The Investments Step By Step Guide To Letting Your Property In The United Kingdom

There are so many rules and regulations governing the lawful letting of a property. It is imperative that these legalities are adhered to in order to be successful long term within the industry. If you choose to overlook the necessary guidelines you may be faced with substantial loss of earnings and potentially face a custodial prison sentence. It is therefore highly important that you have the correct information at your disposal that will help you towards a profitable investment.Anyone can sue these daysThere is a vast amount of information, financial aid and legal advice available to us these days where anyone can find a case for a ‘No Win No Fee’ claim. With such readily available access to the Web, tenants are more clued-up on their civil rights when renting a property. You may think that full knowledge of the following information is not something you need to know too much about because your property will be fully managed by an agent. Although many agents are very professional and experienced when it comes to any problems that may arise, there are no regulations as such that prohibit anyone from running a Letting Agency. It is therefore essential that you have full and up to date knowledge on your investment and can ensure that it is all fully above board.Choose the right agentIt is important to do your research. 99% of agents will not charge you to come out to your property and conduct a valuation so it is to your advantage if you make full use of this and call as many agents as you can within the location of your property. Once these agents are at your property it is easy to be caught up in their ‘chat’ and to be convinced that they are the right agent for you. Agents prefer to be the last of the group to see you and will probably ask you how many others you are seeing and when, and they may also try to find out how much the other agents have valued the property at.It is important to remain ambivalent throughout this stage and not to simply go with the agent that offers the highest valuation. Some agents may slightly over value the rental figure of your property in order to get you on board with them and if it then receives no interest from potential tenants they will discuss a price reduction (which may then be in line with what other agents originally suggested and would have found tenants for in a shorter space of time). Be attentive to the services that they offer for their fee and don’t be afraid to negotiate. You may decide to work long-term with the agent with more current properties or future investments, which surely qualifies you for a discount!Each agent should provide you with the following information:* The services they offer* Comparables of similar properties that have recently let* Health and Safety laws* Their fee* Their contract* A landlord pack* Their valuationIf you feel that the agent has come unprepared, this should immediately tell you that their ability to manage your property would not be much better. You may be duped into thinking that the agent who spends the most time with you is the better choice over the one who is direct and perhaps slightly more rushed. The one who spends the most time with you may be more desperate for the business than the one who is so busy because his/her business is booming. Though this is not necessarily always the case, your ability to assess the situation will enable you to decide what kind of agent they are.Do not make a decision until every agent as come and gone. Make sure they leave all the information that they discussed with you or send it to you when they have compiled a personalised valuation pack. This will allow you to look through each agent’s contracts in your own time. Although this can be time consuming and quite mundane, each contract will differ and it is important to highlight the services that you are looking for when going through them. For example, how long it will take for the money to reach your account – this should normally take no more than 7 days to transfer. If the contract specifies a longer period, or does not mention time frames at all, then this agent may intend to take longer in order to build up their own bank interest rather than ensure that you are able to pay the mortgage on time. This agent is clearly not working in your best interests.You also need to look for hidden charges in the contract, for example, there maybe a payment transfer charge or if there is a void period when the property is not tenanted, will you still be required to pay the agent a management fee for this period of time? Will any work to the property over £100 or so require your consent and is this stated in the contract? Will the agent provide the contractors? Will the agent charge an additional fee for overseeing any substantial work? It is important to check for yourself that the contractors who have quoted you actually exist, that the work that needs doing is genuine, and that the quote is in line with the work required.If the tenants decide to renew their contract, check to make sure the agent hasn’t sent you a contract charging you the same amount as they did when the tenants first moved in. The fee for renewal should be negotiated to about half the original amount. Make sure that you are being charged on a month-to-month basis for management fees and if the tenants have indicated that they would like to stay for several years negotiate a sliding scale of fees with the agent. It is important that you agree a set up with your agent that you are happy with because if you find yourself being over charged, it could be a long process trying to claw back your money as most agents have head offices with accounts departments and area managers, and so on, where these enquiries will be individually raised before the process of refunds begin.Check local newspapers for how effective you find their advertisements to be. Check their website and find out if they can be found on larger property search sites. Find out how large their database is, as some agents will have offices countrywide as well as networks with other agents up and down the country.Any problems?If you are unsatisfied with any aspect of the service you are receiving from your agent, do not give the office manager a chance to formulate their argument to their superiors: go straight to their head office and report your complaint to the Managing Director or the Operations Director. If the company is independent then the