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tenant referencing
Apr 11 2024

What are the problems with document verification during tenant referencing?

Ensuring a tenant’s income through payslips is a common practice in tenant referencing. However, what challenges does this approach pose, and what alternatives exist?

Tenant referencing poses challenges for all involved parties. Agents seek effective methods for referencing, tenants navigate hurdles to secure a property, and landlords must determine the suitability of tenants for their properties.

There’s no universally correct method for referencing tenants. Each application and process has distinct requirements. Some agents conduct referencing independently, while others utilise third-party providers.

Nevertheless, in most cases, agents and landlords aim to confirm that tenants can afford the rent and are who they claim to be.

Traditionally, verification of documents—such as payslips or passports—by an agent, landlord, or reference provider has been necessary. However, this approach can open avenues for fraud.

Here are the challenges associated with document verification and strategies to mitigate them:

  • Understanding Right to Rent checks and the role of documents.
  • Leveraging technology to address issues in Right to Rent checks.
  • Identifying documents used for credit checks.
  • Recognising the increasing sophistication of payslip fraud.
  • Exploring how technology can eliminate the need for document verification.

Right to Rent checks ensure that tenants can legally reside in England. While not required in Scotland, Wales, and Northern Ireland, they are essential in England. Failure to complete these checks can result in substantial penalties or even imprisonment.

Agents or their reference providers must scrutinise documents to confirm their authenticity and match with the applicant’s details. To conduct a Right to Rent check, tenants must provide proof of identification and, if non-British citizens, a share code.

To address potential issues in Right to Rent checks, the Government introduced Identity Verification Technology (IDVT). This technology verifies the validity of documents, enhancing security and expediting the process.

Credit checks, also integral to referencing, assess a tenant’s suitability based on financial behavior. Typically, landlords or reference providers rely on documents like payslips to verify income. However, payslip fraud is a growing concern, with sophisticated techniques emerging.

One solution to combat fraud is open banking, which offers a secure and efficient method to verify income and rental payments. Additionally, referencing providers can integrate with HMRC or payroll systems to verify income directly, reducing reliance on document verification.

In conclusion, while document verification has long been a staple in tenant referencing, advancements in technology offer more secure and efficient alternatives, safeguarding against fraud and streamlining the referencing process.

The information in this post is valid to the best of our knowledge on the date of posting. It is advised that you seek independent advice based on your individual circumstances.

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