Failed or declined a tenant reference? A landlord's decision guide

The reference report lands in your inbox and it’s not what you hoped for. Before you either wave the tenancy through on gut feeling or cancel the application on instinct, pause. A failed reference is not a single thing — it is at least four different problems, each with a different risk profile and a different set of responses. Getting the diagnosis right matters more than ever now that Section 21 was abolished on 1 May 2026 and rent-in-advance as a safety net has gone with it.

This guide walks through the most common failure reasons, what each actually means for your exposure, and the decision framework for what to do next.

What “failed referencing” actually means

Referencing platforms return a pass, refer, or fail against specific criteria. When a tenant “fails”, it usually comes down to one of four distinct issues:

1. Affordability gap. The income multiple doesn’t stack up. Most platforms use a 2.5–3× annual rent threshold (i.e. annual gross income of roughly 30× the monthly rent). According to the English Housing Survey 2024–25, private renters spent an average of 39% of their household income on rent once housing support is excluded (34% with it included) — so it’s no surprise that affordability is the most common reason a reference comes back as a “refer” rather than a clean pass. An affordability shortfall is a risk-management problem, not necessarily a character problem.

2. Adverse credit history. County Court Judgments (CCJs), defaults, or insolvency markers. These indicate that the tenant has previously been taken to court for debt, or has defaulted on credit agreements. This is more serious than an affordability gap because it speaks to payment behaviour when money is tight, not just whether income is sufficient.

3. No credit history. Often confused with poor credit but entirely different. Young first-time renters, recent graduates, and people who’ve arrived from abroad simply haven’t built a UK credit footprint. There’s no evidence of bad payment behaviour — there’s just no evidence at all.

4. Adverse tenancy or employment history. A previous landlord reference flagging arrears or damage, or an employment check that doesn’t verify the income or role the applicant claimed. This ranges from minor disputes to outright fabrication.

Lumping all four together as “failed referencing” leads to bad decisions in both directions — proceeding with genuine fraud risks, or rejecting perfectly sound tenants unnecessarily.

The question you need to answer first: gap or red flag?

Run through this short decision tree before doing anything else.

Does anything suggest the information provided is false?

Warning signs of fraud include: pressure to move in urgently, reluctance to provide original documents, payslips or employer letters that don’t match the company’s publicly available contact details, bank statements that look inconsistent with the claimed salary, and references from individuals rather than professional landlords or managing agents. Tenancy fraud — including fake payslips and forged bank statements — has grown sharply as AI tools make convincing forgeries quick to produce. If you spot more than one of these red flags, the appropriate response is to decline the application. Do not offer a guarantor route as a workaround: a guarantor scheme requires honest information about the tenant’s position.

Is the issue purely financial and verifiable?

If the applicant has provided legitimate documents and the sole problem is that their income doesn’t clear the standard multiplier, or that they have a thin credit file rather than a bad one, you have more options.

What you can actually do — and what you can’t

Add a guarantor

Landlords remain free to require a guarantor under the new rules. A guarantor who independently passes full referencing — including a credit check, income verification (guarantors are typically asked for around 36× the monthly rent, higher than the tenant threshold), and ideally homeownership — significantly mitigates affordability risk. The guarantor agreement is best executed as a deed so it is properly enforceable. Note that rent guarantee insurance (RGI) policies typically require the tenant to have passed identity and credit checks; where a tenant fails the credit check, most policies require a fully-referenced guarantor instead, and the tenant generally cannot be covered on their own credit profile. Always check the specific policy terms before relying on this.

Obtain open-banking income evidence

Where affordability is borderline and the candidate lacks traditional payslips (self-employed, portfolio income, zero-hours contract), open banking can verify actual account receipts over a 3–6 month period. This is often more reliable than a one-line employer reference and gives a genuine picture of cashflow.

Adjust rent-in-advance expectations — the rules have changed

Until May 2026, asking for several months’ rent upfront was a common informal risk-mitigation tool. That option is now gone for new tenancies. Under the Renters’ Rights Act, landlords and agents cannot require more than one month’s rent before the tenancy agreement is entered into, and no rent at all may be required before the agreement is signed. Clauses requiring rent in advance of the relevant rental period are void and unenforceable. Requiring a prohibited payment is enforced under the Tenant Fees Act 2019 and can trigger a civil penalty of up to £5,000 for a first breach, rising to £30,000 (or prosecution) for a repeat breach within five years. A tenant can voluntarily pay more than one month in advance once the agreement is signed, but you cannot make it a condition of tenancy. Plan your risk mitigation accordingly — a guarantor and RGI are now the primary tools.

