Tenant fraud is on the rise with a 140% increase in fraudulent applications in 2023. Consider this alongside the twelve applicants for each rental property, and you’ll understand why letting agents are facing immense pressure to streamline their background and identity checks for tenants.
When letting a property, carrying out the right tenant identity checks is essential for staying compliant, preventing fraud and protecting your rental income. However, as experts in digital due diligence, we know how important it is to make sure those checks are simple and fast, helping you let your properties quickly.
Here’s how to check a prospective tenant’s identity in five steps:
- Verify the tenant’s ID
- Check a tenant’s Right to Rent
- Check the tenant’s registered address
- Check for County Court Judgments (CCJs) or insolvency
- Perform a tenant affordability check
1. Verify the Tenant’s ID
Once you’ve found a prospective tenant, the first step is to check their ID. While many of us take trust for granted, it’s important to stay vigilant for fake IDs used by criminals and ensure that your tenant is who they say they are.
While you can rely on manual ID checks, using an ID document checking app gives an extra layer of protection for your business. When checking an ID, it’s important to screen for:
- Tampered or forged documents
- Presentation attacks and deepfakes
- AI-generated documents
- Synthetic identities
- Stolen or compromised documents
It’s worth noting here that 3.5 million UK citizens lack any form of photo ID. Here’s what we’re doing to make digital ID verification more accessible.
2. Check a Tenant’s Right to Rent
The Right to Rent scheme requires all landlords and letting agents based in England to check the immigration status of prospective adult tenants or lodgers before they move into a property, even if the person isn’t named in your tenancy agreement. This step doesn’t apply to properties based in Wales, Scotland or Northern Ireland.
To confirm a tenant’s Right to Rent, you’ll need to ask them for original documents that prove their right to live in the UK. If your tenant isn’t a British or Irish citizen and doesn’t have an accepted original document, they can give you a share code allowing you to check their status. Failing this, you can request a Right to Rent check from the Home Office.
When it comes to checking a tenant’s documents, you can either do this manually in a face-to-face meeting and keep your own records, or you can opt for using a remote Identity Service Provider (IDSP) to save you time.
If you’re a busy letting agent, we can help you easily verify your tenants’ Right to Rent with certified ID verification technology.
3. Check a tenant’s registered address
While confirming a registered address is an essential part of checking a prospective tenant’s identity, you might also know the frustration of having to gather paper utility bills and bank statements.
Luckily, modern identity verification software replaces the need for this. Instead of requiring proof of address documents from your tenant, we can instead draw data from authoritative sources such as the electoral roll or credit bureaus to check their registered address.
4. Check for County Court Judgments (CCJs) or insolvency
Before taking on a tenant, you’ll need to make sure they’re able to reliably pay their rent. Checking a prospective tenant’s records for CCJs or insolvency is the first step to uncovering any significant financial issues they may have.
Remaining on record for six years, CCJs and insolvencies will give you a picture of a tenant’s ability to manage debt and help you make an informed decision before signing a letting contract.
5. Perform a Tenant Affordability Check
The final step in your screening process, tenant affordability checks help you make sure your prospective tenant can afford the rent over their tenancy period. You’ll typically want to confirm that the tenant’s monthly income is at least 2.5 times the rent.
As a letting agent, performing a tenant affordability check helps you make the best decisions around what tenants to accept and increases your chances of avoiding costly rental arrears and legal disputes. They can, however, be time-consuming when done manually and often involve poring over client bank statements.
If you’re looking for a simpler alternative to manual affordability checks, Open Banking allows you to gather the data and evidence you need directly from hundreds of UK financial service providers. In just a few clicks, you’ll be able to see your tenant’s spending across categories from salary and cash deposits to high-risk activities and gambling.
With payslip fraud being the most common attempt to trick referencing systems, Open Banking allows you to sidestep tampered documents and easily validate your tenants’ proof of income.
How We Can Help
From verifying Right to Rent to affordability checks, we hope this guide has helped you understand how to check a prospective tenant’s identity in five actionable steps. As identity verification software develops, we’ve also shared some of the ways digital background and identity checks for tenants can support your business.
Read our blog to learn more about compliance for letting agents including simplifying sanctions compliance and whether estate agents need to do AML checks.
At Credas, we can remove the burden of checking tenants with streamlined packages from basic ID and Right to Rent checks all the way to full referencing and screening. Every five seconds, we help to safeguard a property transaction from financial crime and fraud.
Find out more about our streamlined checks for tenants and book a demo here.
