Section 21 abolished: why thorough tenant referencing is now non-negotiable

If you've been following the Renters' Rights Act coverage (and if you're a letting agent, you certainly should be), you'll know by now that Section 21 - the so-called 'no-fault eviction' - is officially on its way out. What that means in practical terms is pretty straightforward: once the Act is fully in force, you won't be able to remove a tenant simply because a fixed term has ended. You'll need a specific ground under Section 8, and you'll need to prove it.

For most agents we speak to, this has fundamentally changed the way they think about who they put into a property.

Getting it right first time

When Section 21 was available, there was always an exit route. If things went wrong with a tenant - late payments, antisocial behaviour, property damage - an agent could serve two months' notice and, barring complications, regain possession without having to give a reason. That safety net meant some agents were more relaxed about who they let a property to. Not deliberately careless, but perhaps willing to take a punt on a borderline applicant if the landlord was keen to get the property occupied.

That safety net is now gone. If a tenant falls behind on rent, you'll need to wait until they're at least two months in arrears before you can serve a Section 8 notice under Ground 8. Then there's the court process, which as anyone who has been through it knows, is neither quick nor cheap. We've heard from agents who've had landlords wait upwards of six months from the first missed payment to actually getting their property back. The legal costs alone can run into thousands.

The real cost of a bad tenant

We did a rough calculation recently for a landlord who asked us whether referencing was really worth the money. For a property let at £1,200 a month:

• Two months' arrears before you can serve notice: £2,400
• Court fees and solicitor costs: £1,500–£3,000
• Time to obtain a possession order (optimistic): 3–4 months
• Lost rent during that period: £3,600–£4,800
• Property damage and clean-up: varies wildly, but £1,000–£5,000 is not unusual

You're looking at somewhere between £8,500 and £15,000 in total losses. Compare that with the cost of a comprehensive tenant reference.

What a proper reference actually catches

We're not talking about a quick credit score here. A thorough reference includes three years of credit history, bank account validation, employment and income verification, previous landlord references and AML screening. We've caught all sorts over the years - applicants with undisclosed CCJs, fabricated employer references or even doctored bank statements. Our fraud detection tools have got significantly better at spotting this kind of thing, but the point is: without proper checks, these tenants would have been let into properties.

Under the old regime, that might have been a headache. Under the new rules, it could be a financial disaster for your landlord.

Our advice

If you're not already referencing every applicant - and referencing them properly, not just running a basic credit check - now is the time to start. Talk to your landlords about it. Most of them will have seen the news coverage and will understand why it matters. For those who are cost-conscious, remind them what the alternative looks like.

We offer a free trial for new customers, so there's no risk in trying us out. And if you'd like to chat through how the Renters' Rights Act specifically affects your portfolio, give us a call on 01630 318181. We've been doing this since 2008 and we're happy to share what we've learned.