodger, accept the lodger with a guarantor – note that the guarantor will need to be checked too, or decline the lodger.

    What is a guarantor and when do I need one?

    This is someone who will pay the rent if the lodger can’t – a typical scenario is the parent of a student. If the lodger is unemployed, or their income isn’t very large, isn’t proved (for example, self employed but no accountant or solicitor) or is unstable (e.g. casual work), they’re in a new job or in temporary employment or they don’t have a recent rental history (for example, a student), but they pass the reference otherwise (i.e. no indication of previous bad conduct or rent arrears), you might want to accept them subject to them providing a guarantor, but that is for you to decide. The guarantor will need to be resident in the UK and own property. They will need to pass at least a basic reference to prove income and affordability – most tenant referencing companies will check guarantors too.

    If a lodger offers to pay several months rent upfront, is this good, bad or indifferent? There are any number of reasons why tenants and lodgers might offer rent upfront, but the most common ones are:

  • they want to secure accommodation where demand is high;
  • they're not sure of their income or they're taking a lump sum out of their savings and want the peace of mind of not having to worry about rent for a time;
  • they have a bad or non-existent rental history
  • they need a guarantor for whatever reason but can't get one
  • they're using the property for criminal activities and want to keep the landlord off their back (e.g. running a cannabis farm or illegal subletting);
  • or in the case of a lodger, they want more security of tenure than a lodger would normally have - if the landlord subsequently spends the rental lump sum, but then finds they need to pay it back to the lodger because either party wants to end the agreement early, there will obviously be a problem!
  • Although a lodger is unlikely to be doing this because they want to use the room for criminal activities, I would still advise a live in landlord not to accept money upfront for the other reasons unless the let is only temporary, and their character references check out ok - and it certainly shouldn't be done in lieu of a full tenant check!

    So how and where can I get a tenant check done and how much will it cost?

    There are many companies that will carry out at least elements 1 – 3. A basic check will typically just take in element 1 (i.e. it’s just a credit check). While this is definitely better than nothing, and will tell you something about the kind of person they are as well as their likely ability to afford the rent, it won’t tell you whether they’ll be able to continue to afford it, as you don’t know if they’re in any kind of stable employment, or even their source of income at all (they could be getting temporary help from family, living off savings or even be living off the proceeds of crime). You also have no idea of how they might have behaved with a previous landlord, unless they ran up huge rent arrears or carried out a massive amount of damage and the landlord took out a County Court Judgment (CCJ) against them. I therefore wouldn’t recommend this alone, but if money is really tight for both you and your prospective lodger (in which case, should they be looking to rent right now?), most companies do this for under £15.

    However, the more comprehensive check that covers elements 1, 2 and 3, costs £35 at most. If this sounds like a lot of money, how much is peace of mind? How much will you be out of pocket if the lodger can’t or won’t pay their rent, damages your home or steals from you?

    The tenant checking service provided by LRS is both competitive and comprehensive– 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 their well known delinquent tenant datbase search, known as Tenant Lifestyle checks for £5 – or less, look out for offers – it’s often possible to get this for free.

    As of May 2014, LRS has more than 400,000 tenants' details on its database. The landlord completes the check via the LRS website – you will need the lodger’s date of birth, full name (and any alternate names from past 3 years) and national insurance number.

    When a lifestyle search is conducted, only if all the details entered match, the following information is 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)
  • Unless you’ve already run a check that includes a previous landlord reference, 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.

    LRS is a not for profit organisation, fully regulated by the Information Commissioner’s Office (ICO).

    If you have children

    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. If they're a public servant (such as a teacher, civil servant, police officer etc or they work with children or for most medical staff), they should have already passed a Disclosure and Barring or the older CRB check. However, if they haven't already passed a recent CRB or DBS check, a subject access request 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 previous addresses and any aliases the lodger has been known by.

    Lodger from overseas and Right to Rent

    If your prospective lodger has recently lived anywhere outside the UK, there are still many tenant checking companies that can screen them, such as Tenant Verify. The Tenant Verify website provides detailed instructions on how to carry this out.

    In addition to this, the Immigration Act 2014 became law throughout England from 1 February 2016. This will also be rolled out in Wales and Scotland, but at the time of writing (February 2016) dates have yet to be announced.

    Rental agreements and licences already in existence will not be affected - for the time being, although this is likely to change in future. This requires all private landlords, including live in landlords or their agent (who would then be liable for any breach, not the landlord) to check that any permanent full time occupant over the age of 18 has the right to rent in the UK. If you are taking a new lodger (with the exception of a midweek lodger) see the Right to Rent Wizard designed to use on a tablet or laptop while you do the document check. The wizard will guide you through the whole process.

    Next - The Right to Rent Check

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