Becoming a landlord is a popular investment strategy – whether you are investing in commercial or residential property.
Despite the fact that the Government has imposed strict procedures for evictions (dependent on tenancy type and terms), over 95% of private tenants are continuing to pay their rent. Some of those tenants have made an arrangement with their landlord to pay less rent or defer payment during the pandemic, according to the most recent NRLA survey.
What are these new rules surrounding evictions and more importantly what do they mean for both the tenant and the landlord?
- Landlords seeking possession of their property to set out in their claim any relevant information about a tenant’s circumstances, including information on the effect of the COVID-19 pandemic on a tenant’s vulnerability or social security position.
These rules will apply to all possession proceedings either new or existing, including accelerated possession proceedings. Where this information is not provided, judges will have the ability to adjourn proceedings. These changes will be in place until the end of March 2021 but could be extended.
- Landlords will need to notify the Court and their tenant of their continued desire to seek repossession before the case will proceed using a ‘reactivation notice’.
This rule includes accelerated possession cases and the government says it will ensure that the Court’s time is spent on the right cases. However a reactivation notice will NOT be needed for any claim where a possession order has been granted, suggesting landlords can move to execute the warrant via bailiff services.
- The court will have flexibility on setting the date for the court hearing to allow it to fix a date either on or after the claim form is issued to the landlord.
Currently a hearing date is set at the same time as the claim form is issued. The requirement to fix a hearing eight weeks after the claim form is issued to landlords will be suspended.
- Landlords will need to provide a rent arrears history in advance of the hearing, rather than providing at the hearing itself.
So documentation of payments made and missed payments including any agreements made to repay or reduce the rent during the period in question will be vital as evidence for the court to consider prior to the hearing.
- High Court bailiffs will be required to provide notice of the eviction date to the tenant, in the same way that notice is provided by county court bailiffs.
The notice will include information on how the tenant can apply to suspend the eviction and where to go to for advice.
Accidental landlords
Many people find themselves as landlords even if it has not been a deliberate investment, for example by inheriting a property or deciding to keep both properties when a couple moves in together.
People also find themselves having to rent their property out due to a change in work or financial circumstances – especially with COVID-19 having such an impact on every aspect of the economy and everyday life.
Owning property as a landlord can however bring financial rewards and be, for many, a full time role or job. However, it is important to understand what is involved in renting out a property before starting up in business. To avoid the pitfalls which can limit profitability, cause you to incur fines and other potential criminal sanctions you must understand your role and requirements to ensure that you provide a property that is fit for human habitation and conforms to all relevant legislation and government guidelines.
The list is quite extensive, however in order to break it down we will be exploring the key points to understand over three blogs:
- Pre tenancy – Want to be a Landlord? Where to start your pre tenancy journey
- Mid tenancy – Want to be a landlord? Defining your mid tenancy obligations
- Post tenancy – Want to be a landlord? Post tenancy blues and how to avoid them
Property rental is a business
The most obvious point, but one which is sometimes overlooked by new landlords, is that renting out property is a business. You need to be prepared to keep proper accounts, submit tax returns and put aside money to fund improvements and repairs as well as ensure that you comply with all necessary regulatory requirements.
Just like any other business, a property rental business can make money or lose money – it is not a guaranteed investment like putting your money into a fixed rate savings account. The underlying value of your property can fall as well as rise, and you may experience void periods between tenants where you receive no rent.
Tenants may not always treat the property with the respect landlords would wish, meaning that repairs, maintenance and decoration are essential and so need to be budgeted and funded. So as a potential landlord you need to plan how you will fund both ongoing maintenance and unforeseen one-off costs such as repairing leaks or replacing boilers.
Pre tenancy considerations
With so much choice either on the high street or online; how do you find a good letting agent?
Simply Business have a very useful guide to finding the best agent which looks at:
- How to decide on the services you need
- Why researching your local agents is vital to a good service
- How to compare letting agent fees
- Check legally required memberships
- Client money protection schemes (CMP) that requires you to ensure that your agent is compliant; see government guidelines
If you are taking a deposit on the property you must place your tenants’ deposit in a tenancy deposit protection (TDP) scheme if you rent out your home on an assured shorthold tenancy that started after 6 April 2007.
Always remember that the deposit belongs to the tenant so choose the type of scheme carefully so that you can access their support, advice and their dispute service should the tenancy not end well.
Know your safety responsibilities
The safety of tenants should always be your top priority as this will ensure that they remain safe and content. This will help to minimise any costly void periods and unnecessary headaches when it comes to managing their expectations and the legal responsibilities; so what do you need to know and more importantly do?
Electrical Safety
New Regulations came into force on 1 June 2020 and form part of the Department’s wider work to improve safety in all residential premises, particularly in the private rented sector. These new regulations require landlords to have the electrical installations in their properties inspected and tested by a person who is qualified and competent, at least every 5 years. Landlords have to provide a copy of the electrical safety report to their tenants, and to their local authority if requested.
Visit the MHLCG website for more details
Gas safety
As a landlord you must make sure any gas equipment supplied is safely installed and maintained by a Gas Safe registered engineer. You are required to ensure that a registered engineer completes an annual gas safety check on each appliance and flue which includes giving you a copy of the gas safety check record. This must be shared with the tenant(s) before they move in, or within 28 days of the check being completed.
Visit the Health & Safety Executive website for more details
Water safety
The law is clear; if you are a landlord and rent out your property (or even a room within your own home) then you have legal responsibilities to ensure the health and safety of your tenant by keeping the property safe and free from health hazards.
