Guide to Letting Property

Before you begin viewing properties, it would be wise to sit down with a financial advisor who can recommend the best way to use your capital. We speak to many aspiring landlords who have inherited money or have worked hard to build up savings and want to buy a property outright.

While this isn’t a bad thing, you’re effectively putting all your ‘eggs in one basket’. Alternatively, you could buy more than one house by breaking up your capital to put down a deposit on multiple homes. What would owning two or three houses mean for your future?

Of course, this path is not for everyone. Some people may see owning a few properties as multiplying the stress involved, but it’s still prudent to talk to a financial advisor before making a final decision.

Once you have a clear idea about your options, the next step is to speak to local estate agents about the best areas to invest in. As experts in their field, they can inform you about the types of properties that are renting well and identify high demand and up-and-coming areas.

Local estate agents can also keep you alerted to new properties coming onto the market, but it’s worth setting up property alerts on Rightmove and Zoopla, too. Any new listing that meets your criteria will appear in your inbox, allowing you to request a viewing immediately.

Once you have purchased your property, it’s time to get it tenant-ready. While you should always present a clean and tidy property for the new occupiers, you don’t usually need to go overboard with expensive alterations.

One of the biggest mistakes we see new landlords make is getting too emotionally attached to the property. Remember, as this won’t be your residence, you don’t need to adapt it to your needs or pay for items that aren’t necessary.

Instead, think of your investment dispassionately, like you would a spreadsheet. Chances are, nothing more than a deep clean and a lick of paint is necessary.

Keep in mind that although most tenancies are very successful, there are times when properties aren’t returned in their original condition, which can cause a lot of stress if you’re emotionally attached to the property itself. For this reason, it’s better to accept that tenants won’t necessarily look after the property the same way you would.

Finally, make sure you have adequate buildings and contents insurance in place. Buy-to-let properties require specialist insurance, so picking the cheapest option could backfire. There are many comparison websites that you can use, but it might be worth speaking to a broker who has specialist knowledge in this field.

There are some minimum requirements that you need to meet if you are to become a Landlord. Section 11 of the Landlord and Tenant Act 1985 is a great place to start if you want to know what your legal responsibilities are throughout the Tenancy. In this guide, we will assume that your property is habitable and not experiencing any issues and jump straight to your legal obligations before the Tenancy begins.

You must meet some minimum requirements if you’re to become a landlord. Section 11 of the Landlord and Tenant Act 1985 is a great place to learn your legal responsibilities throughout the tenancy.

This guide assumes your property is habitable and not experiencing any issues, so let’s jump straight to your legal obligations before the tenancy begins.

If your property has gas, you must have all gas appliances tested by a qualified engineer before your tenant moves in and then again on an annual basis. The gas engineer will produce a pass certificate, which your tenant will need a copy of before moving in and when the appliances are retested.

Make sure the gas engineer you choose is registered on the Gas Safe Register and that they are qualified to test every appliance. For example, they might be qualified to test your boiler but not your hob. The Gas Safe Register will tell you exactly what they can and can’t do.

If your property fails for whatever reason, you must complete any necessary repairs and have a pass certificate produced before your tenants can move in. There are no exceptions.

Every landlord needs an EICR for their rental property, carried out by a qualified electrician. This is usually valid for five years or until the date mentioned in the report.

If you provide mobile appliances in the property, like white goods or lighting, these should also be PAT tested. You must complete the repairs if your property fails and issue a copy of the EICR before your tenants move in. You’ll also need to issue a copy every time a new report is carried out.

EPCs show the energy efficiency of a property, using a grading system from A (the best) to G (the worst). They also recommend how to improve the property’s score.

The current minimum requirement for an EPC on a rental property is grade E, although the government plans to raise the minimum standard to C. It would therefore be prudent to consider the EPC rating when investing in a buy-to-let property.

EPCs are valid for ten years. A copy must be provided for the tenant before they move in, and each time a new one is carried out.

Check if your property has a valid EPC here.

