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Advice for landlords
Congratulations on seeking advice before renting
your property. Following these simple guides
should help you maximise the income your
property can generate and please your tenants or
prospective tenants.
The information given here is for general
guidance only, and for more specific matters you
may wish to consult a solicitor or citizens
advice. It is simply impossible to cover all
situations here so we'll cover the most
important.
The first step is to cover the basics before
moving on to the finer points. You should ensure
the property is presented well. It should be
well decorated, clean and tidy in order to
attract a tenant who is likely to pay good
rental.
Under the 1985 Landlord and Tenant Act,
Landlords are legally required to ensure that
tenants are kept 'safe from harm'. Simply put
this means the property must be fit for
habitation.
Properties must be supplied and maintained to a
good standard. As a landlord you must ensure
that the structure, water supply, hot water
supply, lighting, heating and ventilation are
maintained throughout the tenancy.
A fantastic way to advertise your property
portfolio is via your own website. A
company we would recommend is Hubbaguru.com who
currently have a superb package available for
exactly this purpose. You can contact them
on 0845 89 09 247 or
click here for their contact page.
How do I let my property?
There are several ways to let your property:
- Advertise it on letting expert - you're
hear already, why not?
- Advertise it on other internet sites
- Advertise in local shop windows
- Instruct a letting agent
- Advertise through your own website
Should you be considering using a letting
agents it is recommended that you chose one who
is registered with one of the following
professional bodies:
The benefit of using companies who are members
of these organisations is that should a letting
go wrong or there are problems receiving your
rent the agent can take the issue up with the
governing body. Moreover, tenants often feel
more secure knowing that a letting agent belongs
and is governed by a professional body.
Presentation:
The level and quality of the interior decoration
often has a substantial affect on the level of
revenue that can be achieved. We advise that you
follow these guidelines closely:
Carpets and walls should be of a neutral colour.
The use of whites, creams and pastel colours
make a property look and feel brighter, bigger
and fresher.
A painted finish is easier to maintain than
wallpapers. However try to avoid magnolia as it
has become dated and can be off-putting to
renters. Good quality curtains and carpets
should be provided as the lifespan is usually
much greater than cheaper alternatives..
Kitchens should be well equipped and have a high
level of modern quality fittings. Bathrooms are
in a similar vain and it is now normal to have
modern equipment such a s a power shower, good
lighting and a tiled floor. Try to avoid carpets
in either of these areas if possible as there
can be issues with damp and stains. A vinyl or
tiled floor is recommended for kitchen areas. It
is recommended that bathrooms units be of a
white colour as they date less quickly than fad
colours if at all.
A wood flooring or wooden effect is increasingly
popular and gives an impression of space. If you
decide to install a wooden floor be careful if
you deal with a freeholder as there can be
issues with excess noise caused by this type of
finish.
A huge selling point can be lighting. Downward
spotlights are very appealing, and a well lit
home gives the feeling of space. Any dark areas
should be fixed and lamps used if needed.
Outdoor security lights are also appealing and
give tenants a feeling of safety.
Presentation to tenant:
Make sure the property is clean, is free from
clutter and unpleasant odours. Arrive early and
open windows so it smells fresh when the tenant
walks in.
Bathroom areas should be clean, the toilet seat
down, and should contain toilet roll holders
(and toilet role), towel rails, mirror and
bathroom cabinets or shelves.
Don't ask tenants to remove their shoes as they
may not be happy to do so.
Lighting is important. If it is day time open
all curtains and allow natural light. Natural
light gives the impression of space and
shouldn't be under-estimated. If you are showing
the property in low light ensure outside lights
are on if you have them and all rooms are
already lit.
Ensure the garden areas or yards are clean and
tidy. Grass should be cut and weeds removed.
Restrictions on tenants:
You can put restrictions on the tenancy, for
example you may specify no pets, children
smokers etc. Remember however that the more
restrictions you apply the more difficulty it
will be to let the property.
It is now common for tenants to want to be able
to have pets, and as a landlord you should
consider this carefully.
If you do allow pets and/or children it is often
acceptable to have a clause in the tenancy
agreement specifying that the tenant must have
the properties carpets and curtains
professionally cleaned.
Deposits:
From April 2007 under the 2004 Housing Act
landlords will no longer be able to hold
deposits with AST tenancies unless they have
registered with a specific scheme (see above).
Deposit and their return cause many arguments.
It is essential therefore that you complete and
inventory and have the tenant complete an
inventory. You should mark anything that is new
as new, and any older items as used. This will
give an indication of their condition.
Inventory:
A tenant must always be allowed to agree to an
inventory which lists all items in the property
and the condition of those items. It is usual to
allow the tenant around two weeks to return the
inventory as problems may not be noticed
straight away.
