With property investment remaining a great way to make your money do more for you, most landlords are landlords through choice rather than necessity.
But there are the so-called ‘accidental landlords’, who find themselves renting out a property due to circumstance.
That circumstance could be someone who has inherited a property, or perhaps been forced to rent out their own home due to employment, marital or economic changes.
And these are the landlords who often need the most guidance.
Accidental landlord advice
If you’ve fallen into the private rental sector by accident, it can be a daunting place to be.
Legislation and compliance are now more complex than ever and it’s a learning curve with a rising incline.
Here, we’ve looked at some of the most important things you’ll need to know when renting out a property for the first time…
Buildings insurance
If you’re renting out your own home, you’ll almost certainly have buildings insurance in place.
So, you could be forgiven for thinking that is one job ticked off and done.
But you’d be wrong.
If you rent out your property under a standard buildings insurance policy, once tenants move in it will almost certainly be invalid.
Speak to your insurance provider and get your policy updated to cover your home as a buy-to-let property.
Contents insurance
This one is an easy one to overlook if you’re a first-time landlord.
It’s not a legal requirement, of course, but if you are letting your property furnished, having a suitable contents insurance policy in place is well advised.
Unfortunately, accidents do happen and tenants do sometimes break or damage items.
So, it pays to have cover.
If you let your property unfurnished, you don’t need to provide contents cover – that is the responsibility of your tenants when it comes to their own items.
Other types of insurance
As well as buildings and contents insurance, you should also consider landlord insurance to cover:
- Owner’s liability
- Accidental damage
- Legal expenses
- Tenant rent default
Your mortgage
Having fallen into the world of being a landlord by accident, your mortgage will need to be amended as a loan on a buy-to-let property if you are renting it out.
Speak to your lender and let them know you are renting out your home and they will be able to advise on the best kind of buy-to-let mortgage for you.
Is your property leasehold?
If your home is a flat or a house with leasehold status, you’ll need to check the terms of the lease permit tenancies.
Some freeholders, particularly those who own smaller blocks of flats, don’t allow properties to be let out.
So, speak to your freeholder and make sure you’re clear on the terms of the lease before handing over your keys to tenants.
Speak to a good letting agent
You’re in a sector you have no knowledge or experience of, so seeking the advice of those who have been there and done it can provide great peace of mind.
Lettings agents like Martin & Co have been renting out homes like yours for decades and can advise, guide and manage you through the process.
A good lettings agent can also help find and screen tenants, as well as guide you through the mountain of compliance when renting out a property.
Research on rent
It’s always tempting for a new landlord, whatever their circumstances, to seek out more rent than is achievable.
If your circumstances are underpinned by financial problems, this can especially be a problem.
Don’t be tempted to pitch your property above others in the area in terms of asking rent – at least not unless your home really stands out against the crowd and is worth the extra money.
Pricing your property too high could lead to costly void periods, so speak to your local agent and seek advice on the right price point for your home.
Tenant screening
The scenario an accidental landlord can find themselves in can often result in a rushed approach to letting out their property.
And this can sometimes mean failing to screen and assess potential tenants thoroughly enough.
Tenant referencing and screening is arguably the most important stage when renting out your home.
Bad tenants cost money and add huge stress – it’s that simple.
But tenant referencing and screening is a complex business and it can be tempting to make a quick judgment on a tenant simply to get the rent rolling in.
This is not a good approach.
Speak to your local letting agent – they have great processes in place for thorough screening of potential tenants and this can save a whole lot of money and hassle further down the line.
They’ll also be able to assess whether a tenant needs a guarantor, which is an added level of protection for you as a landlord.
Legal obligations
This is the area where most accidental landlords can really struggle.
And it is also the area which is most dangerous unless you get it right.
We’ve broken down some of the most important areas of landlord legislation below, but your lettings agent will be able to advise on these and more to ensure you are fully compliant when renting out your home.
Tenancy deposits
If you decide to manage your rental property yourself, you’ll need to ensure your tenant’s deposit is lodged with one of the three government-approved tenancy deposit schemes in the UK.
These are:
- The Deposit Protection Service (DPS)
- My Deposits
- The Tenancy Deposit Scheme (TDS)
Failing to do this is breaking the law and should your tenant discover you have not registered their deposit, they can apply to have it refunded and for up to three times the amount in compensation.
Gas safety
As a landlord, you must ensure all gas appliances, pipes and flues are maintained.
You must also supply each of your tenants with a copy of your property’s gas safety certificate, a test for which should be carried out by a Gas Safe registered engineer before the start of the tenancy.
Furniture and fire safety
If you rent out your property as furnished, you must ensure all items meet fire resistance regulations.
Such items might include:
- Sofas and chairs
- Beds
- Cushions
- Garden furniture
All furniture made since 1989 usually complies with these regulations, but check, check and double check.
