Managing a Rented Property- Information for Buy to Let Landlords
Managing a Rented Property – for first-time landlords, there are many areas of consideration that need careful understanding and planning, before a self managing a let, or employing a letting agent. Always seek professional legal advice when dealing with tenancy agreements or any other legal contract. This article does not purport to provide recommendations, merely acts as a general guide to the legal issues involved. The following article outlines a practical actions and legal responsibilities of the managing agent and landlord, during the lifetime of the tenancy….
Landlord & Tenants Rights & Responsibilities – prior to self managing a rental property, (or employing the services of letting agent to manage it for them), landlords should make themselves aware of their legal responsibilities under the Housing act 1996 and the Tenancy Act 1985. This UK legislation, details the rights and responsibilities of both landlords and tenants. The main areas of landlords responsibilities are as follows:-
- Paying Service Charges – landlords will be expected to pay for buildings and contents insurance, commonly known as buy to let insurance. In addition, they will need to pay for any outgoings not listed in the tenancy agreement, payable by the tenant.
- Equipment Maintenance – landlords are responsible for maintaining the appliances and equipment in and around the rental property. These include paying for the repair or replacement of faulty equipment, such as electrical wiring, sanitary items, such as bath and sinks and heating equipment. Landlords are also responsible for reasonable wear and tear of the external areas around the property. Here the legislation helps to ensure tenants enjoy a safe living environment.
- Privacy Protection – respecting the tenants a ‘quiet enjoyment of the property’
- Health and Safety– the landlord must comply with all safety regulations to ensure the tenants complete safety. These include dealing with annual maintenance of gas boilers, ensuring soft furnishings comply with fire regulations, and ensuring a electrical areas meet electrical safety regulations.
- Confirming their own contact details so that the tenant has the right to contact them, if needed.
The legislation protects tenants by giving them the right to peace and quiet, the rights to a minimum of two months written notice before any repossession may take place, and that landlords must seek written permission for accessing the tenants property. These areas seek to redress the balance where landlords have behaved poorly in previous decades towards a less powerful tenants group.
As the landlord, you should also make tenants aware of their legal responsibilities. Sometimes these are noted inside the tenancy agreement. In particular, landlords must seek tenant permission before entering the property. The tenancy agreement that they have signed should provide redress in event of accidental or deliberate damages by the tenant. The tenant must also pay council tax and any other bills set out in the tenancy agreement. Lastly and most importantly, the tenant is legally obliged to pay rent to the landlord.
Practical On-Going Considerations – to implement the responsibilities outlined above, landlords will need to devote time and money to ensuring the letters managed professionally and according to the legislation. Well looked after tenants are more likely to pay their rent on time and cause less trouble. The main areas of consideration are as follows:-
- Dealing with Tenants – most part-time landlords have full-time jobs, which leaves little time for dealing with complaints from, or problems realted to their tenants. If landlords plan to self manage the let, they might therefore choose to use a letting agent (most are available six days a week by telephone). Most tenant calls involve broken boilers, leaking roofs, broken appliances or general maintenance issues. Remind the tenant of their obligations, if their requests become unreasonable. However, dealing with people fairly and on time are essential traits, if you want the overall let to run smoothly. Make sure that you have a established relationship with a property maintenance company, if you’re not planning to undertake repairs yourself, or had not employed a fully managed service from a local letting agent. Many landlords live abroad and will be forced to use a local letting agent close to the rental property. Don’t assume that letting agent is doing their job. Sometimes tenants may want to contact the landlord directly, after arguments or disagreements have developed with the letting agent, who may have acted in an unprofessional all unresponsive manner.
- Rent Collection and Management – to avoid late payments, monthly rent is best administered via direct debit and ideally should start on the same date as the date the tenancy agreement has been signed. Some short-term rentals are based on a weekly basis, will which should be administered by a rent book. As the years go by, landlords may wish to increase the rent, but may be restricted by current legislation and original terms within the tenancy agreement. In particular, the Housing act 1988 dictates that annual rent increases must be implemented under the procedure set out in the act. This involves providing the tenant with a notice and right of appeal, should they disagree with the increase.
- Repairs and Maintenance – one of the most tedious and inevitable aspect of being a landlord, is dealing with the maintenance and upkeep of your rental property. Typically, unforeseen repairs will need dealing with quickly and efficiently by trusted and qualified trade’smen. Most decent letting agents have relationships with a local property management firm or have these skills in-house. Without this fallback, some ad hoc callout charges by local trade’smen may be astronomical, when compared to establishing an annual contract with the general property maintenance company. Property management firms will generally offer lower call out rates in exchange for a long-term contractual relationship. Other emergency callout charges are inevitable, such as broken gas boilers or broken pipes and locks. Here only qualified trade’s people are up to the job, and a sensible budget should be built into your investment plan. It is possible to purchase an emergency home assistance policy which provides 365x 24 hour emergency cover for a range of typical problems. Less time critical, are the planned annual maintenance on the property. To undertake this, you will need access to the property during the void periods when tenants are coming and going. In particular, painting and decorating, garden maintenance and landscaping or roof repairs, may need undertaking.
