LANDLORDS GUIDE

Landlords Guide

Becoming a Landlord for the first time, or managing a large property portfolio can be a stressful experience, particularly if you are unfamiliar with the process and legal requirements.

Once an offer has been accepted, there are a number of milestones to be aware of. If you have a basic understanding of these milestones it can make the process much easier.

Approved Agent

Ivy Gate is registered with the Property Ombudsman for Lettings, assuring that our systems and processes are of the highest possible standard.

property searchFind a tenant.

We offer a complete personal service, where we will register and qualify all applicants and confirm their suitability and basic affordability prior to arranging viewings or negotiating any offers.

make an offerAccept an offer.

Once a suitable tenant has been found, we will carry out some basic due diligence before putting an offer forward. Consider all the variables, like the length of tenancy required, the employment status of the proposed tenancy, and the offer amount. Whilst we achieve 97.6% of asking price, it is worth considering that even if the offer is not at the asking price, accepting an offer may be better than risking a void period where you are paying a mortgage with no rent income. We will be happy to discuss the relative strengths and weaknesses of any offer and will always provide honest advice.

pay depositReservation fee.

Once an offer has been accepted, the tenant pays a reservation fee which is required in order for us to take the property off the market. We will then begin the process of referencing and collecting a deposit from them. As a Landlord you do not have to protect against a reservation fee and it is only once the tenant has signed a tenancy agreement that you have a responsibility to protect the full deposit in a secure tenancy deposit protection scheme. Please see www.gov.uk/tenancy-deposit-protection for further information regarding deposits.

protocol formsReferencing.

It is common practice in the UK for estate agents to seek references on your behalf to check that the tenants have the ability to pay the rent and/or that they have previously rented a property without any problems. Referencing involves paying an administration fee in order to process the paperwork involved and carry out the relevant searches.

 

Searches and documents required will normally involve:-

• References from the tenants’ previous Landlord – usually details of property that they have let over the last 3 years.

• A credit check – this will allow you to check that the tenants have a good history of paying bills.

• The tenants’ bank details – including bank name, account number and sort code in the UK.

• Details of the tenants’ employment-  employer, job title, payroll number, salary and previous employer’s number.

If the tenants are finding it difficult to provide references or fail a credit check then they may be able to provide a guarantor that will insure the tenants against default of rental payments.

If the referencing does show any concerns or the tenants fail any of the checks then we will advise you. You can still proceed to a formal tenancy agreement, but any decision to enter into a tenancy is made at the Landlords risk.

Stamp DutyThe deposit.

The deposit is held in a secure tenancy deposit scheme for the duration of the tenancy and is usually the equivalent of 6 to 8 weeks rent. (This is a rough guide, some amounts may differ slightly).

New legislation has been brought in to protect all parties when it comes to the deposit – The Housing Act 2004 with an update in 2007. Please see www.legislation.gov.uk/ukpga/2004/34/contents.

If the tenants have not rented in the UK before and do not have a UK bank account, then they may have to pay up to 6 months rent in advance.

With Ivy Gate, the security deposit will usually be equal to a minimum of 6 weeks’ rent and held during the tenancy against any damages. Usually this will be held by Ivy Gate as stakeholder under the terms of the tenancy deposit scheme, however on occasions you as a Landlord may choose to hold this and register it accordingly.

exchangeThe tenancy agreement.

Most tenancies in the UK are Assured Shorthold Tenancy agreements which states the tenants’ rights to live in a property for an agreed term and the Landlords right to receive a certain amount of an agreed rent for that term. In order to get an overview of the tenancy agreement and what it involves along with the rights and responsibilities of both the Landlord and tenant please see www.gov.uk/private-renting-tenancy-agreements.

If an initial agreement is for a period of more than three years then a deed will need to be drawn up with solicitors acting on behalf of you and the tenant.

There are some residential tenancies that cannot be Assured Shorthold Tenancies. Exclusions include high value properties (where the annual rent exceeds £100,000), lettings where the tenant does not occupy the property as his only or principal home (e.g. a second home) and lettings by resident Landlords (who are living in a part of the property at the time of the tenancy). Tenancy agreements granted in these circumstances are known as Contractual Tenancies.

Another exclusion from AST status covers lettings to companies. Contractual tenancies are not covered by the same statute as conventional Assured Shorthold Tenancy agreements.