office manager is your first option. If persistence here fails, find out if the agency is a member of a governing body such as ARLA or NAEA. If they are not, try your local Trading Standards.Your ContractYour contract will specify all the terms and conditions that you will have agreed to with your agent. You will sign one contract where you and your agent will agree to the management terms of business, and you will also sign another with the tenant. This will then provide recorded evidence of the terms that have been agreed to, and if either party proves to be in breach of these at any point during the length of the contract, compensation can be claimed through the courts. It is important that both of these contracts are written and not verbal because if the landlord, for example, agrees to provide white goods for the tenants and then fails to do so, if this agreement is verbal and has not been recorded in the contract the landlord may still be liable to provide the promised items.Likewise, if the agent informs the tenants that these appliances will be provided, without confirming it with the landlord, the agent could be liable. It is therefore important to make the agent aware of what you will and will not supply with the tenancy, as some agents may falsely tell tenants otherwise in order to clinch a deal.Make sure all details of the contract are understood by you, the agent and the tenants so that there are no uncertainties.Tenancy AgreementsThis is the agreement between the landlord and the tenant.Protected Tenancies Rent Act 1997The dwelling must be let as a separate dwelling under section 1 of the Act. This tenancy rolls on from month to month giving the tenant the right to a fair rent.Protected Shorthold Tenancies Housing Act 1980The tenants have no right to possession of the property at the end of the fixed term and the landlord can call upon mandatory grounds for possession if he/she is not in breach of statutory requirements. The landlord cannot terminate the tenancy unless two months written notice is given.Assured TenancyThis gives the tenant the right to possession of the property even after the fixed term has ended. The tenant can only then be removed by a court order or if they leave voluntarily. This type of tenancy can only be brought to an end by the tenant or the courts.A tenancy granted to a company is not protected under the Housing Acts and so the advise of a solicitor is vital in terms of contracts. Make sure the contract refers to the company, that their registered UK address is valid, that each occupier is named and that it stipulates whether the company or the tenant is paying the rent.When a tenancy has gone beyond the fixed term it is referred to as a Periodical Tenancy. Two months notice must be given in order to serve notice, which must coincide with the end of a rental period. For example, if the rent is paid at the beginning of the month, then the notice must refer to the same day in two months time. However, if the rent is paid quarterly then the notice must be served for possession at the end of the quarter.Safety RegulationsGas Safety (Installation and Use) Regulations 1998Gas Emergency number – 0800 111 999The regulations place responsibility upon the landlord to ensure that all gas appliances, flues and associated pipe work are in a safe condition at all times.* Any work carried our on gas appliances and fittings must be done by a CORGI registered engineer* Room sealed appliances only can be installed in bathrooms* Any gas meter installed in a locked box must provide a key.* All installed appliances must come with instructions for the occupier of the property* The engineer must carry our tests on the appliances that they install or conduct work on.* If there is any escaped gas or CO, the occupier, agent or landlord must take steps to ensure this is minimised and to inform the gas company.All gas appliances and flues in rented accommodation must receive safety inspections every 12 months by a CORGI registered engineer. Certificates must be held in proof of this before any tenant occupies the property. If the 12-month period has lapsed during a void period, the inspections must be conducted before the tenant is scheduled to move in. However, if the tenant provides any appliances, which they will take with them upon departure, the landlord is not responsible for providing a safety inspection.The landlord must keep details of all safety inspections. These certificates must display the following:* Description of the appliance* Date and time of inspection* Address of the premises where the appliance is held* Name and address of landlord and agent* Any problems identified* Any work undertaken* Confirmation that the inspection complies with regulations* CORGI registration number and name of inspectorThe landlord must hold these records for 2 years. A copy of the certificates for each appliance must be given to every individual tenant before they move in. For example, if 3 tenants are moving in together, 3 of each certificate must be provided. If they occupy the property for longer than 12 months, or if the inspections are due during occupancy, the new certificates must again be given to all tenants within 28 days of the inspection.The responsibility of the above it solely that of the landlord. This duty cannot be placed upon the agent or the tenant. You can instruct your agent to organise the inspection on your behalf, although failure to provide up to date certificates will still fall upon the landlord. This can result in a £5,000 fine for non-compliance, although when injury or death occurs a custodial sentence can be enforced.Electrical Equipment (Safety) Regulations 1994Applicable to all electrical equipment with voltages between 50 and 1000 if alternating current or between voltages of 75 and 1500 if direct current.The landlord must ensure the safety of all person and animals occupying the property as well as those entering the property in accordance with the Consumer Protection Act 1987, as well as the above regulations. The regulations place responsibility upon the landlord to ensure that all electrical appliances work to a safe condition at all times.