Not only will doing so help protect your tenants, but it will also protect you from a potential fine of £5,000 and six months in prison.
Fitness for habitation
As a landlord, you must ensure your property is fit to be lived in.
It sounds obvious, but there is more to this area of compliance than meets the eye.
You must ensure the following:
- The building is in good condition
- The property is stable
- It is free from damp
- The layout is safe
- Your property has enough natural light
- It is well ventilated
- Hot and cold water are supplied
- Drainage and sanitation are adequate
- Food preparation areas and waste water disposal are in place
Electrical safety
While gas safety is a legal requirement, currently there are no laws in place for a certificate of electrical safety when renting out a property.
But this is almost certainly going to change in the not-to-distant future.
In the meantime, as a landlord you must ensure your property’s electrics, including sockets and wiring, are safe.
The best way to prove this is by conducting regular electrical checks and having an Electrical Installation Condition Report (EICR) compiled by a qualified electrician.
Accidental landlord tax
One of the biggest changes for landlords to absorb in recent years has been to taxation on rental income.
Martin & Co’s guide to landlord taxes explains everything you need to know, but it’s also advisable to seek advice from a tax accountant before renting out your home.
Minimum Energy Efficiency Standards (MEES)
Landlords must provide a copy of their property’s Energy Performance Certificate to tenants before a tenancy begins.
And since April 2018, properties rented out in the UK must have an Energy Performance Certificate rating of E or above.
Legionella assessment
If you’re thinking of managing your new rental property yourself, you must take steps to prove than an assessment of legionella risk has been carried out.
An assessment must show any steps taken to prevent the risk of legionnaires disease through water contamination.
GDPR
The General Data Protection Regulation (GDPR) came into force in 2018 and means landlords must be fully transparent with tenants on how they use their data and information.
This includes:
- Outlining what information is kept
- Why it is kept
- How it might be used
- How long it is kept
The Deregulation Act
This piece of legislation became active in 2015 and now applies to all tenancies.
Essentially, the Act outlines the consequences of not complying with some of the legislation we’ve already outlined above.
So, as a landlord you must:
- Lodge your tenant’s deposit within 30 days
- Supply a gas safety certificate before the tenancy starts
- Supply a copy of the government’s ‘How to Rent’ guide
- Supply an Energy Performance Certificate
Failing to comply with these points means you would be unable to issue a section 21 eviction notice to a tenant.
And this means, unless you are able to issue a section 8 notice for breach of the tenancy agreement, you will be unable to gain possession of your property should you need to.
Other pieces of legislation
As well as the compliance outlined above, you’ll face the following regulations if your property is in England:
- Right to Rent immigration checks
- Smoke alarm and carbon monoxide alarm laws
- The ban on tenant fees
Tenancy agreements and inventories
Amazingly, there are still landlords who are happy to make a verbal agreement with a tenant.
This is a huge mistake.
Even if you are self-managing your property, use a written tenancy agreement for complete avoidance of doubt.
The best way to ensure you are covered within your tenancy agreement is to use a managing lettings agent, who will be able to draw up an agreement that is legally sound and up-to-date with the latest legislation.
A managing agent can also arrange a professional inventory to be carried out – an added layer of protection should there be damage to your property during a tenancy.
Run your property like a business
This can be a difficult mindset for the accidental landlord to be in, often because they’ll have an emotional attachment to the property they are renting out.
But adopting a strategic and organised approach to your buy-to-let property (because that’s what it is now) will help you keep on top of everything from income and taxation to compliance and keeping on top of key dates.
Keep a fighting fund
Accidental landlords could be forgiven for enjoying the income a successful buy-to-let property can generate.
But the golden rule of renting out your home is to always expect the unexpected.
With that in mind, make sure you keep a contingency fund in place for unexpected, but costly, repairs and maintenance – even to cover an unexpected void period.
Communicate with your tenants
This is so important.
Not to the point where you could be accused of harassing them, of course, but keeping a written record of conversations with your tenants can help protect them as much as you.
It’s 2019, so consider setting up a WhatsApp group with your tenants to keep those lines of communication open.
But remember: Always give your tenants at least 24 hours’ notice if you need to gain access to the property.
Ending a tenancy
It’s important to remember you can’t simply kick out your tenants if you want your property back.
It might seem obvious, but it’s an important fact.
Your tenant will need at least two months’ notice if you want to regain possession of your property at the end of a fixed term tenancy agreement.
You can apply to evict a tenant if they have breached the terms of the tenancy agreement, but a process still applies.
Martin & Co’s guide to evictions has more detail on how to legally remove tenants from your home.
If you have any questions about letting your property, get in touch with your local Martin & Co offices who will be happy to help.
