Landlords Guide

This guide is aimed at those who are first time landlords or considering becoming a buy to let landlord;
but could also prove useful for landlords with previous experience.

Income
Buy to let investing can come from two potential income streams: from rent and from capital growth of the property value going up.

The property market has ups and downs so it is possible to lose money if property value goes down, your outgoings exceed rental yield, or if the property is vacant for a period of time. So being a landlord is a medium to long term investment risk.

Expenses
Fees associated with property purchase:

  1. Stamp duty
  2. Valuation
  3. Property survey
  4. Legal costs
  5. Mortgage arrangement fees (If you already have a property with a standard mortgage you will need to seek your Lender’s permission to rent it out)
  6. Income tax is payable on your rental income, minus day to day running costs. There are specific rules for overseas landlords
  7. If renting your property counts as running a business then you will need to pay Class 2 National Insurance

Day to day costs
It is important to factor in the day to day running costs of a property into your calculations for rental yield.

Here is a list of some of the main costs:

  1. Letting agent’s fees
  2. Mortgage interest
  3. Redecorating
  4. Landlord’s insurance
  5. Annual safety checks (on the boiler, etc.)
  6. Rent insurance (designed to protect you against having tenants in arrears or failing to vacate your property)
  7. General building maintenance
 
 

Meeting Safety Standards
Landlords must ensure tenants are safe as follows:

  1. a smoke alarm must be installed on each floor of the property.
  2. carbon monoxide detectors must be placed in rooms with a coal fire or wood burning stove.
  3. a gas safety certificate for each gas appliance must be available inside the property.
  4. to reduce risk of fire, all furniture must meet safety standards and display the appropriate labels.
  5. any electrical devices must be safe for use, and we recommend an Installation Survey or Portable Appliance Testing (PAT) so you can be sure you are compliant.
  6. the water supply must be working properly to protect tenants form Legionella.

A Housing, Health and Safety Rating System (HHSRS) allows local authorities to assess the condition of a property and any potential hazards. The aim is to maintain good standards in the private rented section. Your Move can help you understand how this legislation may apply to your property.

 

Energy Performance Certificate
As a Landlord you will need to purchase an EPC for a property before you let it. From 1st April 2018, the property must have a minimum rating of E on its EPC as it will be unlawful to rent any property which breaches this requirement with a penalty of up to £4,000.

 

Right to Rent
Landlords have a responsibility to restrict illegal immigrants accessing the private rented sector and so must check that a tenant is legally allowed to reside in the UK. If a landlord does rent out a property to a tenant who does not have the right to rent, the penalty is an unlimited fine and up to 5 years in prison. (There are some tenants who you don’t have to check but this depends on types of accommodation).

 

Information for your tenant
Your tenant must be provided with the landlord’s full name and address, or details of their letting agent. Your tenant must also receive a copy of the Government’s How to Rent guide which gives practical advice about what to do before and during a let.

 

Protecting a tenant’s deposit
Most tenancies are assured shorthold tenancies (AST) and as a landlord you must protect the tenancy deposit with a UK government-approved deposit protection scheme.

A landlord of an AST who doesn’t protect the deposit can be fined and it can make it much more difficult to end the tenancy.

Deposits must be returned in full at the end of the tenancy, unless there is a dispute about damage caused to the property or unpaid rent.

 

Repairs
Landlords are responsible for most repairs to the exterior or structure of a property. This means that any problems with the roof, chimneys, walls, guttering and drains are the responsibility of the landlord. These could include a cracked window, a faulty boiler, leak in the kitchen or a leaky seal in the window. Landlords are also responsible for keeping the equipment for supplying water, gas and electricity in safe working order.

When you choose Your Move’s Fully Managed package our Lettings Hub take care of all maintenance issues on your behalf.

 

Accessing the property
As a landlord it is inevitable that you will need to access the property from time to time to carry out repairs and inspections. However access should not cause unnecessary interference to your tenant.

Give reasonable notice and arrange a suitable time with yourself and the tenant, the notice period is usually set out in your tenancy agreement. – find out more about your access rights.

Lettings legislation and safety regulation
It’s important to be a responsible landlord. At Your Move we take safety regulations and legislation very seriously – it helps to protect both our tenants and our landlords. Here we outline the key safety regulations and landlord responsibilities when letting out a property.

Gas safety
A Gas Safety Record (GSR) is in place to ensure that all gas appliances, pipes and flues are in safe working order. It must be carried out by a qualified Gas Safe Register engineer. This needs to be checked every 12 months. Your Move removes the stress by arranging this for you.

Furniture and furnishing regulations
If you are furnishing your rented property, you must ensure that all furnishings comply with these regulations. Your Move can give advice on which furniture items will be compliant, and all compliant furniture must display standard labels in a prominent position. This is to reduce the risk of fire within the property.

Electrical regulations
You are required to ensure that any electrical devices within the property are safe for use. We recommend an Installation Survey or Portable Appliance Testing (PAT) so you can be sure you are compliant.

Housing, Health and Safety Rating System (HHSRS)
Introduced as part of the Housing Act 2004, the HHSRS allows local authorities to assess the condition of the property and any potential hazards. The aim is to maintain good standards in the private rented sector. Your Move can help you understand how this legislation may apply to your property.

