Landlords don’t enter into a tenancy agreement expecting to encounter problems and certainly wouldn’t assume that damage to the property is an inevitable element of operating in the private rental sector but it does happen. With the UK housing market approaching £400 billion, 4 x the value of all FTSE100 companies, the PRS can be a lucrative and fulfilling business. Rather than hope and keep fingers crossed; what can landlords do to minimise any potential hit on revenue and damage to the rental property?
Tenants
The vast majority of tenants are reliable, responsible and respectful however, sadly, there are exceptions. With any business type, problems, issues and damage do occur whether they are material or reputational and this is true of the private rented sector. Landlords run an inherent risk of accepting tenants who turn out to be careless, reckless or even malicious in their treatment of the property and contents.
By the very nature of the business type; landlords are uniquely exposed to the risk of damage since they have to rely heavily on trust and when handing over the keys to the property are relinquishing a fair amount of oversight and control. So when that trust is broken, there are practical and legal ramifications but it is always best to mitigate any risk right from the start of the tenancy.
There are a number of effective precautions that landlords can take to minimise the chance of loss or damage and they involve elements such as property inspection, insurance, references and contractual provisions. Let’s have a brief look at the ways in which you can prepare for the worst while planning for the best.
Assured Shorthold Tenancy (AST)
Before you even enter into a contract with a prospective tenant it is both recommended and highly advisable to commission and follow up on any landlords references provided, but do bear in mind that these will almost certainly be from referees on whom the tenant is depending on to support their application or, as some landlords find out after the tenant has moved, are from landlords looking to ‘move the tenant on’ when they no longer want the ‘problem tenant’. Far more insightful will be checks made into their rental history.
Talking to previous landlords will give you the chance to identify any patterns of behaviour, issues surrounding payment of rent, general upkeep or damage to the property. Questions could include: how was (any) damage caused? Did the tenant inform the landlord promptly? Did they take none, some or all of the responsibility? How amicably was the matter settled? This could be the first stage at which red flags are raised.
Tenant reference checks are a quick, affordable and simple way for landlords to determine whether the tenant is likely to be reliable and more importantly; keep up with their rental payments.
Checks should include:
- Adverse credit
- Landlord referencing
- Employer references
- Affordability calculations
- Right to rent check
- Documents – bank statements / proof of identity
Once you’re confident in your choice of tenant, think about adding special terms to your AST. Many landlords rely on standard form agreements but there may be special considerations which apply to your property, structurally, geographically or in terms of the style, quality and configuration of internal fixtures and fittings.
Similarly, you may want to ensure that expressly forbidden behaviours such as smoking, keeping pets or excessive use of open flames are clearly highlighted so there cannot be any chance of your wishes being misinterpreted. Think about issues that render your property particularly susceptible to damage and make provision for them. The tenant also has a responsibility to inform you of damage that has occurred or, just as importantly, conditions which might imminently contribute to damage so strengthen any known obligation in explicit terms.
Equally; landlords have a duty to ensure that the property is maintained, and that safety is a priority with required gas and electrical certificates, smoke alarm checks and compliance with current legislation including the Homes Act – fitness for human habitation.
Property reports
Before your tenants move in it is essential to observe best practice in inventory property management. A thorough inspection of the premises down to every last detail of the décor, appliances and furniture as the information will clearly state the condition and gives both parties certainty and creates an even footing. The inventory report process can be lengthy and intricate but there are ways to simplify it. Using a managing agent is one obvious route, but if you’re self managing landlord and or not keen on the expense or the delegation involved then a viable alternative is to commission an inventory company or professional to complete the report.
An experienced clerk will understand what should and needs to be included in the report, ensure that any potential obstacles for dispute are mitigated at the very beginning and set the standard for all future reports such as the interim inspection and of course the check out at the end of the tenancy. You can book a professional, local and vetted clerk using Inventory Base Workstreams
An excellent alternative is to use property inventory software. At Inventory Base, we specialise in property management software which is an ideal platform not just for the initial inventory but for all subsequent reports and inspections if you chose to go down the ‘Landlord DIY’ route.
Start of the tenancy
One of the most difficult times can occur on the day your tenants move in. Even if you are letting it furnished, they will undoubtedly be bringing some of their own belongings. If it is unfurnished then there will likely be some very big items to move across the threshold. With so much toing and froing in a short space of time, the chances of damage to walls, skirting boards, doors and flooring are increased. Make sure you advise tenants of any special attention that needs to be paid to avoid damage to doorways, hallways, paintwork and fittings on moving day.
Having the inventory report ready on the day of move-in helps ensure that should the laminate flooring be damaged from dropping a fridge or the walls chipped as they navigate tight hallways – your asset is protected.
Don’t assume your new tenants will be familiar with the workings of everything in your property. Make sure you explain everything to them. Provide a property folder with all the relevant manuals, guides and information from the heating and hot water to the utilities, security, refuse collection timetable, even TV connections.
You may feel such things are blindingly obvious but there is no guarantee that they will know or be equipped to work out the specifics of your property’s infrastructure. Err on the side of caution as over-explaining will help to minimise any queries, concerns and or unpleasant surprises for you and your tenants.
Property inspections
Once the tenancy has begun, your property is at its most vulnerable because although you have certain rights of entry these are balanced in law against the tenants’ rights of privacy so during the course of the tenancy, your strongest protection is regular property inspections.
Ideally you should be looking to visit the property regularly to ensure that there are no maintenance issues, that the tenant is complying with the terms of the AST and to ensure that smoke & carbon monoxide alarms remain operational and the tenant safe. The use of a property professional or inspection app can reduce the time and effort needed to carry out regular inspections without compromising on the detail and thoroughness of the interim inspection.
How often should you inspect?
Some landlords leave as much as 12 months between inspections while others arrange for them every 3-6 months. Twice a year should be the absolute minimum however there is much to be said for quarterly inspections. The tenants may not be entirely happy with what they see as regular intrusions but you may find them more cooperative if you stipulate this frequency in the AST, together with a clear explanation that the visits will actually protect both parties from unexpected developments and help to resolve issues early on, more quickly and before they become a problem.
One mistake often spoken about in online property forums is that some landlords have been taken in by what appears to be good behaviour of long-term tenants and so have failed to carry out regular inspections. This can hinder rather than help with as even though you have not experienced any issues so far that doesn’t mean they either are looking after the property or masking problems such as over occupancy or developing their own horticultural business (cannabis farm).
Prepare for the worst; plan for the best
Don’t think it can’t happen; statistically, the longer your tenant goes without regular inspections the higher the likelihood of damage to the property occurring. Treat them with courtesy and respect of course, but maintain a watchful inspection regime to ward off any potential nightmare and costly situations.
Remember though that damage is not always the fault of the tenant – things do break or fail due to natural wear and tear. You should always have a scheduled maintenance plan in place so that as little as possible is left to chance.
Ultimately keeping your property safe is not a perfect science and there are no cast-iron guarantees. But caution, forethought and regular attention will go a long way to minimize your losses and maintain a sound working relationship with your tenants.
For support with residential inspections and inventories, start your free trial of Inventory Base today or get in touch with our team for more advice.