Landlord Guide to Letting Property

This guide is designed to help you as landlord understand the various responsibilities that come with the decision to let out residential property.

Leasehold Property

If your property is leasehold, as opposed to freehold, then you effectively have the right to occupy a portion of a building for the given duration of the lease, for example 65, 99 or 999 years. This form or ownership typically applies to buildings that comprise more than one unit, such as blocks of flats, though there are increasingly more freehold flats and apartments. If you are a leaseholder you should check the terms of your lease documentation and obtain the necessary written consent from the Freeholder or the Management Company for the building before letting your property.

Mortgage

If your property is mortgaged or you have a loan secured on the property then you must obtain written consent from your lender prior to the tenancy commencing. Your lender may also require additional clauses in the tenancy agreement of which you must inform us and they will often charge a fee for giving their consent for the letting to take place.

As regard to mortgage payments, we recommend that these are always paid directly by you via standing order.

Council Tax

Every property in the UK has a yearly council tax rate that is calculated from a formula based upon the value of the property, the number of occupants and the financial status of those occupants. It is the responsibility of the tenant or tenants to pay council tax due on a property. There are exemptions and reductions available to single occupants and students upon application to the local council.

Houses in Multiple Occupation (HMO's)

The Housing Act 2004 came into effect on 6th April 2005 and has introduced a new definition of house in multiple occupation (HMO). The interpretation is complex but can briefly be summed up as a building or part of a building consisting of one or more units of living accommodation, or a self-contained flat; occupied by persons who do not form a single household and where there is some sharing of the basic amenities (washing facilities, toilets, kitchens). The main effect of this will be to include shared student housing within this definition.

An HMO is defined as:

A building or part of a building (i.e. flat) which:
• Is occupied by two or more persons not forming a single household; and two or more households occupy and share one or more basic amenities (or lack such amenities)
• Is occupied by more than one household and is a converted building not entirely comprising of self contained flats
• Comprise of self-contained flats and the conversion does not comply with the Building Regulations 1991 and less than 2/3 of the flats are owner occupied.
• The HMO is occupied as the only or main residence. 
• Rents are payable or other consideration is provided in respect of at least 1 of those occupying the HMO.

 

NB: A single household means members of the same family either by blood, marriage, adoption etc.ie. three friends sharing would be 3 single households and treated as multiple occupation

Exempt Buildings include:

• Buildings occupied by two people
• Buildings managed by educational establishments, Local Housing Authorities, Police, Fire, Health Authority or registered social landlord. 
• Buildings owned by religious communities 
• Building owned by the owner, his family, domestic staff and one or two lodgers.

The Local Authority must grant a licence (for a period no longer than 5 years) if it is satisfied that:
The house is reasonably suitable for occupation by the number of households or persons applied for or determined by the LA having regard amongst other things to the provision of amenities and facilities.
The proposed licence holder or manager is a fit and proper person and is the most appropriate person to hold the licence.
The arrangements for managing the house are satisfactory.
There will be a fee payable by the landlord to cover the cost of processing the licence application and inspecting the property to determine whether it meets the relevant standards.

If an HMO is operated without a licence then the person managing or in control of the HMO can be fined upto £20,000

Again for breach of the licence (e.g. more occupants than permitted, or not carrying out works that the council has ordered), fines can be made for individual breaches of upto £5000, with a maximum total fine of upto £20,000

Tenancy Deposit Protection

From 6th April 2007, Tenancy Deposit Protection will apply to all assured shorthold tenancies in England and Wales where a deposit is taken. Virtually all new contracts to let a property are assured shorthold tenancies.

Tenancy Deposit Protection has been introduced:

• To ensure good practice in deposit handling, so that when a tenant pays a deposit, and is entitled to get it back, they can be assured that this will happen 
• To assist with the resolution of disputes by having an Alternative Dispute Resolution service (ADR). It will also encourage tenants and landlords to have in place, from the outset, clear agreement on the condition of the property through best practice, such as the use of inventories, and agreement on the condition of the property.

You will be able to choose between two types of scheme: a single custodial scheme and two insurance-based schemes.

Custodial scheme

The tenant pays the deposit to the landlord;

The landlord then pays the deposit into the scheme;

Within 14 days of receiving a deposit, the landlord must give the tenant the prescribed information (to be set out in secondary legislation) about the scheme being used and the tenancy;

At the end of the tenancy, if the landlord and tenant agree how the deposit should be divided, they will tell the scheme which returns the deposit, divided in the way agreed by both parties;

If there is a dispute, the scheme will hold the amount until the dispute resolution service or courts decide what is fair; The interest accrued by deposits in the scheme will be used to pay for the running of the scheme and any surplus will used to offer interest to the tenant, or landlord if the tenant isn’t entitled to it.

