A simple guide for Landlords
This guide provides simple and straight forward guidance for landlords who let accommodation in the Private Rented Sector (PRS) in England and Wales. It was compiled by the RLA's Advice Team who, among other things, respond to requests from people who are known in the lettings business as "accidental landlords". These are people who did not set out with the intention of becoming landlords. They may have inherited a property which they have been unable to sell. In addition, there are people who have moved house but have been unable to sell their old address. The Advice Team's expertise is available to the many thousands of RLA members.
Landlords clearly need to know what they are doing, have a clear understanding of which legislation they need to comply with and just as importantly, how to get professional help when needed*. At the last count, there are over a hundred different pieces of legislation which relate to letting properties. Landlords need to be aware of such legislation. Failure to comply with all the legislation relating to letting accommodation may lead to heavy financial penalties or, in very rare cases, even a prison sentence.
The latest piece of legislation to affect landlords is the Government's Immigration Act to make landlords legally responsible for checking the immigrant status of tenants and their right to rent in the UK.
Letting a property is by no means an easy matter and landlords should appreciate and understand that the legislation around letting in England and Wales heavily favours tenants rather than landlords. This guide gives an outline to the basics which PRS landlords need to be aware of both before and during the letting of a property. This document is in no way exhaustive and a landlord should always seek professional help and advice on any particular problem.
The guide only relates to the standard tenancy type in England and Wales known as the Assured Shorthold Tenancy (AST). This type of tenancy applies where it began after 28th February 1997 and the accommodation is separate to the landlord's and is let to someone as their main UK residence. If you are unsure what type of tenancy to offer, contact the RLA's Advice Team for help.
Points to remember before letting a property
Gas Safety Certificate - if there are gas appliances in a property, a landlord by law must have a current Gas Safety Certificate and it have it renewed each year on expiry by a Gas Safe registered gas engineer. The tenant must be given a copy before they move in. They also need to be given copies of any further certificates within 28 days of the inspection.
Energy Performance Certificate (EPC) - every property must have an up to date EPC which provides a rating of the property's energy efficiency rating. Furthermore, a copy should be given to the tenant at the earliest opportunity. An EPC is valid for ten years. Landlords with properties in the poorest energy efficiency bands of F and G will not be allowed to let them after April 2018.
Deposit - if you are asking a prospective tenant for a deposit, be aware of the legal requirements to protect the tenant's deposit in one of the deposit schemes and give the required documentation to the tenant, and anyone who paid toward the deposit, within 30 days of receiving the deposit. Failing to protect the deposit within that 30 days has serious consequences for a landlord. As an RLA member you are entitled to use Depositguard to insure any deposits you take.
If you intend letting a multi let property, check on the local Council's website in case you need a House in Multiple Occupation (HMO) Licence. Some Councils are now introducing further licensing schemes for landlords. In certain areas, a landlord will need a licence off the Council for each property, even for families, before he can rent it out.
In Wales, the Welsh Assembly have introduced a licencing scheme throughout the principality. Landlords should have registered by November 2016.
Furthermore, in Wales, if you propose converting a property which was last used as a family dwelling into a multi let property, then you will need to apply for planning permission beforehand. There is no guarantee this will be granted. The same will apply if any "change of use" of the property is being considered. You may also need to this in England but it will be up to your Local Authority.
Don't be afraid to ask your prospective tenant for photographic proof of identity, a passport or driving licence should suffice.
Remember to do the immigration Right To Rent check within the 28 days before signing the tenancy.
Ask your prospective tenant to complete an application form, be sure to ask for their National Insurance number as this may be useful in the future.
On the basis of this application, always do a credit check to see if they have a good credit history. Make sure you get the tenants consent to this as credit check companies require this.
If your prospective tenant is coming from abroad you will not be able to do a credit check and you may have to consider asking for the whole of the rent up front for the fixed term or getting a guarantor. You may also wish to consider taking references from their current landlord and employer.
These last two points should help to alleviate your two chief concerns:-
- Does this tenant have the financial ability to pay my rent?
- Are they likely to take care of my property?
Recruiting an Agent
The property you are letting is more than likely to be one of the single most valuable assets which you own. It makes sense therefore before you put this property in the hands of a letting agent to ask the agent a number of pertinent questions before you actually sign a business contract with them.
Does the agent have a postal address?
Exercise a degree of caution if only a website or PO BOX address is available.
Is the agent transparent about their fees?
An agent must display their fees clearly on their website and in their offices. Check this before you sign their contract. Read their contract carefully and ask any questions beforehand.
How many years has the business been established?
Avoid the "here today gone tomorrow" agent because those agents may disappear with your money. A minimum of two years in business is recommended.
Have the agent's staff attended a lettings training course in the last two years?
By doing this their staff will keep up to date with all the changes in legislation.
Is the agent a member of one of the Government approved deposit scheme?
If not, look for another agent.
Is the agent a member of a professional body?
We are looking for ARLA, NALS or NAEA.
Is the agent displaying a "Safe Agent" logo?
If so, this will indicate the agent has a separate bank account for their clients' money.
Ensure the agent belongs to a "redress scheme".
We are looking for membership of Property Ombudsman, Ombudsman Services Property or Property Redress Scheme. Agents are legally required to belong to one of these three schemes. They also need to advertise which one clearly in their office and on their website. If they do not do this then you should avoid dealing with this agent.
Occasionally, landlords are tempted when letting to a relative or a friend to do this on an informal basis and not bother with the completion of a tenancy agreement. If the tenancy does not work out as planned then life becomes very difficult for those landlords.
Remember, however promising tenants look at the start of a tenancy, things can change during a tenancy which have a direct impact on the tenancy, for example, the relationship might break down, the tenant might lose their employment or benefit entitlement to name just a few.