Section 3(2) of the Health and Safety at Work Act 1974 (HSWA) makes provision for relevant health and safety legislation to apply to landlords to ensure a duty of care is shown to their tenants’ with regard to their health and safety. Landlords, under Section 53 of HSWA are regarded as being self-employed and tenants fall into the class of “other persons (not being his employees)”. If you rent out a property, you have legal responsibilities to ensure you conduct your undertaking in such a way that your tenant(s) are not exposed to health and safety risks.
The Control of Substances Hazardous to Health Regulations 2002 (COSHH) provides a framework of actions to control the risk from a range of hazardous substances, including biological agents (eg Legionella) – to identify and assess the risk, and implement any necessary measures to control any risk.
L8 Approved Code of Practice (ACOP) was revised and republished in November 2013 and retained the guidance on the requirements of HSWA and COSHH for employers AND those with responsibilities for the control of premises including landlords (L8 ACOP, paragraphs 1 and 2). It applies to the control of Legionella bacteria in any undertaking involving a work activity AND applies to premises controlled in connection with a trade, business or other undertaking where water is used or stored and there is a reasonably foreseeable risk of exposure to Legionella bacteria (L8 ACOP, paragraph 22).
For more information and guidance the Health & Safety Executive website
Fitness for Human Habitation
The Act came into force on 20 March 2019. The legislation requires landlords to ensure that you are meeting your responsibilities with regards to property standards and safety.
Under the Act, the Landlord and Tenant Act 1985 is amended to require all landlords (private and social) to ensure that their properties, including any common parts of the building, are fit for human habitation at the beginning of the tenancy and throughout. The Act states that there is an implied agreement between the tenant and landlord at the beginning of the tenancy that the property will be fit for human habitation.
The Act applies to:
- tenancies shorter than 7 years that are granted on or after 20 March 2019 (tenancies longer than 7 years that can be terminated by the landlord before the expiry of 7 years shall be treated as if the tenancy was for less than 7 years)
- new secure, assured and introductory tenancies (on or after 20 March 2019)
- tenancies renewed for a fixed term (on or after 20 March 2019)
- from the 20 March 2020 the Act will apply to all periodic tenancies. This is all tenancies that started before 20 March 2019; in this instance landlords will have 12 months from the commencement date of the Act before the requirement comes into force
For more information on private renting; visit the Gov.uk website for details and guidance
Why should you reference your prospective tenants?
You’ve readied your property for rent; found the best agent and completed all the safety elements to ensure that your new tenants will be able to enjoy the property and also pay a fair/market rental price. How do you ensure that they respect the property and pay the rent on time?
Referencing your tenants is vital to ensure that you minimise the risk of rent arrears and other problems. Carrying out a check on your tenants will help you understand their renting history, financial background, and inform you of any criminal convictions your tenant might have that will help you make an informed decision and mitigate any potential risks so don’t ever skip this part of the process.
You also need to ensure that the prospective tenant(s) have the right to rent in the UK. The referencing process should cover this but you still need to understand the requirements and process so that you can make sure that your agent or if you are doing this yourself, have all the bases covered.
For more information visit Gov.uk
Registering a deposit – Why an inventory is so much more than a ‘nice to have’
The costs a landlord has to bear when it comes to renting out a property can be quite daunting. There are all the safety requirements, agents fees, insurances, referencing checks, deposit costs and to add a final nail to the proverbial coffin; you have to pay for an inventory report. Or do you?
There is no legal requirement to have an inventory report but if you look at what it does and can protect you from then it’s a vital component of the lettings process.
When taking (and registering) a deposit you are effectively indemnifying your investment from any potential damage, cleaning issues and in some cases, lost rent from non payment.
The deposit is always, first and foremost, the tenants and should be returned at the end of the tenancy normally within 10 days of the end of tenancy date unless you as the landlord have a legitimate claim against any of the monies.
If you have a claim then you need to be able to evidence any proposed deductions so that the deposit adjudicator can make a balanced and informed decision.
Often this includes receipts for items damaged or missing, cost of cleaning, cost of replacement of any items and or re-decoration if the property has experienced more than fair wear and tear during the tenancy. But how do you showcase these changes, how do you evidence the fact that an item is damaged or a wall requires redecoration?
Without a detailed, robust and evidenced report you are going to struggle. You can of course complete your own inventory, however a third party report is likely to be more detailed, informative and unbiased. An Inventory provider is skilled at detailing the property, conditions and issues as well as being able to advise on current legislation and ways to help you as the landlord to manage the tenant relationship as they can be the eyes and ears when completing the check in, mid term and check out reports.
For more advice and help visit InventoryBase who are the leading software provider to landlords, letting agents, inventory professionals for compiling property reports, risk assessments, fitness for human habitation assessments and more.
If you want to access and book professional, vetted and insured inventory providers visit Workstreams. A new innovative network that enables anyone to outsource property visits like inventory/check out reports to local and experienced suppliers vetted and approved by InventoryBase. Using Workstreams, landlords can outsource specifically selected property reports on-demand and wait for the final report to be delivered.
For more information visit InventoryBase Workstreams
Deciding on the next steps
There’s a lot to think about here and consider as a landlord, but if I can offer one bit of advice as a former landlord myself; do not cut corners. Often to save a penny you need to spend one and it is very true that you get what you pay for. If you are investing in the property and want to realise the best rental price and deliver a great experience to fabulous tenants, make sure you invest not only in the fabric of the building, but also in the process that will help support you and mitigate the risks involved in renting.
In the second blog of our series; Want to be a landlord? we look at the process and information needed during the tenancy – Want to be a landlord? Defining your mid tenancy obligations
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