Insurance-based schemes

The tenant pays the deposit to the landlord;

The landlord retains the deposit and pays a premium to the insurer - the key difference to the custodial scheme;

Within 14 days of receiving a deposit, the landlord must give the tenant prescribed information (to be set out in secondary legislation) about the scheme being used and the tenancy;

At the end of the tenancy, if the landlord and tenant agree how the deposit should be divided, the landlord returns all or some of the deposit;

If there is a dispute, the landlord must hand over the disputed amount to the scheme for safekeeping until the dispute is resolved. If for any reason the landlord fails to comply, the insurance arrangements will ensure the return of the deposit to the tenant if they are entitled to it.

Tenancy Deposit Scheme Operators

The Government awarded contracts to three companies to run its tenancy deposit schemes on 22 November 2006.

The three schemes are:

The Deposit Protection Service (The DPS) - the only custodial deposit protection scheme ��" is free to use and open to all Landlords and Letting Agents. The service is funded entirely from the interest earned from deposits held. Landlords and Letting Agents will be able to register and make transactions online. Paper forms will also be available should internet access be an issue. The scheme will be supported by a dedicated call centre and an independent dispute resolution service. For more information, visit The Deposit Protection Service,or call 0870 707 1 707

Tenancy Deposit Solutions Ltd (TDSL) is a partnership between the National Landlords Association and Hamilton Fraser Insurance. This insurance-based tenancy deposit protection scheme enables landlords, either directly or through agents, to hold deposits. Letting agents can also join the scheme. For more information, visit Tenancy Deposit Solutions Ltd

The Tenancy Deposit Scheme (TDS) is an insurance-backed deposit protection and dispute resolution scheme run by The Dispute Service that builds on a scheme established in 2003 to provide dispute resolution and complaints handling for the lettings industry. The new scheme enables letting agents and landlords to hold deposits. For more information, visit The Tenancy Deposit Scheme or call 0845 226 7837.

Utilities

It is standard in most tenancy agreements to stipulate that it is the responsibility of the tenant to arrange and pay for utility services such as gas, electricity, water, telephone and television license.

As your agent we can arrange for the transfer of utility accounts to the tenant and between tenants if your property is let again. Meter readings will be taken at the start and end of each tenancy allowing for closing gas and electricity accounts to be drawn up. We will handle all these matters for you, but telecommunication providers will usually require instructions direct from both the landlord and tenant.

As landlord you are also responsible for all standing charges whilst the property is not subject to a tenancy agreement. i.e. when the property is vacant.

Income Tax

If you reside in the UK then it is your responsibility to inform the Inland Revenue of any rental income received and to pay any tax due on it. Before taking the decision to let your property, it is advisable to consult an accountant who can offer professional advice on tax matters. This will usually save you money in the long term. It is also useful to remember that that income tax on rental incomes is charged on the profit received after the deduction of allowable expenses.

If you are not residing in England and Wales during the tenancy then we, as your agents, are required to deduct basic rate tax from any rent that we collect on your behalf. You can apply to the Inland Revenue for an exemption certificate depending on your current tax situation.

Building and Structural Condition

A well-maintained property in good decorative order will help towards a smooth-running tenancy. This will also have a positive impact in the form of a potentially higher rental figure. Moreover, we have found that tenants are more inclined to treat a nicely presented property with greater respect.

As landlord you are legally responsible to keep in repair the structure and exterior of the property and keep in repair and proper working order the installations in the property for the supply of water, gas, electricity, sanitation and for space and water heating. Repairs and maintenance are at the landlord’s expense unless misuse can be established. Also, interior decorations should be in good clean condition and preferably plain, light and neutral in presentation.

Furnished or unfurnished

The majority of properties on the letting market are ‘unfurnished’. A good working definition of this term is that it will usually include carpeting or flooring, curtains / blinds and a cooker. A ‘partly furnished’ property will usually contain the usual ‘white good’ kitchen appliances such as washing machine and fridge.

We recommend that you leave only minimum furnishings and that these should be of reasonable quality. Any items to be left should be in the property during viewings. Personal possessions such as ornaments, pictures and books should definitely be removed from the premises, especially those of financial or sentimental value. Some items may be boxed, sealed and stored in the loft at the owner's risk. All cupboards and shelf space should be left clear for the tenant's own use.

