New landlords: are you properly prepared for letting a property for the first time?

Are you new to letting letting a property? Do you want to rent-out your own home for a time, or have you bought a buy-to-let and you’ve never let one before?

Here, Tom Entwistle spells out the key points you need to be aware of.

If you are really nervous about doing this, and it is perhaps advisable, at least for the first time, you should seriously consider using a good professional letting agent, one that’s qualified and a member of one of the key professional associations: RICS, ARLA UKALA, NALS and NAEA etc. Do your research first and if possible seek recommendations.

This article applies primarily to English law. It is not a definitive interpretation of the law. Although tenancy laws are similar in other jurisdictions, there may be significant differences. Always seek professional advice before making or not making important decisions.

Otherwise, you can save a lot of money by doing it yourself, but you must pay attention to a few absolute basics. If you don’t you could find yourself with a heavy fine, or you will be stuck with a bad tenant, unable to evict, not paying rent and wrecking our property.

Here are some of the important points to cover:

1. Make sure the property is safe – that there are no obvious hazards and that it complies with basic letting rules and regulations. It’s a really good idea to do a simple written risk assessment. You will find a link to risk assessment template and more information about safety and letting here: You can also read about the latest safety requirements in private rented property here: https://www.gov.uk/private-renting/your-landlords-safety-responsibilities
2. You need an Energy Performance Certificate (EPC) before you can market your property. These cost in the region of £60 to £100 and last for 10 years. They give an energy rating from A to F, and after April 2018 the overall property rating must be a minimum of E. This is likely to increase to a rating of C by 2025 for new lets. You must issue a copy of this certificate to the tenant at the start of the tenancy and on renewal. You will find more information about EPCs and how to obtain a certificate here: https://www.gov.uk/get-new-energy-certificate
3. Make sure you have any gas and electrical systems and appliances in the properly checked, and a Gas Safety Certificate issued by a Registered Gas Safe Engineer and a qualified electrician. Also, the gas appliances must be serviced annually. The gas certificates last for 12 months, they must be current at the start of any tenancy, and a copy must be issued to the tenant initially and on renewal. You will find more information about gas checks here: www.hse.gov.uk/gas/domestic/faqlandlord.htm
   The electrical checks must be done initially by a competent person and every five years thereafter. You will find comprehensive information about electrical checks here
4. Alarms – Smoke Alarms must be fitted on each level of the property, preferably in the stairwell, along with Carbon Monoxide (CO) detectors in rooms where there are solid fuel appliances – including open fires. The Smoke and Carbon Monoxide Alarm (Amendment) Regulations 2022 came into force on 1 October 2022. From that date, all relevant landlords must: 1. Ensure at least one smoke alarm is equipped on each storey of their homes where there is a room used as living accommodation. Landlords must ensure that a carbon monoxide alarm is equipped in any room used as living accommodation which contains a fixed combustion appliance (excluding gas cookers). They must ensure that smoke alarms and carbon monoxide alarms are repaired or replaced once informed and found that they are faulty.
   The requirements are enforced by local authorities who can impose a fine of up to £5,000 where a landlord fails to comply with a remedial notice. The alarms / detectors must be tested at the start of every tenancy and tenants should have instructions to test and report faults during the tenancy. You will find more detailed information here
5. Make sure you have done Legionella checks, especially if the property has been vacant for a period – these are basic checks, usually running taps to clear out the water system and cleaning shower heads, which can be part of the safety risk assessment. You don’t have to be an expert to do these checks and carry our a risk assessment. You will find more information on the Health & Safety Executive (HSE) website here
6. You need to issue your tenant with the latest version of the Government’s “How to Rent Guide”, a legal requirement: https://www.gov.uk/government/publications/how-to-rent This document can be served as a pdf. via email if a clause in your tenancy agreement allows for documents to be served by electronic means. Otherwise it is a good idea to attached to the rental agreement at the time of signing. Make sure you have the version that is available at the time of the commencement of your tenancy.
7. Screening and Selecting Tenants. This is perhaps one of the most important things you should be doing to make sure you have a successful tenancy. Make sure you do property checks using this 20 point check-list provided by TenantVERIFY: “A 20 Point Checklist – TenantVERIFY® Recommended Checks” – https://www.tenantverify.co.uk/useful-documents.html
8. Protecting Deposits. Since April 2017 all security deposits taken (maximum of one month’s rent) must be protected in one of the Government approved schemes and statutory information (section 213 notice) served on the tenants and/or any other person who paid all or part of the deposit. More information here: https://www.gov.uk/tenancy-deposit-protection
9. Deposit cap and the limits on fees that can be charged. The Tenant Fees Act 2019 provides for restrictions on these charges. Holding deposits are capped at one week’s rent; Security deposits will be capped at five weeks’ rent where the annual rent is less than £50,000 and six weeks’ rent where the annual rent is £50,000 or more; Default fees (fees which can be charged during the tenancy) are limited to the reasonable costs incurred in replacing a key or lost security device or interest on rent overdue by 14 days or more, capped at 3% above the Bank of England base rate.
10. Inventories. Since the advent of the Deposit Protection Scheme, without a good inventory you will stand little chance of winning a claim against the deposit for damage to the property. You need excellent documentary evidence to show condition before and after the tenancy, and ideally an independent inventory company can provide this at a reasonable cost.
11. The check-in. Checking-in a new tenant is very important in the process of letting a property. It’s a good idea to complete as much of the above as possible so that the documentation can be included in the tenancy agreement. That way there is no possibility that anyone can deny having received it later.
    There a lots of things to remember, so it’s wise to have a check-list in front of you so you don’t forget anything important. Find the Check-in-Check-Out Checklist here: www.landlordzone.co.uk/documents
12. Operating Instructions. You should supply a folder to new tenants with safety instructions, operating instructions and emergency procedures for everything inside and outside of the property: how to operate the cooker, defrost the fridge, light fires, locate stop taps and electrical fuses, alarm settings etc. Also other information such as when and where the bins are emptied, where post should be forwarded to, and where the local amenities, entertainment, good pubs and restaurants, and transport routes are; this will always be appreciated.
13. Inform HMRC that you are letting a property for the first time. As there will be rental income involved you will need to complete an annual self assessment tax return which must be submitted by January 31. see – Paying tax and National Insurance
14. Administration. Don’t forget to record all your income and expenses for each property you own for the year in question. From this you can work out your tax liability. You need to split off those expense items termed as capital expenditure, which should be recorded for when you sell the property, and those items which can be classified as revenue items, which can be off-set against income.
    You will need this information for your annual self-assessment tax return.
    A simple spread sheet will suffice for this if you have just one or two properties, otherwise think about investing in one of the landlord specific accounting software packages. It’s a good idea to keep all the paperwork in one place – have a file for each rental property and one for each tenancy and keep a journal which records all communications, dates, times and conversations with your tenants.

