Buy-to-let guide

Here we have listed some key considerations for would-be and existing landlords. As one of our clients, we would advise you on all these subjects and any other matters that need to be addressed to remain compliant with prevailing legislation.

Obtaining consent (mortgaged, leasehold and pre-let property)

Your lender will need to provide written consent before you can arrange to let a mortgaged property. Some lenders ask for additional terms to be placed in the tenancy agreement, so we will need to see these before we prepare contracts. If the property is leasehold, the terms of the lease will also need to be checked, and written consent obtained from the leaseholder. If you are looking for a tenant for accommodation that you are yourself renting, you will need the landlord's written permission to do so.

Insurance

Check that your buildings and contents policies cover you for letting the building, (otherwise they may be invalid in the event of a claim) and arrange for specific landlord's insurance where necessary. We are a registered agent for HomeLets, an insurance company specialising in landlords and tenants, and our website has links to the relevant HomeLets policy application forms for buildings and contents insurance, rent guarantee protection and legal expenses cover should you require them.

Income Tax

Landlords who are resident in the UK are obliged to pay income tax on their rental income. If the landlord is not resident in the UK, we are obliged, as the landlord's agents, to withhold a proportion of the rent equivalent to the basic rate of income tax (minus allowable expenses) and send it to the Inland Revenue on a quarterly basis. Exemption Certificates can be issued under certain circumstances, so check with the Inland Revenue whether you are eligible for one.

Council Tax

The tenant is responsible for paying the Council Tax on your rented accommodation, but the charge reverts to the landlord during void (unlet) periods. If the vacant accommodation is furnished, the tax is reduced by 50%. If it is 'substantially' unfurnished, the tax will be reduced by 50% following a 6 month 'no charge' period.

HMO (Houses in Multiple Occupation) licence

From April 2006, landlords of HMOs need to have a special licence for their HMO properties. Any HMO that has 3 storeys and more than 5 tenants sharing amenities (or where 2 households reside in the same property sharing amenities) will need a licence. Licenses are granted by the Council (following a satisfactory assessment of the property) and last for 5 years. During the assessment, the council representatives will be looking for safety hazards and evidence of structural inadequacy. Landlords are obliged to remedy any faults that are picked up during the assessment, and the inspectors will carry out a follow-up check within 12 months from the initial inspection to ensure that the work has been carried out. We can advise you on the costs of the licences on request.

Tenancy Deposit Scheme

From 6th April 2007, the government will authorise certain companies to act as custodians of a tenant's security deposit for the length of the tenancy. Therefore, when a landlord or agent takes receipt of a tenant's financial deposit, it must be passed to a custodian company within 14 days, or an insurance policy must be taken out to cover the potential loss of the deposit for the tenant. The landlord must then inform the tenant of the name of the company holding the deposit.

Any dispute over the deposit will be arbitrated by the custodian company. If the dispute can not be settled by the custodian, the landlord can apply to a county court to decide the case, at a cost of £150. (The hefty fee means that in some cases it will not be worthwhile for a landlord to pursue a financial claim).

The penalties for failing to comply with the Tenancy Deposit Scheme regulations include being unable to issue a Section 21 notice for repossession (to end a tenancy), and being asked to pay the tenant three times the amount of rent that he or she has paid over the duration of the tenancy.

Guarantor bonds

As an alternative to taking a financial deposit, landlords could agree to a 'bond' with a guarantor who agrees to pay for any damages or rent arrears associated with the tenant during the tenancy.

Inventory

The Inventory checklist is the landlord's bible when it comes to resolving disputes at the end of a tenancy, so it needs to be a comprehensive document listing the contents of the building with a description of their condition at the beginning of the let. (We are used to preparing very detailed inventory checklists which give peace of mind to both landlords and their tenants).

Safety compliance (general)

There are many safety obligations governing rented accommodation, covering everything from the gas cooker to wobbly roof tiles. By law, it is the landlord's responsibility to ensure all the safety legislation is followed. As a managing agent, we would be both advising on any areas that needed to be addressed, and arranging for checks to be made and necessary work carried out at the landlord's expense.

