Many people are using the property market to earn a second income by taking on “part-time” rentals. However, a sizable percentage are unaware of, or fail to follow, the relevant legal requirements related to lettings.
Below are some of the most important things you’ll have to keep in mind when becoming a landlord or adding to your portfolio. This list is not exhaustive – so make sure you do your research or enlist an agent to ensure you are aware of all the obligations placed upon you before taking on this responsibility.
1. Safety First
Safety comes first. The failure of landlords to keep their renters safe might result in large penalties or even prison time. Every floor where a room is utilised as living space must have a smoke alarm installed by the landlord, and every room with a solid fuel-burning device must have a carbon monoxide detector. The rules are even stricter if you rent an HMO (home of multiple occupancy). Read the government’s recommendations.
A genuine Gas Safety certificate, commonly known as a CP12, must be given to renters at the beginning of their tenure as per the law.
You must additionally ensure that:
- The electrical system is certified, including light fixtures and outlets.
- Each appliance you provide is safe, such as stoves and kettles.
2. Checking the tenants
A prospective tenant should undergo a thorough screening procedure that includes a complete evaluation of their ability to pay rent, credit and ID checks, evidence of residency, and references from employers and previous landlords. If necessary, guarantors should also undergo rigorous inspections.
Remember this is much less about a tenants income amount and much more about their expenditure and how tenuous this is likely to become as utilities and living expenses increase over the term of the tenancy.
Although conducting tenant references is an essential step in the procedure, many landlords don’t like carrying it out. As might be expected, there are referencing firms that will take care of this for you. Alternatively, you can ask your letting agent to do it as part of their property management service.
3. Landlord Insurance
It’s vital to get landlord insurance if you’re thinking about becoming a landlord or adding to your portfolio. When it comes to renting out property, things can occasionally go wrong, expensive repairs may need to be made, or something outside of a landlord’s control could occur (like flooding). Although having landlord insurance is not legally required, it may be a requirement of your buy-to-let mortgage (if you have one), so it is best to double-check.
You can choose the type of coverage that best fits your needs from a range of cover options provided by landlord insurance, including Buildings, Contents, Legal Expenses, and Rent Guarantee.
4. Arrange an EPC Inspection
Arranging an energy performance certificate (EPC) examination is an important item on your agenda. EPCs, which assess a building’s energy efficiency, are a crucial component of renting out your house.
The ranking for your property ranges from A (the most efficient) to G. (least efficient). At least an EPC grade of E is required for all rental homes. Every ten years, landlords must obtain a fresh EPC certificate.
5. Right to Rent
Right-to-Rent checks have long been required by law, and failing to do so might result in a hefty £3,000 fine for each illegitimate tenant that eludes detection. These can be fairly complex, so to make sure you don’t incur any unwanted fines, make sure you’ve brushed up on your Right-to-Rent knowledge.
6. Keeping on top of payments
Keeping track of payments has changed significantly in the new age of spreadsheets and apps. Get this right if you’re going to be self-managing your rental and you don’t want to deal with missed payments in the future.
Its worth creating a separate bank account for each property to manage income and expenditure for each individual property – as well as making self-assessments much easier at the end of the tax year.
7. How to rent checklist
At the start of new tenancies, tenants should be given a copy of the Department for Communities and Local Government publication “How to rent: the checklist for renting in England.” This only applies to tenancies beginning in England on or after October 2015. It’s good to familiarise yourself well with this document, as well as sending it to your tenants.
Your tenants have the option of receiving a physical copy or an email copy (i.e. provide them with a printed version).
8. Conducting an inventory
You should do a thorough inventory of the contents and the state of your property. Then, to confirm their agreement, have your tenants sign the document. You can give them a couple of days to evaluate it and ask for any changes.
An inventory enables you to support any deductions from the security deposit if damage happens during the tenancy.
9. Understand the tax you’ll need to pay
The earnings you make from your rental property will be subject to income tax. Utility and council tax payments, insurance, letting agent fees, service fees, accountant fees, maintenance costs (but not improvements), and the cost of finding new renters are all considered allowable expenses. Your mortgage interest payments are no longer a tax-deductible expense.
10. Other legalities
There are a lot of legalities to be aware of when it comes to being a landlord – we’ve covered some of them in this blog already, but others you should bare in mind include:
- Legionella Risk Assessments
- Plugs and Sockets (Safety) Regulations
- Tenancy Deposit Scheme
- Landlord Selective License (if applicable)
- Furniture and Furnishings Regulation
- Electrical Safety Standards Inspection/Report
Get in touch with Belvoir
It may seem overwhelming to become a landlord, but a qualified agent can assist with all of the aforementioned and take all the stress of become a self-managing landlord away. The best approach to ensure your interests are protected is to hire a seasoned agent, who can help ensure that all legal requirements are completed.
Belvoir’s team of property experts have extensive knowledge and experience in the rental sector. If you’re thinking of becoming a landlord or adding to your existing portfolio, then get in touch with us today to find out how we can help you.
