Tenant referencing is an increasingly important part of the property industry.

It is in fact becoming more important as some local authority licensing schemes are looking to require landlords to obtain references in the belief that it will help weed out anti-social behaviour.

In addition, the Right to Rent checks required in some areas due to the Immigration Act have pushed some landlords towards referencing agencies that have products which are intended to help with this process.

However, there is a lot of misunderstanding about referencing and who owns it.

This is made more complex by the provision of the Data Protection Act (DPA) which restricts the processing of personal information.

I will try to deal with all of these points here.

What is a reference?

A reference can mean a number of things. It can simply be a letter from the previous landlord stating that the prospective tenant was good and paid their rent on time.

It might mean a letter from their employer or bank confirming steady employment or ability to afford the rent. Alternatively it might mean a written reference from a referencing company which might comprise all of these things along with a credit check or check of that company’s own tenant data.

However, it should be remembered that a reference is nothing more than that and it is not any form of guarantee of suitability. References are unlikely to tell you if a tenant has been convicted of a criminal offence, and a credit check certainly will not.

A credit check will also only show rent arrears if the claim was made for money specifically. They will not normally show rent arrears that were claimed alongside an order for possession. It is also important to be aware that previous landlords can lieu or obfuscate and employers are also not always wholly accurate.

An employee on a fixed contract may still be made redundant next month and a tenant who paid promptly each month might still have caused problems with the neighbours by being noisy.

Who owns a reference?

This is a common and confusing question. The data that is supplied to take up the reference is usually supplied by the tenant. This information is theirs.

However, the data that is sourced from other providers does not belong to the prospective tenant and is not theirs.

Prospective tenants have no right to see any data provided by another private person as that person also has a right under the Data Protection Act to have their information kept confidential. Therefore they would have to give consent before the prospective tenant was entitled to see any reference written by that person.

If the reference consists of credit data supplied by a company then that company will be registered with the Information Commissioner and the prospective tenant has a right to know where the data was obtained from, so that they can take their own steps to verify its accuracy.

In respect of the landlord, the reference is taken up on their behalf.

Although the point is not widely acknowledged it is likely that all referencing companies actually contract with the landlord anyway and those that contract with a letting agents are likely to be seen as contracting with the landlord via an agent whose existence they are well aware of. Therefore there should be little reason not to allow the landlord to see the reference.

Informing the prospective tenant

If information is collected for a reference then the tenant is required to be informed of the use to which their personal data is being put.

This should be done when it is collected and consent should be sought.

For most agents this will mean informing the prospective tenant that the information may be passed to the prospective landlord and used to obtain a credit check through an external agency. This can usefully be done on a single form which collects the same data.

Many agents will also use it to deal with such issues as agency fees or a fee to take the property off the market.

Other data issues

If information is collected for a reference then that is the only use to which the information can be put. If there is a desire to use it for marketing or other purposes then the information will either need to be anonymised or specific consent obtained.

The data must be stored securely and it should be destroyed securely once it is no longer required. For example data used for references should be destroyed once the tenancy that was formed using it is over and there is no prospect of a claim being made against the tenant.

The Information Commissioner publishes guidance for landlords and tenants which touches on these issues and this can be found here