The contract will be raised and any ‘addendums’ agreed, such as the inclusion of a clause if the tenants have pets or other specific details about the tenancy. The move in date will be agreed and the documents will be sent to all parties for signing.

move inMove in.

On the day of move in, there will be an inventory carried out on the property. The inventory is one of the most important documents when letting a property. It is key when referring back to the condition of the property if any disputes arise when return of deposit is due at the end of the tenancy.

Once the inventory has been completed, the tenants can move in. Your first months rent will come to your bank account shortly afterwards. Congratulations, you have now let your property!

The cost of the checkout process at the end of the tenancy will be split equally between tenant and Landlord. The cost of the checkout will depend upon the size of the property.

Registered Agent

We are registered with mydeposits, a government authorised tenancy deposit protection scheme designed to enable Landlords to comply with the law.

ARLA

Approved Agent

We are proud to be members of ARLA, the most recognised professional body ensuring the highest possible standards.

Important considerations

 

Any property owner who has a mortgage or is not a freeholder may need to secure the necessary permissions before they let the property. If the owner is a leaseholder then the lease may contain a clause which states either that sub-letting is not permitted or that the freeholder’s permission must be obtained prior to sub-letting. It is very important that this permission is obtained, because if the property is let to tenants without it (even if permission is sought later) then the conditions of the lease will already have been breached and the freeholder can take legal proceedings against the leaseholder.

The freeholder’s permission will generally be a formality and this permission cannot be unreasonably withheld, but the freeholder may make a number of enquiries, for instance, if there have been complaints about noise from former tenants this might be discussed and the leaseholder might be required to satisfy the freeholder that they have addressed this issue this time around. It is usual for the freeholder to make a small charge for granting their permission. If the freeholder does refuse permission then read the lease carefully to find out what the lease says about granting permission and then seek the freeholder’s reasons for their refusal. It may be possible to address and satisfy any misgivings before there is a need to take further advice or make the threat of legal proceedings.

If there is a mortgage on the property, one of the terms of that agreement may be that the owner obtain the lender’s permission before the property is let, even if only one room is being let. This is because the mortgage lender will be keen to make sure that nothing is done that may affect the value of the investment and the lender’s ability to recover the loan that was made when the property was purchased. It is important to check the terms of any mortgage.

For many buy to let mortgages permission to rent the property may be automatic, but even in buy to let mortgages there may be conditions on the type of let permissible. If, as an owner, these requirements are not fully understood then seek advice from a solicitor – the one who assisted with the purchase should be able to help. If it is proposed to let the property as ‘rooms’ or bedsits which will create a House in Multiple Occupation (HMO) this must be made clear as special permission may need to be sought for this and conditions may be imposed that will need to be met.

If the property was purchased for an owner-occupier on a standard mortgage for home owners, then permission will need to be obtained to let the property to tenants. The lender may increase the cost of the mortgage Pre-tenancy. Usually a lender will not object to one room in an owner-occupier’s home being let to a lodger.

Before you let our your property for the first time, there are a number of actions you need to take prior to any tenancy commencement.

The condition of the property

There are a number of things which you are legally responsible for, and these are set out here. However if the property is in top excellent condition, or a new build home, your property will probably meet the required standards.  Don’t forget that if you have gas appliances you will need to get a gas certificate.

HMOs – House in Multiple Occupation

If you are going to be letting to more than two tenants, it might be a good idea to speak to your Local Authority. If your property is classed as an HMO, there will be special standards you will have to comply with. Your home is a House in Multiple Occupation (HMO) if both of the following apply:

  • at least 3 tenants live there, forming more than 1 household
  • the tenants will share toilet, bathroom or kitchen facilities with other tenants

Your home is a large HMO if all of the following apply:

  • it’s at least 3 storeys high
  • at least 5 tenants live there, forming more than 1 household
  • the tenants share toilet, bathroom or kitchen facilities with other tenants

Decor

So far as décor is concerned, neutral colours are recommended, with good quality furniture and furnishings which comply with the latest fire and safety legislation, suitable for the type of tenant you intend to let to. There are several furniture companies which specialise in selling ‘packs’ of furniture to Landlords. We can help you source these.

We can advise you on how best to dress your home for the rental market.

Many landlords also find joining a landlords association provides them with support and advice on local matters, as well as access to special deals from suppliers.

Here is a selection: