First Time Letting – the LandlordZONE® 22 Point Check-List
If you want to let (rent out) your house or for the first time then you can either hire a good professional letting agent to do everything for you, or alternatively save yourself rather a lot of money by doing it all yourself.
If you decide to do it yourself, you need to make sure:
(a) You meet the necessary legal requirements so you don’t end up with a heavy fine, and
(b) You complete all the necessary checks and documents so that you don’t leave yourself vulnerable to a bad tenant.
The following pages in this section will take you step-by-step through the important aspects of letting out a UK residential property, from start to finish.
The information we provide here applies principally to England; other jurisdictions such as Wales, Scotland, Northern Ireland and other overseas countries may be similar but there will be important differences. Seek professional advice if you are not sure.
1 – Obtaining permissions – you should obtain permissions in writing from your:
(a) landlord if you have one (leasehold property)
(b) mortgage lender (you may need a buy-to-let mortgage)
(c) insurers – you will need a landlord policy
(d) local authority – single lets rarely would need planning permission, but this is not usually the case with multiple lets (HMOs) such as student housing. Contact your local authority.
2 – Landlords’ Insurance – it is very important that your insurance policy covers you for landlord’s risks. Any accident on the premises which can be attributed to negligence on your part can result is astronomical accident claims.
3 – EPC – it is a legal requirement to obtain an Energy Performance Certificate before letting.
4 – Preparing the Property – make sure your property is clean, safe, nicely decorated and equipped with the modern facilities which tenants will expect. Make sure any maintenance items have been attended to, that the heating system is adequate and reliable and that the property is properly insulated to current standards.
5 – Agent or DIY – if you have the time and you are willing to attend to some details such as these you can save yourself thousands of pounds by managing your own tenancies. Otherwise, use an agent with a good reputation locally and one that is a member of one of the recognised professional associations.
6 – The Tenancy – The default tenancy is the Assured Shorthold (AST) so you need a good up-to-date letting agreement. Make sure it deals with the deposit protection rules. If you live in the same property as your tenant you will need a different agreement – a lodger (licence) agreement or a common law tenancy agreement.
7 – Safety Checks – You should check out the property for safety hazards and document that you have done this with a safety check-list. You should have the electrical system checked every 5 years or so, and check the appliances, sockets and smoke alarms on every tenant change. If there are gas appliances these must be serviced and a gas safety certificate issued every 12 months by a gas safe registered engineer. It’s a good idea to provide a carbon monoxide alarm where there’s gas.
8 – Inventory – You should use an independent inventory clerk if possible. Without a good (ideally independent) in-going and check-out inventory you will not be in a position to claim against the deposit for any damage.
9 – Finding a Tenant – you can advertise locally in newspapers and shops, with local employers and on the Internet. You can also negotiate a let-only deal with a local letting agent.
10 – Tenancy Application – It is very important to get all the background information you need on prospective tenants by making sure each tenant completes a comprehensive tenancy application form. Make sure every adult tenant is on the tenancy agreement as a joint-tenant.
11 – Credit Checks and Referencing – always do credit checks and referencing on your prospective tenants before handing over your property to a complete stranger. You should also do identity checks and you will need to do right-to-rent checks (immigration checks) where this legislation applies.
12 – Selecting your Tenant – carefully assess your prospects when you do a viewing and by conducting an interview with them before making a letting decision. Be aware that discrimination laws apply to selection so make sure you consistently apply the same selection criteria to everyone and make this transparent, evidencing it by standard questions and documentation.
13 – Rent guarantee and legal protection – think about taking out protection especially if you have a mortgage to pay – it’s a must and relatively inexpensive at less than £2 per week. Your tenants will need to pass a comprehensive tenant’s credit and reference check to get this cover.
14 – The Tenancy Agreement – use an up-to-date tenancy agreement which includes details of the tenancy deposit scheme you are using.
15 – The Check-in – use a tenancy check-in check-list to make sure you miss nothing when you hand over the property and get all the documentation signed, meter readings done etc.
16 – The Deposit – you must by law protect any deposit you take within 30 days of taking it. Also, you must serve a statutory deposit notice (s213) on the person who lodged it within 30 days. Always get proof of service. Failure to do this, and again on tenancy renewal or when it becomes periodic, will result in a fine and you will be unable to evict your tenant using the section 21 process should this become necessary.
17 – Rent payments – make sure you make arrangements for regular payments, ideally using a standing order payment method. Never let a tenant into the property until the agreement has been signed and the deposit and first month’s rent is paid and the payment has cleared.
18 – Managing the Tenancy – think about periodic inspections and ask your tenant to report any defects immediately. You should ask your tenant to complete a tenancy defects form so that there is a permanent record of any defects reported to you. Always deal with complaints about defects without delay.
19 – Ending the Tenancy – use the check-in / check-out check-list to make sure you miss nothing when the tenant leaves. Make sure you carry out the inventory check-out and invite the tenant to be present when the inventory clerk does this.
20 – Problems – deal with problems such as rent arrears, damage to the property, neighbour issues and anti-social behaviour without delay. Document in writing any conversations you have with your tenant when in dispute and keep a schedule of rent payments up-to-date.
21 – Eviction and Court Processes for Debt Collection – if in the unlikely event you do need to evict you need to follow strict protocols – see the relevant sections on our website.
22 – Tax Implications and tax planning – there are three aspects to this with rental property:
(a) Informing the HMRC that you are receiving rental income and doing an annual self-assessment tax return.
(b) Claiming all the expenses you can against the income to minimise the amount of tax you pay. You also need to record any losses you make so that these can be carried forward to claim against profits in future years.
(c) Taking a long-term view to minimise the tax you pay, especially capital gains tax and inheritance tax for your family.