Under the General Product Safety Regulations 1994, it states that all products supplied in the course of a commercial activity must be safe. For a building that is to be let to tenants, this would therefore include the structure of the building as much as its contents, so anything that could be seen as a potential danger needs to be dealt with promptly, such as leaning walls, loose tiles or broken glass on the path.

Keys

Each adult tenant should be supplied with his or her own key. (If we are responsible for the management of the building, we will arrange to have new keys cut as required).

Mail forwarding

A tenant is not responsible for forwarding any mail that arrives at the property addressed to you. So to be sure you receive your mail in a timely fashion, we recommend using the Post Office 'redirection service'. Please ask for a form at your local Post Office branch.

Preparing a property for letting

Utilities

The landlord is responsible for ensuring that all of the major utilities installed at the premises are safe and in good working order. This covers the electrical connections, gas supply, plumbing and waste pipes, central heating and hot water systems. The landlord is also responsible for the repair and maintenance of utility service points in the home, unless it can be proven that any failure is caused as a result of misuse by the tenant.

Cleanliness

Landlords should ensure that the accommodation is thoroughly cleaned before tenants move in. When the tenants move out, they will be obliged to leave it in the condition they found it or to pay to have it cleaned.

Gardens

Landlords should ensure that any garden area is left neat and clear of any rubbish when tenants move in, and that sufficient tools are available for tenants to maintain the tidy appearance. If the garden is particularly large or developed, we offer an optional gardening service as part of our full maintainance package.

Décor and decorations

It is best to redecorate any accommodation in light, neutral colours to appeal to the widest audience. Any personal items around the house should be removed from the premises, or stored in the loft or some other out-of-the-way place (at the owner's risk).

Furniture

All cupboards, drawers and shelves should be cleared to make way for the tenant's things. The minimum amount of furniture should be left for tenants, to reduce overcrowding and leave some room for a few pieces that the tenants may be bringing with them. Everything supplied should be of reasonable quality and in good condition, and available for the tenant to see during the viewing. We advise that unfurnished homes and apartments should still contain carpets, curtains and a cooker at the very least.

Information pack for tenants

To help your tenants through the early stages, and to reduce the number of frustrated queries, it is helpful if you leave a folder of information for your tenants with instruction manuals for the various appliances, rubbish collection and recycled waste days, details on where to find the fuse box, mains stopcock and anything else that may provide them with reassurance during their tenancy. With any luck this is a job that will only need doing once, while the appreciation will last through several rounds of tenants.

Gas appliances (equipment & safety regulations)

Gas appliances should be in a usable condition, and serviced or repaired at the landlord?s expense (unless it can be proved they have been misused by the tenant). The latest revision of the Gas Safety (Installation and Use) Regulations (1996) states that all gas appliances in rented properties must be checked and certified as safe at least every 12 months by a CORGI registered gas engineer. Landlords are obliged to keep a record of inspection dates, any problems that were identified and details of corrective work taken.

Electrical appliances (equipment & safety regulations)

The rules for electrical appliances are slightly different for those concerning gas, as there is no legal requirement to produce a safety certificate under the prevailing legislation (Electrical Equipment (Safety) Regulations 1994). However, all electrical installations and equipment in tenanted buildings have to be safe, so they should be visually checked on a regular basis, and preferably by a qualified electrician.

Furniture & Furnishings (safety regulations)

The latest revision of the Furniture & Furnishings (Fire) (Safety) Regulations (1996 amendment) dictates that specific items supplied to tenants should meet the minimum fire resistance standards. This includes all upholstered furniture, beds, headboards and mattresses, and loose items such as curtains, pillowcases and sleeping bags. It is the landlord's responsibility to ensure that items that do not comply with these regulations are removed from the premises. Furniture made before 1950 is exempt from the regulations, and furniture and furnishings manufactured after the 1st March 1990 are more than likely to comply. We will of course be able to assist with identifying any non-compliant furniture or furnishings as part of our fully managed service.