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TOM’s tips - Setting-up a new tenancy correctly

Tenancy agreement

TOM’s tips - Setting-up a new tenancy correctly

Here, experienced landlord Tom Entwistle, who has been letting property since the 1970s, gives some tips based on his experience.

They say that when dealing in property, or almost any other type of investment, you make your profit when you buy – in other words, through thorough due diligence you make sure you are buying a good property at the right price.

A similar principle applies when it comes to letting a property for the first time: you start off your relationship on a sound basis by ensuring you have all the right documentation in place. You do this by using a thorough methodology to avoid – as far as is humanly possible – any future problems.

I believe in CHECK LISTS. It’s checklists that have reduced the number of aircraft incidents to almost zero. That’s because pilots and crews extensively use checklists to monitor their actions. Similarly, letting a property is a complex process – perhaps not as complex as piloting an aircraft – but there’s still a lot of moving parts.

Checking out and selecting you tenant

By the time you have completed your preliminary checks on your prospective tenant you will have decided on your prospect, having carried out credit checks and referencing, an interview, and if you intend to take a guarantor, you do similar for them too.

Remember, to make sure you don’t fall foul of the discrimination laws. You should take every applicant through exactly the same selection process – have a selection and interview form (checklist) with the same questions for everyone, so you can evidence this process later if you are ever called upon to do so. 

You will also have done the right-to-rent checks following the latest government guidelines - you must take every tenant through these checks.

Sign-up everything at the property

I always advocate meeting with your choice of tenant at the property for the signing and hand-over. You can then finalise all the documentation and carry out an inspection of the property with your tenant/s. This means that everything can be finalised onsite without waiting for any additional copies of documents – they can be signed on the spot and there’s no opportunity later to say they weren’t delivered.

By having a Check-in – Check-out checklist - see below - you can make sure nothing is overlooked, both when the tenancy commences and also when it is ended, and you can obtain a signature to confirm that all the necessary details have been completed to the satisfaction of both parties.

The preliminaries

You should have completed an inventory before the meeting, ideally one made out by an independent inventory company, a specialist inventory clerk, such as No Letting Go. These are relatively inexpensive compared to the money they can save you - being independent they can save you far more money if it comes to a deposit claim.

You should also have made sure the annual gas checks and servicing (if there is a gas supply to the property) and five-yearly electrical checks have been carried out and that you have certificates available, attached to the agreement. If there is a solid fuel device you should also make sure the annual chimney sweep has been done and I recommend you provide evidence of this as well.

Battery operated smoke and carbon monoxide (CO) detectors have a limited life, albeit 10 years in most modern ones, so check they are in date and in full working order, to be demonstrated to the tenant.

You should have made sure the property has been thoroughly cleaned and any painting / decorating completed to a good standard before the viewings.

Ideally you will also have carried out your own risk-assessment, a simple exercise aimed at producing evidence that you have made sure there are no safety hazards in and around the property - again its a simple checklist. 

Typical points include legionella checks, making sure there are no trip hazards inside and outside of the property, child safety catches on windows, stair safety rails, drapes and blind cords are child proof, furniture fire safety labels are in place, security locks and alarms, a full set of equipment instructions is available and there are full instructions about gas/electric/water stop cocks and switches. They should all be part of a tenant’s information pack.

A copy of the current (10-year) Energy Performance Certificate (EPC) should be provided to the tenant at the initial stage of letting.

The hand-over meeting and check-list

Your meeting at the property gives you the opportunity to go round the property with the tenant and with the inventory report in hand, so that you can both be satisfied that everything is as reported. Usually there will be photos embedded in the inventory report, so that clear photo evidence is plain to see.

Usually, the tenant will be asked to initial each page of the report and sign it at the end. This copy will be retained by the landlord and a further copy will be attached to the agreement.

The tenant will be given a copy of the tenancy agreement, if this was not done beforehand. Giving tenants time to sit down and read the contract, and time to query any points they are not familiar with is important. The tenants need to understand fully what they are agreeing to.

There is a free government supplied model tenancy agreement available for residential lettingings in England.

In the case of the letting agreement, I advocate using an up-to-date agreement with counterpart. Therefore, each party can sign one or both copies and retain a copy for themselves there and then. 

Make sure your agreement includes important clauses like allowing delivery of notices by hand delivery, 1st class post or via email.

It should also spell out the reasons for withholding a deposit, for example: rent arrears, cleaning, rubbish removal, damage, lost keys, etc.  

A holding deposit if taken should be applied to the deposit or first period’s rent. Note, if a holding deposit is taken and the landlord rejects the tenant, for example if they fail credit checks / referencing, the holding deposit should be returned.

Any damage (security) deposit taken must be protected in one of the government approved schemes within 30 days. You must also serve on the tenant the appropriate statutory notice. If you can have these available to attach to the agreement at this stage, so much the better. 

Remember, holding deposits must be limited to a maximum of one week’s rent amount and security deposits are now limited to a maximum of 5 weeks’ rent. You are no longer allowed to charge additional fees for things like credit checks. 

Don't forget to give the tenant the latest version of the government's how to rent guide - available to download here

There's also a useful detailed government guide, an overview and checklist of the renting process for landlords here

LandlordZONE

There’s a great deal to remember when letting a property at the hand-over stage, and landlords have an increasing number of obligations to fulfil when letting a property. 

Having a checklist like this is the only way to make sure you don’t overlook something that’s really important. If you follow this guidance you will also produce important evidence to show that you have done everything you need to.

Do all of this and your chances of having problems later are reduced considerably.

Don't forget to carry out regular inspections of the property during the tenancy

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