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Guide to letting your property
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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.
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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).
You may also wish to
consider Rental Guarantee and Legal Protection insurance. There are
several specialist companies that offer these products. We are an
introducer for Rentguard that offer competitive insurance products.
A link to their website can be found on our
Financial Services page.
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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.
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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:
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has a regular and
permanent income or savings/pension that will more than cover
the cost of the rent, plus the bills.
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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)
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will keep the
property clean and tidy
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will not annoy the
neighbours
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will not be too
demanding
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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.
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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.
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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. We would
recommend you use professional agency that is a member of NALS or
ARLA and governed by their codes of conduct. This also ensures
that all their client monies are bonded in
separate client accounts and fully insured.
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.
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.
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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.
Note: If you do
not obtain permission from the mortgage company then they may have
grounds to repossess the property.
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.
Note: If you do
not obtain permission from the Freeholder then they may have grounds
to repossess the property.
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.
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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.
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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. the engineer must be registered with the
Gas Safe Register). 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.
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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
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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
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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 1st 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. If we are
managing the property we will arrange for a contractor to take care
of any issues. The cost of any maintenance and repairs will be the
owners responsibility. We can offer a 24/7 Emergency Cover Plan to
cover the cost of the most common issues. Please ask us for details.
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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.
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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.
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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.
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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.
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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.
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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.
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