I always reference my tenants, and over the past couple of years I have heard the term ‘CCJ’ crop up more and more. Should I be discounting a tenant who has a CCJ straight away, or is it something that can be worked around?
Well done for implementing a strict referencing schedule – this is the first step to understanding your tenant’s ability to afford your property.
All good referencing agencies will look into your prospective tenant’s credit history to see if they have any outstanding debts which will eat into their monthly outgoings. After all, if they have a huge debt to pay every month - even if they are earning a hefty salary - this will have an impact on their ability to pay your rent.
With regards to CCJs, you are correct that they are becoming more prevalent. Over the past four years, the number of CCJs (county court judgements) issues to individuals has surged by nearly two-thirds (59%), with more than one million issued in 2016. This hefty hike has lead to the government stepping in, and a consultation has been launched on how CCJs are issued, after concerns were raised that some rogue companies were deliberately sending claims to consumers using incorrect addresses, thus hurting the individual’s credit rating when the claims go unpaid. If the debt continues to be unpaid (likely if it has been sent to an incorrect address) the recipient could find themselves on the receiving end of a CCJ.
To confirm the details of a CCJ, they are a type of court order that can be issued in England, Wales and Northern Ireland against an individual if they fail to pay money that they owe. In Scotland, the process is called enforcing a debt by diligence. A CCJ will stay on a credit rating for six years.
If you have referenced a tenant, and find that they have a CCJ, you have a decision to make – to let or not to let... and it's a tough question.
On one hand, it is likely that they will fail the referencing process, so you should check if any insurances you hope to implement will be valid. If you use a rent guarantee insurance product, or anything similar, do check if this will be valid if you choose to proceed with a tenant who has failed referencing.
On the other hand, do consider the other aspects of the reference before you jump to conclusions. It is possible that a CCJ received five and a half years ago possibly doesn't reflect your prospective tenant’s financial situation now, now! Also, consider whether the CCJ has been satisfied (fully paid up), and if the tenant still owes money.
Before moving forwards, also delve a little deeper into what the CCJ was for. If it was for non-payment of rent, alarm bells may ring, however if your tenant can explain the situation (a parking fine sent to the wrong address, for example) you may want to be a little more lenient.
Whatever the reason, any type of financial black mark against a tenant can raise red flags, however, it is important to take everything into account before you a make a decision. If you choose to proceed, you could consider asking your tenant to provide a guarantor - someone who is willing to guarantee their rent if they fail to pay.
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