The best thing to do therefore is always approach any tenancy as a business venture and get a tenancy agreement completed. Always ensure the tenant has a copy of the agreement and then they have details of their obligations and responsibilities.
Prospective tenants may ask a landlord for a tenancy of two or three years but do not be tempted! The RLA's advice is to offer a 6 months' tenancy to start with and use this period as a "probationary" period. If the tenancy works out as well as you hoped then offer a longer tenancy, say 12 months, to follow the first one. Be sure to check what your mortgage requires though. Many mortgages insist on a term between 6 and 12 months.
By using the RLA's AST the tenant becomes directly liable for all utility bills. Do not be tempted to include the costs of gas, electricity or water in with the rent, you will be giving the tenants a free rein to use as much gas and electricity as they like. It is good practice for a landlord to notify the utility companies of a tenant's name and the meter readings on the day they move in and move out.
Always have a detailed inventory report done on the day the tenant moves in and the day they move out. These will prove invaluable should you need to make a claim against the tenant's deposit money after they vacate.
If you are letting a house with multiple occupancy you should expect to be billed the full Council Tax charge as the Council will not bill individual tenants. You will need to account for this charge when setting the rent.
Once the Tenant has moved in
Take the time to ensure your new tenant knows how to operate the kitchen appliances, the central heating boiler and timer, smoke/fire alarms and a security system if installed. You also need to ensure any smoke or carbon monoxide alarms are working at the start of the tenancy.
Make sure your tenant has your contact details. A landlord is required to give a tenant an address where the tenant can serve a notice ( of leaving ) on their landlord. At the same time, make sure you have your tenant's contact details.
If you have set up a tenancy with weekly rent, you need to give your tenant a rent book.
If you have taken a deposit off your new tenant you have a legal requirement to protect that money in one of the deposit schemes and give the tenant all the documentation within 30 days of receiving the money. The penalties for not doing so within that time are severe and the law allows no excuses for late protection.
As the owner of a rented property a landlord has a legal duty to provide a decent standard of accommodation. In addition, he needs to maintain the fabric and structure of the property.
If the rented property is furnished, the furniture and furnishings must by law comply with The Furniture and Furnishings Fire & Safety Regulations Act 1988. In short, each item of furniture should have a label attached confirming it complies with this Act. If it doesn't, don't use it.
A tenant should report any breakdowns and repairs in writing to you as the owner. These should be attended to within a reasonable timescale.
Remember to ask a Gas Safe registered engineer to renew the Gas Safety Certificate every 12 months.
If for any reason you need access to your property, you need to give your tenant at least 24 hours written advanced notice of the visit. If the tenant objects or says the time/date is not convenient, don't go near the tenant.
Do make regular checks your tenant is paying their rent as agreed. Failure to do so will quickly lead to an accumulation of rent arrears.
Remember, under the Data Protection Act, you have a duty to keep any personal details about your tenants in a safe place. The RLA advises you get a data protection licence from ICO if you hold the tenants details.
Ending the tenancy
There are only two ways to end an assured shorthold tenancy.
The straight forward way is if a tenant gives the landlord written notice of their intention to vacate, clears all their belongings out and hands the keys back to the landlord on departure.
The other way is if a landlord takes the initiative and gives the tenant a notice seeking possession. This is the first step in what could be a three stage process before a tenant is evicted. This process is both costly and long winded.
Stage One involves serving a valid notice on the tenant. There are two such Notices. The Section 21 Notice requires no reason or grounds for serving it but the landlord needs to give a clear two months' notice to the tenant. The other Notice is a Section 8 Notice and this is served when there has been a serious breach of the tenancy agreement. There are more than 17 grounds on which you can serve a Section 8 Notice. It is most commonly used for rent arrears, ie. Grounds 8, 10 & 11, where at least 14 days' notice of leaving is needed.
Stage Two is making an application to the County Court for a Possession Order where a court fee of £355 is paid. It is important to have the application to the County Court completed fully and accurately. Failure to do both could lead to you missing out on a possession order and losing your court fee.
Stage Three is making a further application to the County Court for an eviction warrant, a court fee of £121 is required.
Most tenants comply with their tenancy agreements and pay their rent on time. However, occasionally, things go wrong. With the recent cuts to benefit entitlement, some tenants are struggling to maintain full payment of their rent. In addition, some tenants do not look after the property as well as their landlord expects. In these circumstances, a landlord is best placed to deal with some situations if they are a member of a professional landlord organisation such as the RLA.
A Landlord's obligations
A landlord has an overriding responsibility to provide a decent standard of accommodation for their tenant. In addition, it should be a safe and healthy environment for your tenants.
If you are letting a property with a mortgage, do ensure your mortgage provider permits the letting to a tenant.
Equally, ensure your property insurance policy will cover a tenanted property. As an RLA member you are entitled to discounted rates on insurance through RLA Insurance.
A landlord has a duty to maintain their property and take reasonable steps to remove any hazards. Failure to do so may lead to the tenant reporting the matter to the Council's Environment Health Department. Once a Council are aware you are a landlord who is failing in your responsibilities they can make life very uncomfortable for a landlord.
If you require access to your property you must give your tenant at least 24 hours written advanced notice. If the tenant objects or says it's not convenient then cancel the visit.
Landlords must not discriminate on the grounds of sex, race or disability.
There are obvious tax implications on letting a property but this is not a topic the RLA can help with. A landlord should seek advice before letting from a qualified tax adviser.
If as a landlord you are still unsure about the letting business, consider signing up for one of RLA's training courses, details such as cost, dates, venues are shown on the RLA's website.