These days, with such low interest rates, people in their droves are buying property not just for the sake of capital gain, but also as a way of getting some return from their savings on an annual basis. Letting property to others is a relatively simple process and can generally be handled by the property owner, unless there is a large property portfolio that has to be managed.
Fortunately, or unfortunately (depending on who you are), it is not as simple as just buying a property and then advertising for tenants. There are many regulations that have to be understood and documents completed before even one tenant can pass through your door. This, in the long run, protects you as a landlord as well as ensures that your tenant has a safe, well-maintained property to reside in.
Health and safety is a big issue. Accidents such as slips and falls in poorly maintained rental properties are no exception. Whether or not you are sufficiently insured as a landlord, you may not get such a big return from a rental property if you are faced with personal injury claims for negligence.
Ten important documents that every landlord should be aware of are described below.
With fire regulations at their toughest, and regulations governing the use of wood or coal for heating, gas has become a common fuel for both cooking and heating. There are a number of ways you might use gas in your rental property. It could be plumbed in from the mains or you may have installed heating and cooking appliances that involve the use of portable gas cylinders.
Whatever method you use, it is common sense to maintain any gas equipment so that there is no risk of a gas explosion and your tenants are not subject to carbon monoxide poisoning.
By law, you, as the landlord, are required to get all equipment related to gas installations serviced every 12 months, which includes heaters, boilers and cookers. You will be issued with what is called a “Gas Safety Certificate” on completion of a gas inspection by a gas engineer. You will need to make the certificate available to your tenants within 28 days of the document being issued.
A tenancy application form is an important document as it will provide you with the necessary information needed to undertake tenant checks, and it helps to ensure that the tenant is aware of his or her responsibilities.
If you are a landlord, it is in your interest to list the contents of your rental property and the condition of all the items in it and those that are available to the tenant. This helps to ensure that no damage is done to your property by the tenants, as each page of contents will be subject to your initialling and that of your tenants. Don’t forget to note any wear and tear so you do not get into any unnecessary arguments over damage while your tenant is residing in your property. All parties to the landlord's inventory document should be given a copy.
Depending on how long the tenant is expected to stay, you should undertake an inventory check at three-month intervals. This gives you peace of mind that your tenant is taking care of your property’s contents and is aware that you carry out regular inspections. However, even though you do have the right to enter the property at any time, you should respect your tenants’ rights to privacy and give 24 hours' notice of your inventory inspection. Make sure that you remind your tenants that a final inventory check is done before he or she vacates the property.
Today, you cannot just go down to one of your local second-hand shops to equip your property for rental purposes. Those days have long gone, as under the 1993 Furniture and Furnishings (Fire) (Safety) Amendment Regulations any furniture made prior to 1988 probably will not meet these standards. The most important aspect is the upholstery, which includes that found on mattresses, beds, headboards and sofas. Cushions, pillows and any nursery or children's furniture must be up to scratch, too.
There are some items you do not need to be concerned about, including blankets, duvets, sleeping bags and pillow cases. Curtains and carpets and any furniture made prior to 1950 can also be ignored.
When you are checking your items for fire safety standards, a permanent label should be attached to the item which gives the name of the regulation it is based on. Mattresses and the bases of beds do not need an attached label. To avoid possible flammable material igniting, any item you are not sure about should be replaced by one that matches the 1993 regulations document.
When you rent out your property, you must draw up a tenancy agreement, which is the principal contract made between you and your tenants. It outlines specific rights that you have as a landlord, including the ability to charge rent for the use of your property, and on the part of the tenants their rights to reside for a specified time period at an agreed rent. Short-term tenancy agreements can be drawn up between you and your tenants, but the use of a solicitor for this is preferable.
One of the most common tenancy agreements is the assured shorthold tenancy (AST), which has been in existence since the 1990s. It includes the obligations of you and your tenants. A significant feature of this agreement is the right of the landlord to repossess the property at the end of the agreed term, but there is no minimum period. Your tenant does have the right to reside in the property for no less than six months. Using the services of a solicitor to draw up an AST is the best option if the period is likely to be longer than three years.
Setting up an AST means following certain conditions that have to be met, as follows:
The agreement should include the following information:
There may be other payments that the tenant should be responsible for. These can be outlined in this document and may include such items as council tax and utilities.
As a landlord, you should include the services you offer, which may include grounds maintenance.
When you or your tenant wishes to terminate the tenancy, the notice given should be stated in this document.