* Written instructions must be provided for all electrical appliances in the property* Proof of safety inspections must me provided to the agent and tenant before the tenants move in* All safety inspections must be carried out by an NIC electrician, preferably every 12 months.If an incident occurs due to the neglect of the above regulations the penalties are high. If there is a risk of a fire or an animal is injured the penalty is 3 months custodial sentence and/or £5000 fine, if a person is injured or killed the penalty is 6 months custodial sentence and/or £5000 fine. However, a conviction of manslaughter could also apply.The Furniture and Furnishings (Fire)(Safety) Regulations 1988Fire resistance for domestic upholstered furniture, furnishings and other upholstered products. All furniture must carry 2 labels showing that they have undergone and passed the match test and the cigarette test. This applies to: Beds, headboards, sofa-beds, mattresses, futons, nursery furniture, scatter cushions, seat pads, pillows, loose and stretch furniture coverings and garden furniture. These regulations do not apply to antique furniture, furniture made before 1950, bed clothes and duvets, pillow cases, carpets, curtains and sleeping bags.Fire proofing furnishings with sprays is not adequate and therefore will fail to comply with regulations. Fines and custodial sentences will apply if regulations are not met. It is the responsibility of the landlord to make sure every aspect of the property, inside and out, is safe and does not pose a danger in any way to tenants, animals or visitors.Tenant ReferencesIf you are not using an agent you will need to obtain references from the tenants, otherwise the agent will do this on your behalf. However, never ask the tenants to directly supply the references as they could realistically come from anywhere. Always write to these people yourself or contact the referees if references are given. What you do need to ask for are referees. Make sure you check these to make sure that they actually exist.* Previous Landlord – name, address and telephone number* Employment – name, address, telephone number of employer and department* Bank – name of account manager, address of bank, account number and sort code and telephone numberProblems?If the tenant has not rented before then it is a good idea to seek references from their doctor, dentist, solicitor or any other professional who can vouch for the trustworthiness of the tenant. If the tenant is entering into his/her first job then look for a referee from the school, college or university they have just left who will verify that the grades they achieved are true to the ones put forward to their employer. Also request confirmation from the employer that the tenants’ position is permanent and that the salary they will receive will cover the rent.If the tenant is about to start a new job, request details of their previous employer and new employer. Find out how long they were with the previous company and why they decided to leave and also if the employer would re-employ the tenant in the future. Again, request confirmation from the new employer that the tenants’ position is permanent and that the salary they will receive will cover the rent.The tenant should have a bank or building society account. If they tell you that they do not have one, how do they intend to pay their rent and how does their employer pay them their wage?If the tenant refuses to provide any of the above information then do not allow them to dupe you into believe their reasons for it.Can you Rent?Check the lease, as even if you own the freehold to the property there may be restrictions from renting. If you have a mortgage you must seek the approval of your mortgage company beforehand. Although they will often allow you to let the property, you may be required to pay an administration fee to have this information placed on their records. To avoid any further fee: a raising interest, for example, you might inform them that you have recently changed jobs and although you do not want to let go of the property, it is not close enough to your new employment.If any aspect of the information that you have given to the mortgage company changes, you are required to keep them updated. You also need to inform the companies that provide you contents and buildings insurance. Check that your insurers include third party cover (your tenants and anyone who enters the property). Insurers will only pay out for injuries if they have been informed that the property is being let.What Kind of Tenant do you want to Attract?You have a duty to your tenants to let the property in a clean and inhabitable condition. The cleaner the property and the better the conditions that it is in, the better the calibre of tenant you are likely to attract. If you demonstrate a keen interest in your property, your tenants are more likely to take care of it while they are living there. If you are looking to attract professions, then the condition of the property needs to reflect this. When the tenant leaves the property, it will stipulate in their contract that it must be professionally cleaned throughout to the standards of how it was when they moved in.Therefore if you decide to have the property cleaned by a professional company before it is let, then this will also apply to all tenants to do the same before the next tenants move in. In order for this to continue throughout tenancies, you will need to have a professional inventory prior to check in, and again at each check out. For example, if the inventory is thorough and at the time of check out there are stains on the carpet, this will be recognised by the inventory clerk and the cost of cleaning will be deducted from the deposit that was paid at the start of the let.Rent increase can be put forward by the landlord once every 12 months by notification of this intention in accordance with section 13 of the Housing Act 1988. However, the tenants can seek advise with regards to this will a fair rent board.Serving NoticeIt is important to name all tenants on the notice, or serve each individual with notice.This must include the name and address of tenants, name and address of the landlord, the address of the property, the date the notice is served and the date that possession is required. The notice must refer to the Housing Act 1988 section 21 (1) (b) or section 21 (4) (a).PossessionThe Housing Act of 1988 section 21 states that a minimum of 2 months notice must be served to the tenant and under section 98 of the amended Housing Act of 1996 this notice must be given in writing.Stamp DutyStamp Duty Land Tax does not affect lettings if rental income is less than £60,000 in total (since it was first let). If it does exceed this then it is the responsibility of the tenant to pay tax.

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