Guide for Landlords
We at Orlando Reid have produced this guide with the aim of providing simple, straight-forward guidance for landlords who let accommodation in the Private Rented Sector (PRS) in England and Wales. This guide also applies to those who, perhaps, did not set out with the intention of becoming a landlord. It may be that you have inherited a property which you have been unable to sell. Or perhaps you have moved house but are unable to sell your old address.
As a landlord, it is important for you to have a clear understanding of legislation that exists and how to get professional help when needed*. This can be quite overwhelming at first! There are over a hundred different pieces of legislation which relate to letting properties that you as a landlord should be aware of. Failure to comply with legislation relating to letting accommodation can lead to hefty 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, which makes landlords legally responsible for checking the immigrant status of tenants and their ‘Right to Rent’ in the UK.
We recognise that letting a property can be difficult and stressful. Another important point to recognise is that the lettings legislation in England and Wales heavily favours tenants over landlords. This guide serves to outline the key points a landlord should be consider prior to and during the letting of their property.
Checkpoints prior to Letting a Property:
- Gas Safety Certificate: By law, if there are gas appliances in a property, a landlord must possess an up-to-date Gas Safety Certificate. This must be renewed annually, upon expiry, by a “Gas safe” registered gas engineer. The tenant must be given a copy prior to their move in. Landlords should also provide tenants with copies of any further renewal certificates within 28 days of the inspection.
- Energy Performance Certificate (EPC) : Every property must have an up to date EPC. This provides a rating energy efficiency rating of the property. The tenant should be given a copy 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 request a deposit from a prospective tenant, you should be aware of the legal requirements to register and protect the tenant's deposit in a deposit scheme. You will then need to provide 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 30 days has serious consequences for a landlord.
- Licences: If you intend to let a multi-let property, you should check the local council's website as to whether you need a “House in Multiple Occupation” (HMO) Licence. Some councils have now introduced additional licensing schemes for landlords. In certain areas, a landlord will need a licence for each property, even for families, before the property can be rented out.
- Identity Verification and Documentation:
The next steps should help address the following questions:
•Does this tenant have the financial ability to pay my rent?
•Are they likely to take care of my property?
It is not unreasonable to request your prospective tenant to provide photographic proof of identity in the form of a passport or driving licence.
For overseas prospective tenants, you will need to obtain an “Immigration Right-To-Rent” application form and your tenant should fill this out within the 28 days before signing the tenancy.
Ask your prospective tenant to complete a “Referencing form” which will include details such as their National Insurance number. On the basis of this application, you will be able to perform a credit check regarding the tenant’s credit history. You must take consent from the tenant prior to performing this check; credit check companies stipulate this. If your prospective tenant is coming from abroad you will not be able to do a credit check. You may consider asking for the whole annual sum of rent up-front for the fixed-term, or getting a guarantor.
You may also consider taking references from their current landlord and employer.
- Recruiting an Agent
The property you are letting is likely to be one of your most valuable assets. Prior to entrusting the letting/management of a property to an agent, and signing a contract with them, it is sensible to ask the following questions:
- 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. You should be clear about the fees prior to signing the contract. Read the contract carefully and ask any questions beforehand.
- How many years has the business been established? Avoid the "here today gone tomorrow" agent. A minimum of two years in business is recommended.
- Have the agent’s staffs attended a lettings training course in the last two years? This demonstrates that the staff will be up-to-date with recent changes in legislation.
- Is the agent a member of one of the Government approved deposit schemes? If not, look for another agent.
- Is the agent part of Client Money Protection? If so, this indicates that the agent has a separate bank account for client monies.
- Does the agent belong to a "redress scheme”? Does the agent possess membership of Property Ombudsman, Ombudsman Services Property or Property Redress Scheme? Agents are legally required to belong to one of these schemes. If they do not possess this membership, you should avoid dealing with this agent.
- Tenancy Agreement
It is imperative to draw up a tenancy agreement. Occasionally, landlords are tempted, when letting to a friend or relative, to do so on an informal basis, without a tenancy agreement. This can become messy if the tenancy does not work out as planned.
It is important to remember that circumstances can change during a tenancy, which can impact directly on the tenancy, for example, loss of tenant employment or benefit entitlement, relationship breakdown. It is therefore advised to approach any tenancy as a business venture, drawing up a tenancy agreement. Always ensure the tenant has a copy of the agreement and that they are clear about the details of their obligations and responsibilities.
Orlando Reid’s “Assured Short-hold Tenancy” (AST) agreement stipulates that the tenant becomes directly liable for registration and payment of all utility bills. Do not be tempted to include the costs of gas, electricity or water in with the rent. 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. Should an inventory and check-out not be conducted, the landlord will be unable to deduct money from the tenant deposit.
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.
We strongly recommend that you take out comprehensive rental insurance, as a safe-guarding measure.
Checkpoints once the tenant has moved in
- It is recommended that the property is cleaned by a professional cleaning company in order to start a new tenancy on a positive note. Your previous tenants or you, as the landlord may organise this but it is important to choose a reputable company.
- 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 notice (of leaving) to 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 from your tenant, you have a legal requirement to register and protect that money in a deposit scheme and provide the tenant with 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, you are required to maintain the 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’ notice, in writing, in advance of the visit. If the tenant objects or says the time/date is not convenient, try to agree a mutually convenient time.
- Be sure to peform regular checks that 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. Orlando Reid advises you get a data protection licence from ICO if you hold the tenants details.
Ending a tenancy
There are two ways to end an assured shorthold tenancy.
The more straight-forward way is that 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. Altertanively the landlord serves the tenant notice, and the tenant accepts this.
The other way is if a landlord takes steps to evict the tenant, against the tenant’s will. This is a three-stage process that is 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 to be served, but the landlord needs to give two months' notice to the tenant. The other notice is a Section 8 notice, which is served when there has been a serious breach of the tenancy agreement. There are 17 grounds on which you can serve a Section 8 Notice. It is most commonly used for rent arrears, where at least 14 days' notice of leaving is needed.
Stage Two involves making an application to the County Court for a Possession Order. A court fee is required. 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 involves making a further application to the County Court for an eviction warrant. A further court fee 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, you may be find being a member of a landlord association such as the RLA helpful.