Guide to letting your property
A summary guide to letting your property and information on our
services & fees is available to download in PDF format by clicking
on the Landlord Brochure link on the left.
Below is more comprehensive information about the things to consider
when letting a property. It should be useful for all landlords in
all areas, whether you are thinking about entering the buy-to-let
market for the first time or already have a large portfolio of
properties.
Please click on the specific headings or simply scroll down to read
all the information.
Starting out
Mortgage and finance
Location and types of
property
Types of tenant
Pets
Letting agent or DIY
Permissions required
Presenting your property
Fire and safety checks
Other legislation
Tax
Documentation
Length of tenancies
Notice periods
Houses in Multiple
Occupation (HMO's)
Disclaimer
There are many reasons why you may decide to let your property. You
may be moving temporarily with a job contract and may be aiming to
move back one day. You may have inherited a property or you may be
considering a buy-to-let investment.
The UK rental market is growing due to many trends. People are very
transient these days and move around with their jobs. Due to ever
increasing property prices many young people are unable to afford to
buy and need to rent. There is also a new wave of immigrants from
Europe who need places to live.
Before buying a property or deciding to let your current home it is
best to seek advise from letting agents in your local area. See if
the property you have is in demand or if seeking an investment, ask
what areas and types of property are popular. It is also useful to
talk to other people you may know that have rented or let a property
and read as much as you can on the subject.
If the property has been your main home, or is inherited, the
decision to allow someone else to live there may be a difficult one.
If it is an investment decision, then you are less likely to be
emotionally attached. Either way letting a property should be seen
as running a small business. It may provide additional income and
capital appreciation but will also incur costs and tax liabilities.
Just like a companies assets, fixtures and fittings will depreciate
and from time to time need replacing.
< top
If you are investing in
a property specifically to let, you will need a suitable buy to let
mortgage. There are now thousands of suitable buy to let mortgage
options available and most lenders will be able to advise you. If
you are going to let a property you have lived in and have a normal
residential mortgage then you will need permission from the
mortgagee. Most lenders will allow you to rent but there is usually
and administration fee (see permissions section below).
< top
There is a market for most types of property from one bedroom flats
to 6 bedroom country houses (or larger). The demand for each type of
property may vary from area to area. Before considering letting your
property or buying a property as an investment, you should carry out
extensive research. Look on the internet property portals and the
press and see what is available in the area you are considering. It
is best not to choose anything too unusual - that underground, eco
friendly, converted WWII bunker may look attractive but will have a
limited appeal. Look carefully to see if the market is inundated
with a particular property. For example there may be a lot of 1 an 2
bed flats available which could indicate an oversupply or not enough
demand. Speak to several agents to get a feel for what will rent
quickly and achieve a good rental income, what areas are popular and
where to avoid. Always buy with your business head on and not with
your heart. The area may be near a university and if you are happy
to have student tenants then a large shared property may be a good
investment. With larger properties, be sure to check if it falls
into the category of a House in Multiple Occupation (HMO). HMO's
have a lot more legislation and you will need a lot of advise or
experience before considering this type of property. More
information can be found in the HMO section below. Young
professional couples often seek good quality apartments near the
centre of town. For families consider 3-4 bed houses near good
schools and amenities.
Whatever the type of property, most tenants will look for off road
or allocated parking (especially in the centre of town), en-suite
bathrooms, more than one bathroom if it is a larger property and low
maintenance gardens.
Location is all important, consider proximity to good schools,
shops, entertainment, town center, rail, bus and road networks.
< top
Tenants are often given labels in adverts. You will see: "Suit Young
Professional Couple or Single", "No Students or DSS", "Ideal
Executive Family House"
The ideal tenant comes in many different guises but what every
landlord needs is someone that:
-
has
a regular and permanent income or savings/pension that will more
than cover the cost of the rent, plus the bills.
-
will stay at the property for a reasonable length of time
(assuming it is an investment and you do not need to move back
in after 6 months)
-
will keep the property clean and tidy
-
will not annoy the neighbours
-
will not be too demanding
-
Will give plenty of notice when they leave
There isn't a label that will allow you to find this type of tenant.
Sometimes the young upwardly mobile professional (everyone's idea of
a good tenant), will still have parties and trash the place. The
older, more mature couple with a family may have a divorce or a
redundancy to deal with and leave early or stop paying the rent. The
one claiming benefits, who can stereo-typically be given a bad
reputation may treat the property well and pay the rent on time
because they know how difficult it is to find landlords that are
willing to consider them as tenants.