Gardens

Gardens should be left neat, tidy and rubbish free, with any lawns cut. Tenants are required to maintain the gardens to a reasonable standard, provided they are left the necessary tools. However, if you have very high standards for your garden or if it is particularly large then you may wish for us to arrange visits by a regular gardener.

Cleaning

At the commencement of the tenancy the property must be in a thoroughly clean condition and at the end of each tenancy it is the responsibility of the tenant to leave the property in a similar condition. Where they fail to do so, cleaning will be arranged at the tenant’s expense.

Information for the tenant

It is helpful to the tenant if you leave a ‘useful information’ folder at the property containing manuals and documentation for operating the central heating and hot water system, washing machine and any alarm system. It is also good to include details of when the refuse is collected.

Provision of keys

You should provide one set of keys for each tenant. Where we are managing your property we will arrange to have duplicates cut as required.

Landlord Guide to Safety Issues

The following requirements are the responsibility of the Landlord as owner. Where you have signed up for our full management service, they are also our responsibility as agents. Therefore, where we are managing your property we will need to ensure compliance with these requirements.

Gas Safety

It is the responsibility of you the landlord to ensure that gas fittings and flues are maintained in a safe condition at all times. All gas appliances must be serviced in accordance with manufacturers instructions and by a CORGI registered engineer.

Under the Gas Safety (Installation and Use) Regulations 1998 all gas appliances and flues in rented accommodation must be checked for safety within 12 months of being installed and thereafter at least every 12 months by a CORGI registered gas installer.

You MUST therefore ensure that an annual gas safety check is carried out and that the certificate is issued to the tenant for all gas appliances, flues and associated pipework.

Full records must be kept for at least 2 years for the inspections of each appliance and flue. These must include records of any defects found and any remedial action taken.

A copy of the safety certificate issued by the engineer must be given to each new tenant before their tenancy commences or to each existing tenant within 28 days of the check being carried out.

For a detailed explanation of the Gas Safety Legislation , please see the Landlord Guide to Gas Safety [PDF]

Electrical Safety

Under the Electrical Equipment (Safety) Regulations 1994, and certain other regulations, electrical appliances and equipment provided in tenanted premises must be safe. It is therefore necessary to arrange a qualified electrician to carry out a comprehensive check to ensure that all electrical items, plugs and leads are completely safe and undamaged and to remove or replace any faulty items.

In particular, each item should be

• Well maintained, complete and in full working order. 
• Supplied with a mains lead in good condition without wear, fraying or joining repairs and that it is secure at both the plug and appliance. 
• Accompanied by user instructions, guidelines and warnings. 
• Fitted with the correct plug of the latest approved type (BS1363) with sleeved live and neutral pins and also fitted with the correctly rated fuse.

Consumer Protection - Fire Safety

The Furniture and Furnishings (Fire) (Safety) Regulations 1988 (amended 1989 & 1993) provide that specified items supplied in the course of letting property must meet minimum fire resistance standards. The regulations apply to all upholstered furniture, beds, headboards and mattresses, sofa-beds, futons and other convertibles, nursery furniture, garden furniture suitable for use in a dwelling, scatter cushions, pillows and non-original covers for furniture. They do not apply to antique furniture or furniture made before 1950, bedcovers including duvets, loose covers for mattresses, pillowcases, curtains, carpets or sleeping bags. Items that comply will have a suitable permanent label or swing ticket attached. Non-compliant items must be removed before the tenancy commences.

Smoke Alarms

All properties built since June 1992 are required to have been fitted with mains powered smoke detector alarms from new. Although there is no legislation requiring smoke alarms to be fitted in other ordinary tenanted properties, it is generally considered that a common law 'duty of care' exists meaning that landlords and their agents could be liable should a fire cause injury or damage in a tenanted property where smoke alarms are not fitted. We therefore strongly recommend that you fit at least one alarm on each floor in the hall and landing areas. Where possible we also recommend the provision of fire extinguishers and/or fire blankets.

Other Goods

Specific safety regulations exist for high-risk goods including gas cooking appliances, electrical equipment, upholstered furniture and nursery equipment. The General Product (Safety) Regulations 1994 state that all goods must satisfy general safety provisions - essentially that they must be 'reasonably safe'

The Consumer Protection Act 1987 reiterates this point stating that such goods supplied in the course of a business must be 'reasonably safe' and includes goods that are both new and used.