You may also wish to consider the use of an
Independent Inventory Agent who are specialists
in this field.
Inventories should not stop at listing the
properties contents and condition but should
also look at walls, floors, windows,
cleanliness, condition of light switches etc. It
helps to be as list as much as possible as this
can avoid conflicts later and if needed be used
as evidence should a dispute go to arbitration.
Most letting agents will not arbitrate disputes
between landlords and tenants and the final
decision lies with a professional inventory
agent or professional letting association.
Transfer of services
including Council Tax:
Normally your tenant will be responsible for the
payment of Council Tax, Water, Electricity, Gas,
TV Licence, oil and Telephone. Between lets you
will be responsible for these (except TV Licence
if unoccupied).
The agent or owner should write to the local
authority and service providers advising of the
change of occupier. British Telecom quite often
will not transfer a service without the current
subscriber agreeing to this.
Please note the telephone number at a property
is for a current subscriber and if you want to
retain your existing number, you must make
arrangements with BT or Telephone service
provider to hold your number in “suspense”.
Water
- Water Industry Act 1991 – Information
about water meters for home movers:
Since 1989,
most new homes built in England and Wales have
had a water meter installed. In addition to
this, many water company customers previously on
a non-metered supply have opted for water meter.
Since 1st April 2002 companies like
Three Valleys Water Plc in England have been
installing water meters when a property is sold.
From the 1st January 2005 this
company will also be installing meters when a
property is rented out.
The
government act covering this is under S1444B of
the Water Industry Act 1991.
Tenant Referencing:
Most Agents will take up Credit Search
references using Letsure or Homelet Referencing.
or similar types of company. Provided the
references are satisfactory you can for an
annual premium subscribe to their Legal
Protection insurance plan.
If the tenancy requires a Guarantor, the credit
search company will advise and referencing will
have to be taken up on that person. Company lets
will also follow the same procedure.
Letting to
Non EU Nationals in the UK:
Landlords /
property owners or their agents should make sure
that they obtain a photocopy of the prospective
tenants passport and work permit/visa. If the
applicant only has three months remaining on the
visa and they are looking for a six month let,
then there could be problems with them being
able to remain at the property.
Several of
the credit search companies when they take up
references on an EU resident or non EU resident
also ask for a copy of an utility bill (mobile
phone bill etc) from the applicants last known
address as “proof of residency”.
Property manuals:
From experience the Landlord will normally know
how equipment operates, where the stopcock is,
when the dustmen call and where the nearest
school and pub are located.
You should prepare a ring binder that gives
notes about the working of the property, the
location of meters and the property’s postcode
etc. You should also include photocopies of
instruction manuals for the washing machine,
cooker, vacuum cleaner, water softener etc.
Insurance & legal expenses insurance:
You must advise your insurance company that
the property is being let. This should cover the
buildings policy and contents. You should also
check to ensure you have sufficient public
liability cover.
Many people who let unfurnished do not insure
their contents. Contents insurance for let
property is really not expensive. If for example
you had a burst pipe in the attic and water
damage penetrated through to the kitchen. The
buildings policy would normally cover replacing
the ceilings, decoration, but not your carpets
or curtains that were damaged as a result of
this accident.
A tenant is normally
responsible for insuring his/her contents and
this will not cover your belongings. It is
possible to take out insurance to cover the
legal costs of pursuing claims against the
tenant arising from a breech of the terms of the
tenancy, including the costs of obtaining
repossession.
When you take out a Buildings Policy the main
insured perils should include Fire - Lightening
- Aircraft - Explosion - Smoke - Impact - Burst
pipes or leakage of oil - Storm or flood -
Subsidence damage - Theft- Malicious damage.
(Some policies will give the option of malicious
damage caused by the tenants - a valuable option
for let properties). Most policies will
compensate you for loss of rent following damage
from one of the above perils if the property is
uninhabitable. Check this out with your block
management agent if you have an apartment and
don't arrange the buildings insurance yourself.
It should be noted however, that damage to
property caused by tenants who are classed as
DSS asylum seekers, refugees or students will no
longer be covered under some buildings insurance
for blocks of apartments and you should seek
professional advice.
If your flat is let and
you have not taken out additional insurance, you
will be held personally liable in the event of
damage to property, including neighbouring
properties, howsoever caused, including all
costs incurred by the Management Company,
solicitors, neighbours etc.
Income tax:
The income derived from letting your
property is subject to UK tax. The position can
vary depending if you are a UK resident or a UK
non-resident. It is money very well spent to use
an accountant.
Income earned in the UK
is subject to taxation under self-assessment.
This means that the landlords will receive their
income from an agent less any bills the agent
has settled on their behalf.
Any tax implications will be between the
landlord and Inland Revenue. If you are a UK
resident you will receive the usual personal
allowances applicable to your circumstances,
which may be offset against all your taxable
income.