New rules are coming into force for all rental properties. From 1st October 2022, all landlords must:

• Ensure at least one smoke alarm is equipped on each storey where there’s a room used as living accommodation. This has been a legal requirement in the private rented sector since 2015.
• Ensure a carbon monoxide alarm is fitted in any room used as living accommodation containing a fixed combustion appliance (excluding gas cookers).
• Ensure smoke alarms and carbon monoxide alarms are repaired or replaced once informed that they are faulty.

Local authorities can impose a fine of up to £5,000 if a landlord fails to comply with these requirements after a remedial notice.

The government has produced a booklet on this subject, which you can download here.

While you can sometimes command a higher rent if your property has furniture, you’re better off offering it unfurnished in most cases. Most tenants already have their own furniture, especially families moving from another property.

If you invest in a furniture pack, you might have to remove it anyway when your tenant moves time. While you can take out insurance on things like white goods, this is another overhead you can easily avoid.

In some cases, tenants might expect to have white goods as a minimum, such as if they’re renting an apartment on a high floor. However, it might be wise to see how your viewings go before committing to supply them; it’s often not a deal breaker and could save you some money.

If you go down the furnished route, it’s essential to know that all mobile electrical appliances must be PAT tested, and any material items like mattresses and sofas must have fire-safe tags.

Whilst we favour unfurnished properties, we recommend the three Cs as a minimum: cooker (and hob), carpets, and curtains.

Now that your property is ready to rent, it’s time to find a suitable tenant.

The first step is to decide the level of involvement you’d like during the tenancy. If you’re unsure, head to our Lettings page to see the different types of letting management levels available. What appeals to you the most?

Whatever you decide, please don’t be tempted to cut corners. Sure, a handwritten sign in the window might be a cheap way to advertise, but will it attract high-quality tenants?

Likewise, housing a family member or friend in your rental might seem convenient, but would you be comfortable dealing with any problems or arrears should they arise? Also be aware that you may not get the best price if you rent to the first interested party.

A good letting agent will conduct multiple viewings, take numerous applications, and maximise the rental price based on current market conditions. They’ll also ensure that you comply with legal requirements during the marketing process.

Great news, you have found a tenant. They can move in straight away – right? Not quite. There are still a few legal hoops to jump through first.

As agents, we also take a non-refundable holding fee equivalent to a week’s rent. Once your proposed tenant passes referencing, the money is reallocated towards their deposit. Alternatively, if the tenant fails referencing due to something they didn’t disclose on their application form, this money is retained to subsidise the lost marketing time.

It’s the landlord’s responsibility to check that every tenant residing in their residential property has a right to rent in England. This means checking identification is valid and in date.

If your tenant is not from England, they’ll need to prove they have:

• A biometric residence card or permit
• A settled or pre-settled status
• Applied for a visa and used the ‘UK Immigration: ID Check’ app to scan their identity document on their phone.

You can learn more about Right to Rent here.

You should put every tenant through a detailed referencing process to protect yourself and your property. This includes providing income details, employment (if applicable), a working reference and a previous landlord reference.

Ideally, you should also check the tenants have a good credit rating, which means they have demonstrated they can meet their financial obligations.

Sometimes, unfortunate circumstances might have led to tenants gaining a poor credit history or the inability to quite meet the affordability criteria. We often find that tenants share the reasons for this before they go through the application and referencing process, as they stand to lose holding fees if they haven’t disclosed certain information.

If there’s an affordability issue, some tenants will use the top-ups they receive from the government to pay their rent. A less-than-perfect credit score might also have resulted from an unavoidable personal situation.

In these scenarios, it is advisable to seek a guarantor who can act for the tenant. The guarantor would be responsible for the whole tenancy agreement if things go wrong, including non-payment of rent. Because of this, guarantors should be referenced too.

Once you have completed the right-to-rent checks and are satisfied with the references, it's time to take some advanced payments from your new tenants.

The maximum deposit you can take is equivalent to 5 weeks' rent. So, for example, if the rent is £650 PCM, the maximum deposit you can take is £750:

£650 x 12 ÷ 52 x 5

Upon receipt, you must lodge it in a government-approved deposit holding scheme within 30 days and provide the tenant with a deposit certificate.