Whatever your target market and however "nice" the applicants appear
to be, it is important to get a credit check and reference for all
the adult occupants and if necessary a guarantor.
< top
Many people want to bring their pets to their new homes and of
course they vary from a goldfish to a horse! You can stipulate
whether or not you accept pets and restrict the type. Or you can
stipulate a higher deposit to safeguard against damage by the pet.
< top
There are benefits for both routes to letting your property. Also,
letting agents will provide different levels of service allowing you
to be as involved as you want to be.
If you decide to find a tenant and manage the tenancy yourself, you
will reduce the costs of letting a property and maintain tight
control over the property. You will, however, need the time to show
applicants around, will need to be very up to date with the latest
regulations and have all the relevant documentation ready. You will
also need to be available to act promptly if the property needs
maintenance and to answer the tenants questions and deal with rent
collection etc. You will also need to market the property yourself
which may be limited to word of mouth and an advert in the local
press. This is fine if you have one property and a flexible job but
if you decide to build a portfolio, are very busy at work or live
away from the area then it may prove more difficult.
If you choose a Tenant Finder Service from a letting agent you will
benefit from their marketing. This is usually on the internet where
most people look for rental property as well as in the appropriate
press sections. Applicants are usually accompanied on viewings. They
will also be referenced and credit checked. All the documentation
will be taken care of and you will be advised on compliance with the
latest legislation.
If you want the stress free route then a fully managed service will
normally mean the agent deals with any queries from the tenant
during the tenancy and you will have little or no contact from the
tenant at all.
Choosing an agent
Letting agents services, fees and levels of professionalism vary. It
is often a good idea to get a recommendation from a friend that has
used a reputable agent in the past. It is also a good idea to have 2
or 3 different agents come and appraise your property. You will get
an average market value and will also get a feel for the agency
themselves.
Levels of Service
Look closely at the levels of service offered, not all tenant finder
or management services are the same. Some agents may charge extra
for items such as Inventories, documentation, tenancy renewals etc.
There services and fees should be clearly displayed on their
documentation and on their websites. Make sure you choose an agent
that is a member of a professional body such as the National
Approved Letting Scheme (NALS) or the Association of Residential
Letting Agents (ARLA). They should have the association logos
displayed.
Fees
The fees also vary, high street agents may charge higher prices to
cover the bigger overheads associated with operating from
prestigious premises when in reality more customers are found via
the internet these days.
If they are charging higher than average, ask yourself if you are
really getting more for your money (especially if they still charge
for those extras!). It is also probably not a good idea to choose
the cheapest budget agency.
Accompanied viewings
A professional letting agency will always accompany applicants on
viewings at your property, as part of their service. This means
viewers will receive a consistent and professional presentation of
the property and will not feel awkward asking questions or providing
honest feedback.
Reference and
credit
checks
A good letting agent will carry out comprehensive credit and
reference checks on each adult tenant. Quite often they will employ
the services of a professional agency to do this. The applicants
will fill out an application form with their employment and address
history.
The credit check will normally show if the applicants have any
County Court Judgments (CCJ's) or an adverse credit score. The
references that are normally taken are an employer reference and a
previous landlord reference if applicable.
The employer reference is usually to ascertain if the tenant is in
the job they claim to be, if that job is permanent and if they are
earning the salary they have indicated on the form. The agencies
normally have a salary multiple criteria to see if the tenants can
afford to pay the rent. This is typically that the annual salary
should be equal to or more than 2.5 x Rent x 12.
The landlord reference will cover if the tenant did indeed live at
the address, for how long and if they paid the rent on time and were
generally good tenants.
It should be noted that the credit and reference checks are a
snapshot in time. It looks and previous history and current
situation. It does not guarantee that even the best looking
applicants on paper will still be able to pay the rent if their
company has redundancies or that their teenage kids won't play their
music too loud and annoy the neighbours.
< top
Mortgage company
If you have an existing mortgage on a property and decide to let it
out you will need permission from the mortgage company. The
mortgagee will normally charge a fee to give you written permission
but most will not refuse, as long as you have not defaulted on
payments. Some may place restrictions on the types of tenants or
request to see a copy of each new tenancy agreement. You should
inform your appointed agent of any of the mortgagees requirements.