Income from letting a property is subject to
income tax at the basic rate on profit. Profit
is assessed after deducting expenses from the
rent received; examples are:
a) Any
water, electricity, gas charges paid by the
Landlord.
b) Insurance Premiums related to
the cover of the buildings, contents and loss of
rent.
c) Repairs – but not improvements.
d) Letting Agents, accountants and legal fees-
including VAT.
e) Mortgage interest payments.
f) Maintenance contractors e.g. gardening
contractors
If you are going abroad, it
is essential that you apply for your FICO
(Financial Intermediaries and Claims Office)
number through the Inland Revenue as quickly as
possible. The Inland Revenue has further
information and you can download information
including a FICO application form at
inlandrevenue.gov.uk/cnr/nr_landlords.htm.
Please note until an Agent is informed by the
Inland Revenue of a FICO Approval number that
they are not able to pay over the rent without
holding back an amount for tax. If the
certificate is not received or approved, they
will have to retain money for tax and pay this
over to the Inland Revenue on a quarterly
basis.
They would also make an administration charge to
cover their time in carrying out this work. If
you are collecting the rent direct, your tenant
should withhold a percentage to cover any tax
liability, so it is essential that a) You obtain
a FICO approval and b) you employ the
services of an accountant.
If an Agent is acting on a Tenant introduction
basis and you are going overseas you must still
obtain a FICO approval number as otherwise the
tenant living at the property would be
responsible for the paying of tax and most
tenants would not want this inconvenience. The
Letting Agent would also be duty bound to advise
them of the situation.
Overseas properties - UK TAX:
If you invest in overseas property you must
declare the profits in the UK. Unless you are
classified as non-UK domiciled, you are taxed in
the UK on all your income and gains wherever
these profits arise. If you let your overseas
property you should inform the tax authorities
where the property is located, which will
sometime mean completing a tax return in that
country.
The income and expenses from your foreign
property must be listed on the foreign income
pages of UK tax return.Any foreign tax you pay
on that income can normally be off-set against
the UK Tax duew where a double taxation
agreement exists between the UK and the country
where the property is situated. Remember other
countries have different rules for tax
deductible expenses. Take professional help.
Resident Landlords:
If you rent out part of your own home this can
also count as residential lettings, but you can
take advantage of the 'Rent a Room' scheme
instead. This lets you get tax-free income of up
to £4,250 from letting rooms in your home.
Leasehold
properties /consents to let:
If you
have a mortgage, you should gain consent from
the lender prior to lending. If you do not you
will be breaking the mortgage covenant. Most
lenders will give consent provided they have
seen and approved a tenancy agreement and that
satisfactory references are taken up on a given
tenant.
In the case of a Leasehold
Property, a consent to underlet may be required
from the Freeholder under the terms of the head
lease. You may also have to pay for a consent to
underlet a leasehold property. You might be
required to provide a copy of the Lease to be
incorporated into any tenancy agreement that is
prepared.
Tenants deposits:
When an Agent is rent collecting or managing
a property they will normally hold the deposit
in separate clients account. You should find out
if your agent is a member of a professional body
like ARLA, NALS etc and maintains separate
clients accounts. On average a rental equivalent
to six weeks rent should be held.
Sometimes a tenant will stop the final payment
of rent and suggest that you have the deposit
instead. In the event of this happening when
there is only a months deposit held, there will
be no money for end of stay dilapidations or
cleaning etc.
There will be occasions, e.g. some Military and
Corporate lets where the company or country will
guarantee the deposit and will not therefore
physically pay a deposit. Remember if you hold
the deposit, it is not your money and should be
kept in separate bank account.
Redirected post:
You should consider
paying The post Office to redirect your post for
you. The Post Office charges for this service,
but you should receive your post quickly.
Although a tenant might initially send on the
post to the agents or Landlord, this can delay
matters.
Apart from arranging the redirection via the
post office, you should also leave your
forwarding address in the Property Manual with a
note requesting them to cross through your
address and forward it on. (It does not cost
anything in the UK, but it will if the item has
to be sent overseas). You should also write to
your bank, Credit Card Company, insurance,
mortgage company, friends and give them your new
address
Keys:
You should leave sufficient number of keys for
the number of people renting the property. Some
Agents will retain a set at their offices. You
should label up all the keys at the property.
e.g. garage door, French windows, front door,
windows etc.
Alarm systems:
If you have an alarm system make the Tenants
(and Agents if applicable) have the appropriate
access codes. It should be clearly defined who
actually pays for alarm maintenance – Landlord
or Tenant.
SAFETY GAS, ELECTRIC,
FIRE & FURNISHINGS, SMOKE DETECTORS:
Gas:
The regulations were introduced to ensure that
appliances are properly installed and maintained
to avoid the risks of carbon monoxide poisoning.
