Affordability failed, but should have passed?

Landlord Discussion
1

I have a potential tenant who I like. He’s just failed affordability check.
He’s self employed, and I can see on the bank account statements on the report that his income is around £25K net (approx £30K as tax deducted at source) which should pass.

Is there a possibility that affordability has been assessed on the assumption that the payments going into his account, still need to be taxed (when they’re not)

2

I have a similar problem with a lady who I like & who apparently has ample savings and even offered to pay 6 months upfront but has failed the check! Now I’ve asked for her Guarantor’s check and still awaiting that.

I don’t know what I’m going to do if that fails too?!

Jill

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3

I’ve had a similar issues where the person said they had ample savings , failed referencing and so did two guarantors and after three weeks pulled out. Do not go with any tenant that can’t officially reference. Do it at your own peril. Good business means doing it by the book. It’s so costly to get an unreliable tenant in. Referencing companies cheque everything and if you pass you are entitled to rent guarantee insurance which I do recommend every landlord gets. Good luck.

4

Few things raise flags for me here

  • you haven’t asked for or gone over the last six months of his bank statements. That’s a fundamental check you should have done before you paid for referencing.
  • if he’s truly self-employed then there’s no “tax deducted at source”. He’ll be liable for self-assessment and will pay tax once his tax statement lands each year. Until he does self-assessment, there’s no way of knowing how much tax he’ll owe because it will depend on the figures he provides inland revenue. IOW, payments going into his account do indeed still need to be taxed. If not, he’s not self-employed.
  • again, if he’s self-employed, those payments will also need to have NI deducted from them as HMRC now collect payments annually for this if you’re self-employed and resident in the UK
  • finally, where are his accounts? He should provide you with at least two years’ worth. If he’s got an accountant who can verify his accounts even better.

As it stands, I’d go with the results of the affordability check, but more digging might provide you with more certainty.

5

I don’t agree I really don’t like the way open rent do the referencing. I have lost out on stable tenants due to the way they do it. They don’t allow multiple sources of income on their system and also the open banking some tenants just cannot share their data through this way but that’s the only way open rent to it. Go with your gut

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6

No you haven’t. You’ve lost out on applicants that may have been stable tenants…

… or they may have been completely unstable. But if they were never your tenants you have no way of proving that either way.

If you don’t agree with my recommendation, that’s fine, but do the OP a favour and address the four raised flags that I detailed and provide some rationale for ignoring them.

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7

Affordability check doesn’t guarantee a tenant will pay the rent let’s just be honest. I have lived in my current place in london for close to a year now and I have never been late in paying my rent and will never be because I know how important it is. Guess what I failed the affordability check but the landlord took a gamble on me after seeing my bank statement and a clean reference from my previous landlord I am never late with my rent. The landlord also agreed for me to pay the deposits in 3 installments as I was moving to london from hull.
So far so good everything is going well for me and my LL.

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8

Exactly. Affordability check doesn’t guarantee a tenant will pay their rent and in time.

9

You can be Self Employed working in the Construction Industry (CIS) and the contractor deducts 20% off your gross for tax and pays this to the HMRC, this is normal procedures for Subbies working on site,

10

that’s useful to know… unfortunately we don’t know what the applicant in this case was self-employed as.

11

However, its not usually worth suing a self employed person for a debt as you can’t apply for an attachment of earnings order.

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