Tenancy Deposit Scheme (TDS)
Landlords and letting agents are required to register a tenant’s deposit with an approved Tenancy Deposit Scheme. A Tenancy Deposit Scheme protects the tenant’s money and can help to resolve any disputes at the end of the tenancy. At Your Move, we register deposits with a scheme such as My Deposits. We will handle the administration of the protection of the security deposit and provide your tenant with all the details of the scheme.

Energy Performance Certificate (EPCs)
An Energy Performance Certificate, or EPC for short, is a report detailing the energy efficiency of a property. It gives a property an energy efficiency rating from A (most efficient) to G (least efficient) and is valid for 10 years. All landlords are required to purchase an EPC for a property before they let it. It is also a requirement that letting agents display the EPC when marketing the property. If a property does not have an EPC when marketed, the landlord and the agent risk a fine.
When you let a property through Your Move we can help you obtain an EPC for a small additional charge. Ask in your local branch for more information.

Houses in Multiple Occupation (HMO)
When you let to sharing occupants who are not a family group you will need to comply with rules around Houses in Multiple Occupation (HMO). 

Income tax
All landlords could be liable to pay tax on their rental income, whether they live in the UK or are based overseas. 
There are specific tax rules for overseas landlords.

Legionella
As a landlord you have a duty of care to your tenants to make sure your water supply is working properly to protect them from Legionella.

Smoke Alarms and Carbon Monoxide Alarms  (for England only)
Regulation has been introduced which requires all landlords – with properties in England – to have at least one smoke alarm on every storey of their properties – even where only a bathroom is located. And, if any room contains a solid fuel burning appliance, such as a wood burning stove, a coal fire, an open fire place or where biomass is used as fuel, a carbon monoxide alarm has to be present. 
The alarms must be correctly checked on the first day of any new tenancy but it is then the responsibility of the tenant to regularly check the alarms are in working order – the Department for Community and Local Government recommend once a month and, if they are not working, report it as a maintenance issue.  There’s more to read at our smoke alarms regulations page.

The How to Rent Guide – the checklist for renting in England (for England only)
A new tenant should always receive a Department of Local Government and Communities How to Rent Guide at the start of their tenancy from their lettings agent which gives practical advice about what to do before and during a let. A Guide which the tenant must confirm they have seen at the start of a new tenancy. The Guide is available via gov.uk or for further information simply ask your local Your Move branch.

Right to Rent checks
The Right to Rent scheme, which helps to make sure that people renting property in the UK have a legal right to be here, was rolled out across England in February 2016. At Your Move we’ve been doing this as part of our referencing process for many years, but if you carry out your own checks you will now need to make sure you get an acceptable proof of residency or risk a fine. If we don’t currently handle tenant checks for you, we’d be very happy to discuss how we can help you with this.

All landlords must provide installed and working smoke and carbon monoxide alarms in their properties (in England only). 

  1. At least one smoke alarm installed on every storey  – even where only a bathroom is located 
  2. A carbon monoxide alarm in any room containing a solid fuel burning appliance (e.g. a wood burning stove, a coal fire, an open fire place or where biomass is used as fuel).
 

What this means for you? 

  1. You must check that the Smoke and Carbon Monoxide Alarms, are in working order on the FIRST Day of the tenancy.
  2. You will need to make your tenants aware that it is their responsibility to check the alarms are in working order on a regular basis. The Department for Community and Local Government recommend that this is on a monthly basis although this is not enforceable. And, if they are not working properly, they will need to understand how to report the fault to you. 

When a house is let to sharing occupants who are not a family unit, landlords must ensure that the property complies with rules around Houses in Multiple Occupation (HMO). 

What is HMO?
A rented property is considered a House in Multiple Occupation if:

A property is occupied by five or more people, forming two or more households, who also share facilities such as the kitchen or bathroom, regardless of the number of storeys the property has.

What is a ‘household’?
A household is defined as either a single person or members of the same family who live together. A family includes people who are:

  1. married or living together (including same-sex couples)
  2. relatives or half-relatives (eg grandparents, aunts, uncles, siblings)
  3. step-parents and step-children

What are my responsibilities if I let a HMO?
As well as all your normal legal responsibilities you must ensure:

  1. smoke detectors are installed
  2. electrics are checked every five years
  3. that the property is not overcrowded (there should be a separate room for sleeping for each couple, each single person over 21, and for every two young people aged over 10 years)
  4. there are adequate cooking and washing facilities
  5. communal areas and shared facilities are clean and in good repair

What is the minimum room size for sleeping?
National minimum room sizes for sleeping will be introduced:

  1. Minimum 4.64 square metres – one person under 10 years
  2. Minimum 6.51 square metres – one person over 10 years
  3. Minimum 10.22 square metres – two people over 10 years
  4. Any room where the ceiling height is less than 1.5 metres cannot be used towards any minimum room size

You must contact your local council to determine whether you need a HMO licence before you let to tenants. If not, you could risk a fine of up to £20,000.

