At the last count, there were more than 100 pieces of legislation related to being a landlord. It is a serious business and carries with it a number of responsibilities. Read on for the key areas you need to consider when becoming a landlord.
For advice on becoming a landlord in England and Wales, check out the Residential Landlords Association or the National Landlords Association. In Scotland, a good place to start is the Scottish Association of Landlords.
Managed versus ‘do-it-yourself’
The first question is: do you want to use the services of a letting agent? As a buy-to-let investor or accidental landlord you have two choices when it comes to finding tenants and managing properties – pay a letting agent a sizeable fee or do it yourself.
|Managed by a letting agent||Lettings agents will typically offer a “let-only” service, where they will find, interview and vet tenants, do the paperwork and take the deposit and first month’s rent for a fee of around 10% of the rent.
There is also a “full management” service, which can cost 15% or more. Here, the agent will continue to collect rent and deal with the day-to-day running of the property.
An agent’s services can be essential for landlords who have properties far away or a large portfolio to manage. They can also guide you through the many pieces of legislation a landlord must comply with and the complexities of the local lettings market, along with practical issues such as an out-of-hours service for emergencies.
Look out for membership of a registered body such as the Association of Residential Lettings Agents (ARLA) or the UK Association of Lettings Agents (UKALA), as this means staff are trained, your money is protected and there is a redress scheme in place if things go wrong.
|Do it yourself||Agents come at a cost though, and you may prefer to go it alone and save money. If this is the case, make sure you know what your responsibilities are as a landlord and vet tenants thoroughly. When it comes down to it, the basics to get right are: will they pay and will they look after my property?|
Before your tenants move in
One of the most important pieces of documentation you can have as a landlord is a tenancy agreement. This sets out your responsibilities and those of your tenants. It covers how much they pay, who looks after what and what happens when either of you wants the tenancy to end.
There are lots of websites giving free templates of Assured Shorthold tenancy agreements (the most common form of tenancy agreement) so you can draw one up yourself – such as this one from the GOV.UK website.
This is one of the most important documents in the letting process. It details the contents of the property that you will be leaving for the tenants and the condition they are in on the day the tenant moves in. On the tenant’s first day, you will be expected to agree on the exact condition and contents of the property and make sure both you and the tenant have a signed copy of the inventory. This will help in the event of any disputes about the contents or condition of the property when your tenant leaves.
Tenancy Deposit Scheme (TDS)
When a tenant pays you a deposit to rent out your property, you are then obliged to protect it in a government-initiated scheme. There are two types of schemes, custodial and insurance-based.
Custodial scheme – the deposit is held by the scheme for the duration of the tenancy. It is then returned at the end of the scheme, divided up accordingly, or retained until any disputes are resolved.
Insurance-based scheme – the landlord keeps the deposit for the duration of the tenancy, but pays an insurance to the deposit scheme. If there are any disputes at the end of the tenancy, the landlord hands over the deposit to the scheme whilst the dispute is resolved.
There are a few safety requirements for a property that is going to be let out. This area is being constantly updated, so make sure you check the up to date legislation.
- Landlords are required by law to service all gas-related equipment every 12 months and provide tenants with a gas safety certificate.
- Regulations about fire resistant furniture are strict for rental accommodation and you must ensure all items meet the guidelines set out in the Furniture and Furnishings (Fire) (Safety) Amendment Regulations 1993. As a general rule, furniture made before 1988 is unlikely to meet the standards and should be replaced.
- You’ll also need an Energy Performance Certificate (EPC). This contains information about a property’s energy use and typical energy costs, as well as recommendations on how to reduce energy use and save money. An EPC gives a property an energy efficiency rating from A (most efficient) to G (least efficient) and is valid for ten years.
Landlord insurance isn’t a legal requirement but it does provide useful cover, such as buildings insurance and protection against loss of rent. Many mortgage lenders make buildings insurance a requirement of taking out a buy-to-let mortgage.
Landlord insurance can cover your building, contents, loss of rent and even public liability (protecting you if a tenant has an accident on your property and it is decided that it is your fault).
Managing and ending the tenancy
For advice on managing the tenancy – details of how far your responsibilities extend, how to deal with disputes, access and maintenance of your property and how to end a tenancy – check out the Which Guide to becoming a landlord.