Home Letting Guide

Introduction

Whether you are considering renting out your own home or wish to enter the buy-to-let market, this letting guide offers considerable useful advice on becoming a landlord. After deciding to let a residential property, one of the first questions is whether to use a letting agent or go it alone.

Preparing the home that is to be let is important, ensuring it is in good decorative order, tidy and that repairs have been carried out. The better the condition of the house the better quality tenants you will attract. While most landlord and tenant arrangements run smoothly, occasionally disputes can arise.

Using A Letting Agent - Pros And Cons

Many landlords prefer to use a letting agent who can deal with a tenant directly, help find a suitable tenant and deal with financial matters. When choosing a letting agent ensure they are members of Propertymark or Safeagent. This ensures they abide by a strict code of conduct.

Advantages

• The letting agent can tailor a service to suit your needs, including finding and checking tenants, managing the property, dealing with repairs and organising insurance
• Letting agents registered with trade associations ensure staff are well trained and offer prompt, efficient service
• Can provide tenancy agreements and handle advertising
• Members are signed up to The Property Ombudsman scheme, giving landlords right of redress

Disadvantages

• Fees can be prohibitive - typically 10% to 17% of monthly rent for property management
• Creates an extra layer in the relationship with tenants, potentially slowing communication
• If agency goes bankrupt, landlord is still liable to tenant for outstanding money

Responsibilities Of A Landlord

Landlords have serious responsibilities regarding the safety of the property they are renting out to their tenants.

Fire Safety

All furniture and furnishings need to meet strict criteria laid out in the Furniture and Furnishings (Fire) (Safety) Regulations 1988. All upholstered items must have fire resistant filling and have passed match and cigarette resistance tests. The Housing Act 2004 lays down rules to ensure tenants can easily escape in case of fire. The Smoke and Carbon Monoxide Alarm Regulations 2015 explains requirements for warning systems.

Gas Safety

Landlords are required to ensure gas boilers and equipment are serviced once a year. Records must be kept and landlords must provide tenants with an annual gas safety certificate. Service must be carried out by a Gas Safe registered contractor. Relevant law: The Gas Safety (Installation & Use) Regulations 1998.

Electrical Safety

Electrical wiring must be safe and in good working order. Smoke alarms need to be fitted and work properly. Wiring more than 15 years old needs annual inspection. Use electricians approved through the Part 'P' Competent Person Scheme. Relevant law: The Electrical Equipment (Safety) Regulations 1994.

Energy Performance Certificates

Since 1st October 2008, landlords have been legally required to provide copies of an Energy Performance Certificate to potential tenants. An EPC tells how energy efficient a rental property is on a scale of A-G. Valid for 10 years and must be obtained from a qualified Domestic Energy Assessor.

Contracts With Tenants

A tenancy agreement between tenant and landlord is required before a tenancy can be legally binding. The most common form is an Assured Shorthold Tenancy for a minimum of six months. This can be oral or written, but written is advisable.

Written Agreement Should Include:

• The landlord's name and tenant's name
• The address of the property
• The length of tenancy and notice period
• Amount of rent and when due, including advance payments and whether bills are included
• Whether fixed term or open ended, and details of rent increases
• Details about the deposit
• Obligations of the tenant
• The duties of the landlord to ensure the home is kept in good repair

Landlord Letting Insurance

It is vital that landlords arrange insurance. This is offered through letting agents but can also be arranged separately. It is the landlord's responsibility to arrange building insurance and to insure furnishings included on the inventory.

Types of Landlord Insurance:

• Buildings insurance to cover rebuilding or major repairs
• Contents insurance to cover items on the inventory
• Liability insurance to cover issues such as personal injury claims by tenants
• Loss of rent insurance to cover damage or building work making property unrentable

Tenancy Deposit Schemes Explained

Under the Housing (Tenancy Deposit Schemes) Order 2007, all landlords must hand over deposits that are part of an assured shorthold tenancy to a tenancy deposit scheme. This was put in place to stop landlords keeping tenants deposits unfairly. There are two types: custodial and insurance-based.

Custodial Scheme

The Deposit Protection Service (DPS) is a Government appointed custodial deposit organisation. Free to use, funded by interest earned on deposits. Hands back deposit when tenant and landlord agree, with disputes service if they cannot.

Insurance-based Schemes

Landlord pays a fee into the scheme which insures against unlawfully retaining the deposit. Two schemes: MyDeposits (sponsored by National Landlords Association) and Tenancy Deposit Scheme (only open to landlords and agents who belong to professional bodies).

Evicting Tenants

Under the Protection from Eviction Act 1977, residential tenants can usually only be evicted with a court order. It is a criminal offence to harass a tenant. With assured shorthold tenancies there are two simple grounds for eviction: valid notice ending the tenancy and non-payment of rent.

Notice to End Tenancy

Landlord can serve notice with no justification ending a tenancy after the fixed period (usually six months). If tenant remains, landlord must go to court and seek a court order for eviction.

Non-Payment of Rent

A Section 8 eviction notice can be issued if tenant is in rent arrears. Landlord entitled to take possession if tenant is in arrears of at least two months rent. Tenant must be given at least 14 days notice to leave.

Houses In Multiple Occupation

An HMO is typically a property shared by three or more tenants who are not members of the same family. Rates of return are typically better but balanced by greater active property management and more regulation.

Licensing of HMOs

Large HMOs (at least five tenants of more than one family sharing facilities) come under mandatory licensing. Requirements include: registration fee, landlord must be fit and proper person, property must be up to acceptable standard using Housing Health and Safety Rating System.

Fire Regulations for HMOs

HMOs have more stringent fire regulations including: fire alarms throughout building, systems checked regularly, fire equipment like extinguishers and blankets, escape route with self-closing fire resistant doors.

Letting A Room In Your Own Home

One potentially useful way for homeowners to exploit hidden potential is to rent a room in their own home. Lodgers do not have the same legal protection as normal residential tenants and do not have a fixed six month period before agreement can be ended.

Tax Treatment

Under the Rent a Room Scheme, landlords can receive an additional £7,500 tax-free allowance. This is halved if you share income with your partner or someone else. Check that renting rooms does not create Capital Gains Tax liability when you sell your home.

Troubleshooting Problems That Can Arise

Key Advice

• Minimise risk of problem tenants by carrying out thorough credit and reference checks
• Do not get angry with tenants and be professional at all times
• Keep on top of problems - repairs do not go away
• Carry out regular property checks with reasonable notice (24-48 hours)
• Keep accurate records of tenancy agreements, financial transactions and correspondence
• Be present during inventory checks at beginning and end of tenancy
• Minimise damage by making décor hard wearing - washable paint, stain protected carpets or laminate flooring

Useful Contacts