At the commencement of a letting, a Landlord is
required by law to hold a current Gas Safety
Record.
The tenant must be provided with a copy of the
record prior to occupation. The gas safety
record must be renewed annually and must cover
all gas appliances in the property. An
authorised CORGI registered engineer can carry
out the Inspection. N.B. A standard annual
service would not be sufficient to comply with
the requirements of the regulations
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Electricity:
At present there is no specific statutory
requirement to prove that the appliances
supplied are regularly checked or tested;
the Landlord does have a duty of care.
Dangerous wiring, flexes, exposed cable and
damaged sockets must all be replaced.
Appliances must be fitted with a sleeved
insulated plug.
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Furniture &
Furnishings:
From the 1st January 1997 any furniture
supplied as part of a new letting that
commenced after 1st March 1993 must comply
with the regulations. They do not apply to
Antique furniture made before 1950, carpets,
curtains, pillowcases, duvets, bed linen or
loose cover for mattresses. Generally they
apply to all other furniture that has a
cover fabric and filling including cushions,
padded headboards, loose covers, beds and
pillows etc. If your items do not comply and
have appropriate safety labels, they should
be removed from the property. The
independent inventory agent will normally
note down the compliance on the inventory.
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Smoke Detectors:
These are compulsory in all new homes built
since June 1992 and these have to be fitted
via a mains feed on each floor. There are no
specific statutory regulations stating these
have to be put in older buildings (unless it
is a registered House in multiple
Occupation), but it is advisable to fit a
battery detector in stairways and
halls/landings. You might also like to
consider providing a fire extinguisher and
blanket for the kitchen.
Cleaning & gardening:
Before a Tenant moves into your property
that it is professionally cleaned throughout. If
you have not had your carpets cleaned for a
while, they must be professionally cleaned and
you might like to consider having a protective
coating put on them by the cleaning contractor.
Windows should be clean inside and out.
You should make sure that your chimneys and
flues have been swept. In many tenancy
agreements, a clause states that tenants should
do this during the tenancy, but they must also
be done prior to the tenancy starting.
It
is often normal practice to have a clause in the
tenancy agreement stating the gardens have to be
maintained in a satisfactory condition. Over the
last twenty years, the lifestyle of a tenant has
changed. You do get some enthusiastic gardeners,
but the majority of tenants are working long
hours and when it comes to a weekend want to
pursue other activities rather than gardening.
We would suggest whenever possible:
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a) You have a gardener to attend to hedges,
shrubs and trees at least twice a year or
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b) Include this together with regular
maintenance of lawns and flowerbeds. A
tenant who knows that they will not have to
look after a garden will be happier to rent
your property.
Empty property:
You will find that most Letting Agents will
not be responsible for a property between lets
and that you have to agree a fee for checking
the property. You should also check the terms of
your property insurance regarding this issue.
During the winter months if the property is
empty that either you have the water system
drained down professionally or leave the heating
running.
What service to
you want from a letting agent?
Many agents offer three types of service:
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TENANT INTRODUCTION
-
RENT COLLECTION
-
FULL MANAGEMENT SERVICE
TENANT INTRODUCTION:
The Agents find a tenant, take up credit search
references, prepare the tenancy agreement *,
arrange the check in of the tenant * and advise
the gas, electricity & water companies & local
council of change of occupier. After that the
rental is paid directly to the Landlord and all
management is carried out by the Landlord The
letting fee is payable once the tenant has been
installed.
RENT COLLECTION: The
Agents find a tenant, take up credit search
references, prepare the tenancy agreement *,
arrange the check in of the tenant * and advise
the gas, electricity & water companies & local
council of change of occupier. The Agent
collects the rental and pays this over to the
Landlord each month less their fees. The
Landlord carries out all management.
FULL MANAGEMENT: The Agents find a tenant,
take up credit search references, prepare the
tenancy agreement *, arrange the check in of the
tenant * and advise the gas, electricity & water
companies & local council of change of occupier.
They collect the rental and pay this over to the
Landlord each month less their fees & manage the
property. This involves dealing with enquiries
from the tenant, arranging routine maintenance
e.g. washing machine repairs, plumbing repairs
etc and visiting the property approximately
three times a year for a property inspection. If
major works are requested by the Landlord, e.g.
decoration, new carpets, insurance claim work
etc, they would usually make an additional
charge.
*Please note additional charges
are normally payable for Tenancy Agreement
preparation & independent Inventory Agents
charges.
Stamp Duty on Tenancy
Agreements: From the 1st December 2003,
Stamp Duty has been abolished and replaced with
Stamp Duty Land Tax. The starting point for this
is £125,000. This means that the vast majority
of Tenancy Agreements will not attract SDLT and
this will be the responsibility of the tenant.
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