If you have a buy to let mortgage product, then the mortgagee
will already assume you are going to let the property so written
permission will not be required.
Freeholder
If the property is leasehold then you will also need permission from
the freeholder or the management company. This should also be in
writing. A management company may also charge a fee for this
request.
Insurance
company
You must also inform any insurance companies that the house will be
let as it may change the policy or render it void if it is not you
living there.
< top
Tenants do not normally view just one property and there is normally
a lot of competition with other properties available. Tenants are
more demanding these days and presenting your property in the best
light will not only help to let it quicker but will help you achieve
the best rental value as well.
Clean,
tidy and de-cluttered
Renting is no different to buying a property. Tenants want to see
the property in good condition, clean, tidy and free from clutter
and personal items. This obviously easier if the property is empty
but harder if you are still living there with the kids and pets.
Even if you are not ready to move, it is still a good idea to remove
all the personal items such as family photos, ornaments and
de-clutter as much as you can. Clean all the windows and the
exterior of the property, tidy the garden, especially the front, and
keep the grass cut in preparation for viewings.
Maintenance and repairs
Paint over any marks and scratches in the walls or woodwork. Make
sure everything that is staying at the property is working such as
appliances, fires, heating etc. Have the carpets professionally
cleaned if there are any marks or stains. These will show up more if
the property is empty and the furniture or rug you were hiding that
stain under has been removed!
Neutral colours
That pink nursery bedroom may have been suitable for little Lucy but
for the professional couple that needs a study it may not be ideal.
Again, just as if you were selling, it is worth spending a little in
painting over any loud colours and possible replacing any outdated
carpet with plain neutral colours or laminate.
Furnished
or unfurnished
As Letting and Managing agents, this is one of the most frequent
questions we are asked by potential Landlords looking to invest in
property to let in the area. We are specifically asked for the
difference in the market value between the two and which is more
popular.
Typically these days there is little difference in rental price that
can be attained. Although it depends on the level of furnishing and
the size of the property. For valuation purposes furnished
properties are usually slightly higher than unfurnished and tenants
generally expect to pay more. The larger the property the more the
difference in price between the two.
The main difference to the Landlord is to wear and tear on the
property. Furniture is usually much more likely to show early signs
of wear than the fixtures and fittings and therefore you need to
factor in the costs of replacing it. Also, if an appliance breaks
during the tenancy it will need to be replaced immediately as the
tenant has accepted the property on the basis of the appliance being
there. It is, therefore, a good idea to consider whether it is worth
leaving older appliances and electrical items in place.
If you decide to let the property with furniture, you should
consider carefully to what level. Typically minimum requirements,
even if advertised as unfurnished, will be for the Kitchen to have
all appliances such as oven, fridge/freezer and washing machine. If
furnished then, bedrooms should have beds, wardrobes and drawers and
the living area should contain a sofa, armchairs and a dining table
if room permits.
Furniture is also more likely to be damaged and if letting a
furnished property the Inventory and Schedule of Condition should
indicate the age and state of all the furniture. This gives more
evidence if it comes to charging a tenant for damage. It is also a
good idea to take lots photographs.
If there are soft furnishing at the property then you will need to
check they have the relevant fire safety labels in place, see the
safety check section below for more information.
Some company/executive tenants who move frequently need to rent
properties that are completely furnished down to the knives and
forks and this can be a good market to aim for in the right area.
< top
Gas
annual safety check
Under the Gas Safety (Installation and Use) Regulations 1998 all gas
appliances and flues in rented accommodation must be checked for
safety within 12 months of being installed, and thereafter at least
every 12 months by a competent engineer (i.e. a CORGI registered gas
installer). Note: The Gas Safety Check must be completed and
a copy of the certificate handed to the tenant before they can move
in.
Note: The check does not guarantee that the appliances remain
safe and we strongly recommend they are also serviced regularly by a
qualified engineer.
Although the legislation does not insist on a safety check for oil
and other fuel fired systems. Most fuels can produce Carbon Monoxide
if they are faulty and you should have any heating / water system or
appliance checked for safety and serviced regularly.
Electrical appliances & equipment
There are several regulations relating to electrical installations,
equipment and appliance safety, and these affect landlords and their
agents in that they are 'supplying in the course of business'. They
include the Electrical Equipment (Safety) Regulations 1994, the
Plugs and Sockets Regulations 1994, the 2005 Building Regulation -
'Part P, and British Standard BS1363 relating to plugs and sockets.