Consider the eviction landscape before proceeding

The abolition of Section 21 on 1 May 2026 means that if a tenancy goes wrong, you cannot simply serve a no-fault notice. The mandatory ground for rent arrears (Ground 8) now requires three months’ arrears to have accumulated and be present both when you serve notice and at the court hearing, with four weeks’ notice required. Add in the time to reach a hearing and you could be without rental income for several months before possession. If a tenant has adverse credit history, that timeline is the exposure you are taking on. RGI is the mechanism designed to protect against exactly this risk — but only if the policy is in place before a problem starts and the referencing eligibility criteria are met.

You can read more about how PropertyGoose’s referencing service captures the right affordability and credit data to support these decisions, including what goes into each check.

The specific cases

Failure reason	Risk level	Typical route forward
Affordability gap, otherwise clean	Low–medium	Guarantor + RGI, open banking verification
No credit history	Low	Guarantor, open banking
CCJs / adverse credit	Medium–high	Guarantor + RGI (check policy eligibility carefully); consider declining
Adverse tenancy history	High	Corroborate with open banking; usually decline unless evidence is very minor and old
Signs of document fraud	Decline	Decline; retain evidence

The guarantor is not a rubber stamp

A mistake some landlords make is accepting a guarantor without properly referencing them. A guarantor who is retired with a modest pension, renting themselves, or carrying their own CCJs provides limited protection. Run a full reference on the guarantor — the same checks you would run on the tenant. If they don’t pass, the guarantor arrangement does not reduce your risk in any meaningful way.

Discrimination: what you cannot do

Two points worth flagging explicitly. You should not decline an applicant simply because they receive housing benefit or Universal Credit. A blanket “no DSS” policy has been found by the courts to amount to unlawful indirect discrimination on the grounds of sex and disability under the Equality Act 2010, because women and disabled people are disproportionately likely to claim. The Renters’ Rights Act now also expressly prohibits discrimination against benefit claimants, backed by civil penalties. If a benefit claimant doesn’t clear an income multiplier, the correct approach is to assess whether the benefit income covers the rent and whether a guarantor is possible — not to apply a blanket ban.

Additionally, when calculating arrears for Ground 8, any sum that is unpaid only because the tenant has not yet received a Universal Credit housing award is disregarded — so a landlord cannot rely on UC payment delays to reach the three-month mandatory threshold. The realistic route in that situation is the discretionary Ground 10, where the court must be satisfied it is reasonable to grant possession.

When the right answer is no

A referencing failure is not always a problem to solve — sometimes it is information telling you the tenancy is not viable. If the applicant has active CCJs, an adverse tenancy history corroborated by open banking data, or any indication that documents may have been falsified, declining is the right outcome. Return any holding deposit promptly: the Tenant Fees Act 2019 requires this, and you must give written reasons within seven days if you keep it. A landlord may retain the holding deposit (capped at one week’s rent) where the tenant has provided false or misleading information that the landlord was reasonably entitled to take into account. Document your decision-making — particularly important now that the Private Rented Sector landlord ombudsman scheme is being rolled out and complaints processes are more formalised.

If you are systematically finding that good applicants are failing on affordability, that may be a signal to revisit your pricing structure and think about what income multiple you are genuinely prepared to accept with a guarantor in place, rather than simply defaulting to the platform’s pass/fail line as an absolute.

A practical checklist

• Identify the specific failure reason(s) — do not treat all failures the same
• Check for fraud red flags before exploring workarounds
• If fraud is suspected, decline and document; do not offer a guarantor route
• For affordability or thin-credit failures, consider a fully-referenced guarantor
• Verify the guarantor properly — income, credit, residency
• Check RGI eligibility before proceeding: most policies need the tenant to pass credit, or a referenced guarantor in place
• Do not require more than one month’s rent in advance for new tenancies, and never require rent before the agreement is signed — it is now a prohibited payment
• Factor in the post-Section 21 eviction timeline when assessing risk tolerance
• Document your decision-making throughout

PropertyGoose’s referencing checks are designed to give landlords the detail they need to make these calls — not just a binary pass/fail, but the underlying data. If you’re running your own portfolio or managing on behalf of landlords, take a look at how our pricing works and how we compare to other providers.

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Craig Ryder is co-founder of PropertyGoose, a UK tenant referencing and tenancy-management platform built by ex-letting agents.