It is a legal requirement that your rental property’s electrical systems have to be safe and are maintained to an acceptable level. There must be sufficient sockets installed in the property that will meet any tenant’s needs. The electrician you use should be accredited by the National Inspection Council for Electrical Inspection Contractors.
If your rental property’s wiring exceeds 15 years, an annual inspection of its condition should be carried out. This is not a requirement for newer electrical wiring. Electricians tend to recommend the time they think the next inspection should take place, which generally is somewhere between 2 and 10 years. The electrician will provide a written document resembling a report that will detail any maintenance that might be required.
There has been legislation in force since 6th April, 2007 in relation to holding a deposit that you, as a landlord, are permitted to secure from a tenant, but you must protect your tenant's deposit. This is intended to make sure that landlords do not just spend their tenants’ deposits and have it readily available at the termination of their tenants’ rental period, assuming that the condition of the property is satisfactory.
If you fail to do this, you might be required to pay out three times the value of the deposit. This protection legislation is called the Deposit Protection Scheme (DPS) and its purpose is to ensure:
The government will assist you by protecting the deposit if your tenant holds an assured shorthold tenancy, offering two protection schemes for you to choose from. One is called the 'custodial scheme' and the other is called the 'insurance-based scheme'.
The deposit is placed in this scheme while the tenancy agreement is in force, and it is available free of charge. Within 14 days of the tenant paying the deposit, you must provide a document to the tenant detailing what arrangement has been made for the deposit. Included in the document should be the following information:
When the tenancy is over and an agreement has been made concerning the amount to be returned, the deposit will be given back. If there happens to be a dispute, the Tenancy Deposit Scheme will keep the money until the disagreement has been solved either by a dispute resolution service or the courts. This scheme is only provided by the DPS.
Similar to the custodial scheme, your tenant’s deposit is kept by the scheme during the tenancy agreement, after which it is returned. As the landlord, you do not have to hand over the deposit and can keep it. To ensure you still have the amount available, you pay an amount in the form of an insurance premium directly to the insurance-based scheme.
If this is the scheme you intend to use, you are required to provide documentation to your tenant within 14 days of receiving the money. This document should include:
As the landlord, you are responsible for returning the agreed deposit amount at the end of the tenancy agreement. If there is a dispute, you are required to give the deposit to the scheme until reaching a resolution. If you do not comply, the scheme will be responsible for returning the money to the tenant if he or she is entitled to a refund.
This document is a legal requirement that indicates your property’s energy efficiency. You must make it available every time your property’s tenancy changes hands.
Don’t forget how important it is to take out insurance for your property before a tenant occupies it. This is not so much to protect your property from accidental fire or vandalism, but it also covers you for any injuries to your tenants caused by a hazard in your property if the tenant files a personal injury claim or if visitors are injured while on the property. Most insurance policies for tenancy-occupied rental property will cover your property for break ins if it is empty up to a period of 30 days.
If you are new to renting out property to tenants, you may be wondering why you have to ask tenants for a deposit as you would have thought most ordinary people would be careful enough when living in someone else’s property. What you should remember is that tenants want to treat your property as if it were their own, so sometimes anything goes.
A recent example online cited a tenant who was living in a rental block of flats who complained to their landlord of water dripping through their ceiling. The landlord was called to investigate and found in the flat above, to her utter amazement, two unusual occupants of the flat. One was a 24-inch-deep plastic swimming pool, full to the brim, while the other was a number of hens, neatly housed in the kitchen cupboards!
Even if the landlord had decided not to give notice to the tenants, it would have been unlikely that they would have got their deposit back. As a landlord, you are permitted to withhold money deposited by tenants if damage is done to your property while tenants have a tenancy agreement with you. In this case, it is highly unlikely that keeping poultry in the kitchen cupboards was regarded as acceptable under the tenancy agreement. It is also unlikely that the leaking swimming pool was regarded as acceptable, since it obviously seriously damaged the integrity of the flooring under the room where the pool was kept.
Landlord insurance is not something you particularly want to pay, but sometimes the damage done to rental property costs far more to repair than the deposit paid by the tenant. Insurers know that and accept the risk, even though they almost always file a dispute with the claimant as they expect the landlord to keep a careful eye on their rental property.
There is often damage done by pets scratching away at furnishings and furniture, which can be far more than wear and tear and can take a lot of money to put back in order. There are tenants who for weeks do not bother cleaning inside the property at all, leading to waste build-up that requires the service of a professional cleaning company to restore it to near normal conditions. With the right landlord documentation in place, you can ensure that you, your property and your tenants are protected in the necessary ways.
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