Are you new to letting letting a property? Do you want to rent-out your own home for a time, or have you bought a buy-to-let and you’ve never let one before?
Here, Tom Entwistle spells out the key points you need to be aware of.
If you are really nervous about doing this, and it is perhaps advisable, at least for the first time, you should seriously consider using a good professional letting agent, one that’s qualified and a member of one of the key professional associations: RICS, ARLA UKALA, NALS and NAEA etc. Do your research first and if possible seek recommendations.
This article applies primarily to English law. It is not a definitive interpretation of the law. Although tenancy laws are similar in other jurisdictions, there may be significant differences. Always seek professional advice before making or not making important decisions.
Otherwise, you can save a lot of money by doing it yourself, but you must pay attention to a few absolute basics. If you don’t you could find yourself with a heavy fine, or you will be stuck with a bad tenant, unable to evict, not paying rent and wrecking our property.
Here are some of the important points to cover:
- Make sure the property is safe – that there are no obvious hazards and that it complies with basic letting rules and regulations. It’s a really good idea to do a simple written risk assessment. You will find a link to risk assessment template and more information about safety and letting here: You can also read about the latest safety requirements in private rented property here: https://www.gov.uk/private-renting/your-landlords-safety-responsibilities
- You need an Energy Performance Certificate (EPC) before you can market your property. These cost in the region of £60 to £100 and last for 10 years. They give an energy rating from A to F, and after April 2018 the overall property rating must be a minimum of E. This is likely to increase to a rating of C by 2025 for new lets. You must issue a copy of this certificate to the tenant at the start of the tenancy and on renewal. You will find more information about EPCs and how to obtain a certificate here: https://www.gov.uk/get-new-energy-certificate
- Make sure you have any gas and electrical systems and appliances in the properly checked, and a Gas Safety Certificate issued by a Registered Gas Safe Engineer and a qualified electrician. Also, the gas appliances must be serviced annually. The gas certificates last for 12 months, they must be current at the start of any tenancy, and a copy must be issued to the tenant initially and on renewal. You will find more information about gas checks here: www.hse.gov.uk/gas/domestic/faqlandlord.htm
The electrical checks must be done initially by a competent person and every five years thereafter. You will find comprehensive information about electrical checks here
- Alarms – Smoke Alarms must be fitted on each level of the property, preferably in the stairwell, along with Carbon Monoxide (CO) detectors in rooms where there are solid fuel appliances – including open fires. The Smoke and Carbon Monoxide Alarm (Amendment) Regulations 2022 came into force on 1 October 2022. From that date, all relevant landlords must: 1. Ensure at least one smoke alarm is equipped on each storey of their homes where there is a room used as living accommodation. Landlords must ensure that a carbon monoxide alarm is equipped in any room used as living accommodation which contains a fixed combustion appliance (excluding gas cookers). They must ensure that smoke alarms and carbon monoxide alarms are repaired or replaced once informed and found that they are faulty.
The requirements are enforced by local authorities who can impose a fine of up to £5,000 where a landlord fails to comply with a remedial notice. The alarms / detectors must be tested at the start of every tenancy and tenants should have instructions to test and report faults during the tenancy. You will find more detailed information here
- Make sure you have done Legionella checks, especially if the property has been vacant for a period – these are basic checks, usually running taps to clear out the water system and cleaning shower heads, which can be part of the safety risk assessment. You don’t have to be an expert to do these checks and carry our a risk assessment. You will find more information on the Health & Safety Executive (HSE) website here
- You need to issue your tenant with the latest version of the Government’s “How to Rent Guide”, a legal requirement: https://www.gov.uk/government/publications/how-to-rent This document can be served as a pdf. via email if a clause in your tenancy agreement allows for documents to be served by electronic means. Otherwise it is a good idea to attached to the rental agreement at the time of signing. Make sure you have the version that is available at the time of the commencement of your tenancy.
- Screening and Selecting Tenants. This is perhaps one of the most important things you should be doing to make sure you have a successful tenancy. Make sure you do property checks using this 20 point check-list provided by TenantVERIFY: “A 20 Point Checklist – TenantVERIFY® Recommended Checks” – https://www.tenantverify.co.uk/useful-documents.html
More reading on tenant referemcomg
- Protecting Deposits. Since April 2017 all security deposits taken (maximum of one month’s rent) must be protected in one of the Government approved schemes and statutory information (section 213 notice) served on the tenants and/or any other person who paid all or part of the deposit. More information here: https://www.gov.uk/tenancy-deposit-protection.
More reading on deposit legislation.
- Deposit cap and the limits on fees that can be charged. The Tenant Fees Act 2019 provides for restrictions on these charges. Holding deposits are capped at one week’s rent; Security deposits will be capped at five weeks’ rent where the annual rent is less than £50,000 and six weeks’ rent where the annual rent is £50,000 or more; Default fees (fees which can be charged during the tenancy) are limited to the reasonable costs incurred in replacing a key or lost security device or interest on rent overdue by 14 days or more, capped at 3% above the Bank of England base rate.
- Inventories. Since the advent of the Deposit Protection Scheme, without a good inventory you will stand little chance of winning a claim against the deposit for damage to the property. You need excellent documentary evidence to show condition before and after the tenancy, and ideally an independent inventory company can provide this at a reasonable cost.
More reading on how inventories work.
- The check-in. Checking-in a new tenant is very important in the process of letting a property. It’s a good idea to complete as much of the above as possible so that the documentation can be included in the tenancy agreement. That way there is no possibility that anyone can deny having received it later.
There a lots of things to remember, so it’s wise to have a check-list in front of you so you don’t forget anything important. Find the Check-in-Check-Out Checklist here: www.landlordzone.co.uk/documents
- Operating Instructions. You should supply a folder to new tenants with safety instructions, operating instructions and emergency procedures for everything inside and outside of the property: how to operate the cooker, defrost the fridge, light fires, locate stop taps and electrical fuses, alarm settings etc. Also other information such as when and where the bins are emptied, where post should be forwarded to, and where the local amenities, entertainment, good pubs and restaurants, and transport routes are; this will always be appreciated.
More reading on why tenant welcome packs are important.
- Inform HMRC that you are letting a property for the first time. As there will be rental income involved you will need to complete an annual self assessment tax return which must be submitted by January 31. see – Paying tax and National Insurance.
More reading on taxes for landords.
- Administration. Don’t forget to record all your income and expenses for each property you own for the year in question. From this you can work out your tax liability. You need to split off those expense items termed as capital expenditure, which should be recorded for when you sell the property, and those items which can be classified as revenue items, which can be off-set against income.
You will need this information for your annual self-assessment tax return.
A simple spread sheet will suffice for this if you have just one or two properties, otherwise think about investing in one of the landlord specific accounting software packages. It’s a good idea to keep all the paperwork in one place – have a file for each rental property and one for each tenancy and keep a journal which records all communications, dates, times and conversations with your tenants.
Good luck with your lettings business.