- Annual Gas Servicing – probably the most important safety aspect of maintaining rental property is to ensure the safety of the gas appliances within the property. The annual servicing of the boiler must be undertaken by a qualified COGRI registered engineer. They will produce a gas safety report and undertake essential repairs to the boiler, if appropriate. A gas certificate must be produced, a copy of which must be provided to the tenants and must be left in the property for the next tenants. The landlord is also legally obliged to ensure that appliances and pipes must not be used if he suspects that there is insufficient air the appliance to allow for proper combustion, or that the removal of products of combustion from an appliance cannot be safely carried out or that the room where an appliance is located is not ventilated properly. The penalties for failing to ensure regulations are met enforceable under the Health and Safety Work Act 1974. Tenants health and safety may be at risk, and so any accidents that occur due to negligent behaviour of a landlord, could result in unlimited damages.
- Inspections – most good short short hold tenancy agreements have and inspection condition built into them. This provides an annual inspection of the property to ensure the tenants are treating the property according to the terms of the tenancy agreement. It is a great opportunity to make a list of any repairs and general maintenance that needs to be undertaken. The inspection must be carried out on any mutually agreeable date and time and can only be carried out with the written confirmation of the tenant beforehand.
- Banking and Administration – most landlords will need an accountant to help produce the annual accounts to complement their own income-tax return. Most UK landlords are private investors, using property to supplement, replace or represent their old age pension. As such, the Inland Revenue will expect the formal submission of information outlining the income and expenses related to the investment. This would involve providing a properly formatted profit and loss account to summarise the annual profitability of the buy to let. This must be backed up by receipts justifying all sundry expenses. By creating a separate business bank account to deal with rental income and outgoing rental related expenses, it is simpler to produce the profit and loss account at the end of the year. Only allowable expenses can offset rental income and the Inland Revenue will look closely at large expense items and whether they relate directly to the investment property.
- Void Periods – there will inevitably be times throughout the life of the tenancy where your buy to let property will remain unoccupied. During this time you may need to obtain empty property insurance, the policy terms of which differ slightly from normal uk landlord insurance.
Inventory Check Out – an important aspect of managing a rental property is the inventory check-in and checkout processes. For rentals that are furnished, the inventory process protects the tenants deposit, as well as the landlords investment in furniture and fixtures. Tenants need to be notified in good time but the process will involve and what is expected of them. Most tenancy agreements state that furniture should be replaced to the original room it was located, if the tenant has decided to move it throughout the tenancy. Most letting agents will notify the tenants a couple of weeks beforehand and provide a copy of the inventory for the tenants to review. First-time renters may not be aware that the property should be left as they first entered it. In addition, they must provide written confirmation that the final bills have been paid, before the deposit can be returned.
It is completely normal that the odd plate or cup gets accidentally dropped and broken. Be prepared to these type of minor accidents and ensure that any minor breakages noted during the checkout process. Third-party inventory clerks can be employed as an impartial person to undertake the checkout process. The national tenancy deposit scheme has recently been set up to act as an independent adjudicator in landlord tenant disputes regarding deposits. This provides the tenant with added confidence that there is no bias towards the landlord and that both parties interests are being fairly balanced. The clerk would normally provide a complete written report commenting on the general state of the property and noting any specific breakages, damages and repairs required as a result.
In order to work out how much attention paid for my breakages and replacements of items a fair method is to use a ‘new for old’ calculation. You cannot claim for natural wear and tear as this is a cost which you as the landlord must bear, over the long period of investment. The clerk will ask the tenants to sign the report to confirm they agree except it’s findings. Tenants will need their rental deposit to pay for an ex-rental property and will be concerned that withheld deposits may affect their ability to pay for a new home elsewhere.
Tenancy Agreement Issues – as a landlord you should seek professional legal advice regarding any legal issue related to the termination of a tenancy, the ongoing renewal of a tenancy or any dispute your having with your tenants. At some point in the future you may wish to terminate the tenancy and you must seek advice regarding practical and legal process, depending upon your individual situation. Under an assured tenancy agreement, early termination by the landlord means Landlords must provide two months written notice to the tenants. It must be undertaken in accordance with the tenancy agreement and statutory regulations. It can only be undertaken at the end of fixed term. In practical terms, your letting agent will normally submit a ‘notice to quit’.
If the tenant wants to leave the property before the end of fixed term, you may be able to negotiate with them, assuming you have found new tenants to replace them. They will still be obliged to pay the rent for a fixed term, but you may decide to let them off if you have found new tenants and they have been co-operative and helpful throughout the process. Conversely, there may come a situation where your tenants want to carry on living in your property at the end of the fixed term and is the tenancy agreement about to expire. You should seek advice from a solicitor regarding the renewal by periodic tenancy or renewal of fixed term, depending on your plans for the property in the future.
Unfortunately, sometimes tenants fail to pay rent or turn out to be troublesome. Therefore, if you have decided you want to remove tenants from the property, you must be extremely careful how you achieve this legally. An early termination due to a breach of the tenancy agreement must be established legally (by following the regulatory processes). To regain possession, court proceedings must be undertaken, implemented via your solicitor. Failure to follow the proper procedure could have severe financial penalties for the landlord. One of the main grounds for serving a notice for repossession is failure to pay rent within a fixed term. Your solicitor will be up to explain the practical process for implementing this, and whether an accelerated possession order is appropriate or not. As a landlord you may not remove tenants from the property without the backing of the court. The protection from eviction act 1997, protects tenants from this type of illegal eviction.
Assetsure provides UK landlord buy to let insurance for buildings and contents for private landlords, letting agents and property management companies in the United Kingdom.