Although with tenanted property there is currently no specific legal
requirement for a qualified electrician to carry out an inspection
and issue a safety certificate (as exists in the case of gas
appliances), it is now widely accepted in the letting industry that
the only safe way to ensure safety, and to avoid the risk of being
accused of neglecting your 'duty of care', or even of manslaughter
is to arrange such an inspection and certificate. It is also
recommended that all portable appliances be tested (PAT). We can
recommend companies to carry out the above inspections.
Consumer protection - Fire
The Furniture and Furnishings (Fire) (Safety) Regulations 1988
(amended 1989, 1993 and 1996), and other regulations provide that
specified items supplied in the course of letting property must meet
minimum fire resistance standards. The regulations apply to all
upholstered furniture, beds, headboards and mattresses, sofa beds,
futons and other convertibles, nursery furniture, garden furniture
suitable for use in a dwelling, scatter cushions, pillows and
non-original covers for furniture. They do not apply to antique
furniture or furniture made before 1950.
Bed covers including duvets, loose covers for mattresses,
pillowcases, curtains, carpets or sleeping bags. Items which comply
will have a suitable permanent label attached. Non-compliant items
or items without labels must be removed before a tenancy commences.
Smoke alarms
All properties built since June 1992 must have been fitted with
mains powered smoke detector alarms from new. Although there is no
legislation requiring smoke alarms to be fitted in other ordinary
tenanted properties, it is generally considered that the common law
'duty of care' means that Landlords and their Agents could be liable
should a fire cause injury or damage in a tenanted property where
smoke alarms are not fitted. We therefore strongly recommend that
the Landlord fit at least one alarm on each floor (in the hall and
landing areas) and that they are tested and if necessary batteries
replaced before a tenancy begins. The tenant is responsible for
checking operation and battery condition during the tenancy.
Risk assessment
It would also be prudent to risk assess the property before it is
rented. Look for risks to the occupants such as loose carpets, loose
paving in the garden, sharp edges that could be removed, loose
doors, cupboards, check if the appliances and large bookshelves are
stable. It is also advisable to supply a fire extinguisher and fire
blanket in the kitchen.
Records
Full records must be kept for at least 2 years of the inspections of
each appliance and flue, of any defects found and of any remedial
action taken. Copies of the certificate must be given to each tenant
before they move in and thereafter within 28 days of the check being
carried out.
< top
Deposit
protection
From the 6th April 2007 all deposits taken from tenants by landlords
or letting agents must be safeguarded by a government authorised
scheme. There are two insurance backed schemes allowing the landlord
or letting agents to hold the deposits and one custodial scheme. The
two insurance schemes charge a fee for each deposit and the
custodial scheme is free.
-
The Deposit Protection Service - the only custodial deposit
protection scheme - is free to use. For more information, visit
www.depositprotection.com or call 0870 707 1 707
-
Tenancy Deposit Solutions Ltd is a partnership between the
National Landlords Association and Hamilton Fraser Insurance.
This insurance-based tenancy deposit protection scheme enables
landlords to hold deposits. For more information, visit
www.mydeposits.co.uk
-
The Tenancy Deposit Scheme is an insurance-backed scheme that
enables landlords to hold deposits. For more information, visit
www.tds.gb.com or call 0845 226 7837.
Energy Performance Certificates (EPC)
From October 2008 all rented properties will require an EPC. The
current view is that these certificates will last for 10 years and
that property owners will not be required to introduce any
modifications that may be recommended. Copies of the certificate
will have to be given to each applicant with the property details.
You can see more information and arrange an EPC by
clicking here.
Repairs and maintenance
It is the landlord’s obligation to maintain and repair the property
in line with current legislation particularly in relation to section
11 of the Landlords and Tenant Act 1985 as well as in line with
current safety regulations regarding furniture, electrical items and
gas.
< top
UK based
landlords
Rents taken from tenants are part of the tax payers total income and
are taxable less allowable expenses. The expenses that can be
claimed must be wholly and exclusively incurred in the course of the
letting the property.
General items that can be claimed include: mortgage interest, travel
to the property (in the course of the letting process), the agents
fees and 10% allowance for wear and tear.