The three government-approved deposit schemes are:

• My Deposits
• Deposit Protection Service
• Tenancy Deposit Scheme

We also recommend that you take a month’s rent in advance from your tenant. This works particularly well when the tenancy is approaching its end date, as the tenant will have already paid the last month, so you won't be chasing it in once they have left.

The tenant should then set up a standing order to pay the rent monthly once they move in. Please note that charging a tenant any fees for moving in is illegal.

An inventory is a detailed report about the condition of your property. It should be carried out the day before the tenants move in and the day after they move out.

Ideally, both the landlord and the tenant should sign the inventory on the day. Where this can’t be achieved, the tenant should sign an inventory declaration form stating that they accept the terms of the inventory should it not be challenged in writing within the first seven days of the tenancy.

The two inventories (check-in and check-out) will be compared at the end of the tenancy to determine whether any deposit monies should be retained to go towards dilapidations.

Dilapidations always get priority over rent arrears. For example, if the deposit is £750 and there are £750 worth of rent arrears but £300 worth of damages, the £300 of damages would be allocated first and £450 of arrears second. The tenant would then be liable to pay the remaining £300 rent arrears independently of the deposit.

We advise getting the inventory outsourced so that if you need to make a claim, you can show it was carried out independently. A good inventory should include detailed photographs and descriptions of every room in the house, including wall colours, types of floor coverings and any furniture. It should also detail the current condition.

Even if your property is unfurnished and has white walls and beige carpets throughout, still do a thorough inventory. Otherwise, if your tenants haven’t signed an inventory, you’ll struggle to recover any deposit monies if they return your property in a worse state than when they moved in.

Once you have found suitable tenants and completed the steps above, they need to sign a tenancy agreement. This agreement states the term (usually 6 or 12 months) and sets out the obligations you and your tenant are expected to follow during the tenancy period, so both parties know what is expected of them.

An assured shorthold tenancy agreement (AST) is England and Wales's default type of tenancy. You can find various templates offered by different companies online, but with legislation changing all the time, you must choose one that’s up-to-date to avoid being caught out.

All tenants over 18 should be named on the agreement and provide a signature accepting the terms. Ideally, you should seek an independent witness to sign, too.

If you’re letting your property under a joint tenancy (where tenants share an obligation to pay the rent), the wording on the AST might need to be different. This also applies to houses in multiple occupation (HMO) where individual rooms are let out. Don't hesitate to contact a team member if you’d like further information about this.

For now, we're going to assume you need a standard AST agreement.

Before your tenants sign the agreement, you must issue them with the following paperwork and ask them to sign a declaration to say they have received them:

• How to Rent Checklist (click here for the latest version)
• Gas Safety Certificate
• Electrical Installation Condition Report
• Energy Performance Certificate
• Deposit Information Sheet (supplied by applicable deposit scheme)
• Prescribed Information Template (deposit certificate)

Once done, sign the agreement, and you're all set!

Rent guarantee insurance protects landlords against the loss of rental income if tenants cannot pay their rent. Most policies also include legal expenses, covering the legal cost of regaining possession of your property if necessary.

Not all policies are the same, so it’s worth researching several companies before deciding. For example, some policies might only pay a percentage of the rent or have large excesses. Some might only offer 6- or 12-months’ cover and pay up to a certain level in rent. Think about whether the policy would be enough to cover your losses.

Keep in mind that you can’t usually put a policy in place retrospectively, and most insurers will expect all legal paperwork to have been served, an applicable AST agreement to be in place, and reference checks on all tenants to have been completed. We work with experienced brokers to ensure we have the best products available for our landlords, so we’re happy to help with this process.

Once your tenancy is up and running, you’ll need to plan mid-term inspections. This is where you or someone on your behalf visits the property to check on its condition and make sure that it’s being looked after. Property inspections are usually conducted every six months and should be referenced within the tenancy agreement, so it doesn’t surprise your tenants.

Many landlords make the mistake of not revisiting the property after checking their tenants in. In some cases, years go by because the landlord assumes everything is okay as the tenants have been paying on time.

But what if the tenants have made significant changes that weren’t authorised? What if there has been damage that has gone unreported for long periods? If this happens, repairs and end-of-tenancy renovations could cost a fortune to rectify, possibly wiping out any profit from your rental income.