Preparing and maintaining your rental property requires both time and financial investment and therefore its important, when considering a tenant’s request to have a pet in your property, to weigh up the positives, protection options and things to look out for, as well as doing some background work. 

 

Shorthold or leasehold?
Before you start, check the deeds to your property. If your property ownership is on a leasehold basis, or an older freehold, there may be restrictions on accepting tenants with pets.

 
Positives

Demand is high
We know that property where pets are permitted is limited because of the negative press they receive. But with 44% of UK households currently owning a pet* and the private rental market increasing year on year, those landlords who buck the trend in allowing our four-legged-friends instantly increase their chances of attracting long-term, trustworthy tenants.

Rent negotiations
Tenants may be willing to pay a higher rate to secure a property that will allow pets and to cover any potential issues.

Careful clients
A tenant who is lucky enough to find a pet-friendly property is likely to be the model tenant in order to protect their future rental opportunities.

Added security
A lesser concern for the landlord than the tenant, but a concern all the same, is security. Having a dog in the property can act as a deterrent to would-be vandals or burglars. 

What to watch out for

Anti-social neighbours
Dogs and cats aren’t always the most socially acceptable neighbours. As a landlord, it is important to keep on good terms with the owners of neighbouring properties, so consider them in your plans.

Ever-present risk
Unfortunately, no matter how much preparation or protection you have in place, there will always be the risk of damage, mess, lingering odours and flea infestations. Some companies, like Your Move, have specific pet deposit schemes to cover the added risk of property damage so you can minimise the impact to your bottom-line.

 
Protection

Tenancy agreement updates
If you decide that the pet-owning tenant is for you then its worth including a pet clause in your tenancy agreement along with an additional clause to ensure that any damage is paid for or fixed and that the property is left clean.

Pet policy
Setting out your expectations for a tenant with pets can help to avoid problems.

Referencing
Consider asking potential tenants for a reference from a previous landlord relating to their pet. If that isn’t possible then their vet may be able to help. If that isn’t available ask to meet the pet and/or see the owner’s records of vaccinations and flea protection.  

 
It’s your choice

Ultimately, you have to consider how risk-averse you are. If you’re happy to take your chances and benefit from a wider market, and potentially increased rent, then tenants with pets are for you.

However, if the thought of added maintenance and cleaning raises your stress-levels then you should probably avoid it!

Getting the décor and furnishings right may not always improve the value of your property but can help improve your chances of securing a tenant in a competitive market, and reduce the time your property is empty.

Colour Schemes
As a general rule neutral is considered the best way to go as it will appeal to more people, and will easily go with any furniture and furnishings.

When choosing paint use a satin finish so that it will be easy to clean walls in between tenancies and reduce the remedial work to get the property ready for the next tenant. Use high durability paints that contain acrylic or latex to cut down on the need for redecoration. If you need a quick turnaround between tenants use water based acrylic paint which dries quickly.

Flooring
Go for a mid tone carpet that won’t show dirt or stains. Cheap carpets may be appealing, but are less likely to last especially with regular professional cleaning. So choose the best quality flooring you can afford. Light carpets are difficult to maintain, and show dirt and stains too easily.

Carpets are generally preferred in sleeping areas, but good quality laminate or wooden floors are good for high traffic living areas.

Furnishings
Providing a furnished property can be a godsend to tenants who are on temporary working contracts and can help show off your property.

Ensure that each room has the basics covered:

Lounge – sofa and side table

Dining area/room – table and chairs

Bedroom – bed and bedside tables

If you are aiming at students you may want to invest in a desk and chair to meet their study needs.

White Goods
Supplying white goods in your rental may also be an added incentive to achieve a quick rental. The minimum would be cooker, washing machine and fridge/freezer.

Below is a checklist to use to make sure you are ready for your tenant(s).

  1. Go through the property and ensure it is clean and presentable
  2. If you were the prior resident arrange to have your mail redirected
  3. Transfer utility bills into the name of the new tenant
  4. Arrange for the council tax to be paid by the new tenant
  5. Leave instructions for all appliances with each appliance.
  6. Make sure all relevant equipment is labelled correctly
  7. Copy the house keys so that each tenant has a set

Make sure you can provide your tenants with the following:

  1. An Assured Shorthold Tenancy agreement  
  2. A Schedule 2 Ground 2 Mortgage Notice  
  3. Energy Performance Certificate  
  4. How to rent guide   
  5. Standing Order  
  6. Smoke alarm checklist  
  7. An inventory of the property

On the day your tenants move in

  1. Take final meter readings and give them to the tenants
  2. Conduct, agree and sign the inventory with the tenants
  3. Demonstrate the workings of relevant equipment – alarms, locks
  4. Explain how to use any safety equipment – extinguishers, blankets
  5. Provide emergency contact numbers and written explanations of how to deal with an emergency in the property
  6. Allow the tenants to ask you any questions they have
  7. Hand over the keys

If you are letting your property through an agency then a lot of the above will be carried out by the agent.  Check with the agent what they will be responsible for.  This will depend on the type of agreement you have.

Here at B Estates we will assist you all the way in selling or renting your property for the best price in the shortest time possible. Please feel free to contact us.


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