This is a complicated issue, however, and professional advise should
be sort from a tax advisor
Overseas resident
landlords
Managing agents have a legal obligation to deduct basic rate tax
from the rents collected and pay this to the H.M. Revenue & Customs
each quarter. If there isn't a managing agent then the obligation to
deduct and pay to the H.M. Revenue & Customs falls on the tenant.
Landlords can apply for exemption by contacting H.M. Revenue &
Customs Residency (HMRC Residency). Once they obtain approval HMRC
Residency will issue an exemption number to the letting agent or
tenant and the landlord can receive the gross rental payments,
although the rent will remain liable to UK tax.
For
more information or to apply for exemption contact:
HMRC
Residency
Unit 367
St John's House
Merton Road
Bootle
Merseyside
L69 9BB
or
fill out an NRL 1 form (see
also
NRL 1 Notes) and
post it to the above address.
< top
Landlords
identification
A letting agent will normally request proof of the landlords ID such
as a copy of their passport and will also require copies of their
proof of ownership of the property and permissions to let.
Tenants
identification
Copies of the applicants passport and a current utility bill proving
their residency will normally be requested.
Tenancy
agreement
The usual tenancy agreement is an Assured Shorthold Tenancy (AST).
Copies of standard agreements are available from the larger
stationers and from various sources on the internet. If you are
using an agent, they should have a suitable current agreement.
Prescribed
information for deposit scheme
As well as lodging the deposit or details of the deposit with a
relevant scheme you must also give the tenants certain prescribed
information such as the details of the scheme and how to claim the
deposit back at the end. The information should be provided by the
relevant scheme that you subscribe to or should be provided by your
agent.
Inventory and
schedule of condition
This document is very important and although not a legal requirement
it is strongly recommended by the deposit scheme administrators. It
is very difficult to prove the condition of the property and
dilapidations at the end if you do not have a detailed inventory and
schedule of condition, preferably with photographic evidence to back
it up. A good agent will supply a professional, detailed inventory
and depending on the level of service will get the tenants to sign
it at the beginning and end of a tenancy.
Document
folder for appliances / heating
etc
It is extremely useful for tenants, and time saving for you or your
letting agent if you provide as much documentation as possible to
the tenants at the start of a tenancy. This saves a lot of time
answering calls from tenants that do not know how the washing
machine works! It is a good idea to collect together all the
information you can find and present it in one folder that can be
added to the inventory. The agents should provide the tenant with
information such as utility suppliers etc but it is also advisable
to provide information such as alarm codes, entry codes, bin day,
recycling day etc. on a sheet of paper in the folder.
< top
Legally the minimum length of a tenancy is 6 months but they can be
arranged for longer fixed periods by agreement between the landlord
and tenant. Once the tenancy agreement is signed the tenant is
liable to pay the rent for the fixed period and the landlord can not
usually evict the tenant from the property until the end of that
period. At the end of the fixed period the landlord and tenant can
agree to sign for another fixed period or allow the tenancy to
become a statutory periodic tenancy.
< top
For an Assured Shorthold Tenancy
(AST) the notice period a landlord must
give is 2 months but it can not end before the initial six months or
fixed period unless a tenant is in breach of the tenancy agreement.
Even then the landlord would have to apply to the courts to evict
the tenant.
A tenant does not usually have to give notice to end an AST at the
end of the fixed period but if the tenancy has become a statutory
periodic tenancy, then the tenant must usually give one months
notice to finish at the end of a rent period unless stated otherwise
in the AST.
< top
The Housing Act 2004 defines what constitutes an HMO. Some types of
HMO require licensing and must comply with fire and safety
regulations and inspections as well as having the correct number of
amenities for the number of occupants it is licensed to house.
From April 2006 the Government have stipulated that an HMO with 3 or
more stories containing 5 or more occupants that share facilities
(such as bathrooms and Kitchens) must be licensed.
This is a complex field and professional advice should be sort if
you have a property that may be considered and HMO. A Practical
Guide to Licensing of HMO's and further information provided by
Warwickshire District Council can be downloaded by
clicking
here.
< top
Information for this section has been taken from current sources in
good faith and is believed to be accurate at the time of writing.
The guide is updated from time to time but please note that
legislation, laws and regulations regarding letting property is
subject to change at any time. The information given here, should
not to be used as the basis for action without prior checking and
verification, or without independent professional advice where
appropriate. The information refers, unless stated, to a standard
Assured Shorthold Tenancy Agreement in the UK.
< top
< back to landlords page
|