No matter who lives in your property, even if it’s a friend or relative, conducting regular inspections will allow you to deal with any issues immediately. If you aren’t comfortable doing this yourself, an inventory company can do this for you and provide a detailed report after each visit.

Two months before each fixed term ends, you should ask your tenant if they wish to renew their tenancy. It’s also wise to conduct a rent review at the same time to ensure your property is still rented out at market value.

Many landlords keep tenants on the same rent for years because they pay on time and look after the property. Tenants usually appreciate this loyalty, which is fine if it works for the landlord. We do have many landlords who operate this way.

However, if you don’t conduct rent reviews or renew your tenancy regularly, two common problems may arise:

1. The rent becomes too detached from the new market value, so when you eventually need to increase it, the tenants might struggle to afford to meet the sudden rise. We usually find that reassessing the market value of the rent every 12 months is the best way to keep your tenants on track and your investment producing a good income.
2. If legislation changes, your tenancy agreement can become outdated, leaving you at risk of not complying with new laws. We recommend you renew your tenancy agreement at the end of every fixed term.

You must give 30 days’ notice from the rent due date to increase the rent. You might end up negotiating with your tenant, which could take several days/weeks. By starting early, you can get everything sorted in time for the new fixed term.

In this case, your tenant will move onto a statutory periodic tenancy, commonly referred to as a ‘rolling contract’. The tenants are still bound by the same terms of the original tenancy agreement, but they have the flexibility to end the tenancy at any time by giving one month’s notice from the rent due date.

Although your tenants are liable for the original terms of the agreement, a statutory periodic tenancy is still classed as a new contract, so you’ll need to serve the latest How to Rent checklist again as if the tenants were new. Failing to do this could go against you if you ever serve an eviction notice.

You can – if you haven’t done so within the last 12 months. You can only increase the rent once every 12 months.

Most landlords and tenants agree on renewals and rent increases without official notice. However, it should still all be confirmed in writing, preferably alongside a new tenancy agreement.

However, if you can’t reach an agreement, you must serve an official notice. This is referred to as a Section 13 (form 4). It outlines the increase and advises the tenant when it will take effect. Many landlords aren’t aware that a tenant can appeal a rent increase. Details of this process are stated on form 4. If your tenant appeals, it will be referred to a tribunal to decide the maximum rent.

A landlord must give tenants two months’ notice from the rent due date if they want them to leave their property. If your tenant is on a fixed-term contract, the earliest you’ll be able to serve notice is two months before the fixed term is due to end.

The standard notice for simply regaining possession of your property without a reason is a Section 21 (form 6a).

If your tenant breaches their contract due to being in arrears, you can serve a Section 8 notice. However, your tenant must be a minimum of two months in arrears. And if they bring the arrears back within the 8-week threshold, the grounds for possession for this reason are no longer valid. Section 8s also cover several other breaches – useful if a tenant has broken the terms of their tenancy.

Acceptable ways to serve these documents should be noted within your tenancy agreement, but we recommend you visit the official government website to get the most up-to-date information. Alternatively, you can speak to one of our Lettings Specialists.

Our owner, David Warburton, has personally been involved in property management for over twenty years, so he has seen the good, the bad and the ugly.

One of the most important lessons he learnt during that time is that communication with your tenant is essential. While this can be challenging and stressful, dealing with issues swiftly and effectively is critical to enjoying a successful tenancy. It also helps avoid minor hiccups developing into serious problems, like substantial rent arrears.

We also recommended dealing with any maintenance issues quickly and decisively. This should ensure that your property is kept in the best possible condition, leading to happy tenants and longer terms.

Most tenancies run smoothly and without significant problems, aside from the odd late payment and maintenance issue. But letting isn’t risk-free. Sometimes, things go wrong. Your tenant might stop paying, cause damage to your property, or refuse to leave if you choose to take your property back.

While all the above scenarios are unlikely, it’s important to have experienced people on your side who can offer help and advice if they do. That’s why we teamed up with some of the best legal experts in the industry, who we’re happy to put in touch with our clients.