Good luck with your lettings business.

View Full Article: New landlords: are you properly prepared for letting a property for the first time?

UPDATED: The importance of the residential property Inventory

Why Use a Professional Inventory?

With the introduction of the Deposit Protection Schemes (DPS) inventories are now more important than ever. If you take a deposit from your tenants (most landlords and agents do) then by law you are obliged to protect it in one of the approved schemes. If there is a claim against the deposit for damage, then without a good inventory the landlord (or agent) does not stand a chance of securing a claim when it goes to a scheme adjudicator.

Deposit disputes need to be resolved quickly and cheaply so must disputes are handled by the deposit scheme’s adjudicator based on documentary evidence alone, so the inventory alone provides the most important evidence. Going down the court route takes much longer and is expensive, so most deposit disputes don’t’ involve the courts.

It might be better for a landlord to go to court if they have a big claim that goes well beyond the amount of the protected deposit, and also if they have a counterclaim from the tenant – say if they had to pay for boiler repairs because the heating did not work for several weeks. The schemes’ adjudication cannot deal with counterclaims.

Landlords or agents can process the inventory themselves (inventory forms are available free on this website or from various suppliers listed on our Classified Directory), or as an alternative, an independent inventory company can be used. Using a professional inventory company is always preferable as they are totally independent, their evidence should be to DPS standards, and will therefore give the landlord the best chance of success with any claim.

Using an independent is less expensive than most landlords think: starting at around £75 for a Check-In and less for a Check-Out. If you use them again, the check-out forms the basis for the next check-in, so the cost usually reflects this and is less. A good idea is to have the letting agreement constructed such that the landlord pays for the Check-In and the tenant pays for the Check-Out. This has the psychological effect on the tenant reminding them that everything should be in order before they leave – they are paying for the independent assessment of this!

What is an Inventory?

An inventory should detail the condition of all décor, fixtures, fittings and contents relating to a rental property. Contrary to popular belief, an inventory is not just a list of the items to be found in a rental property and is therefore not merely restricted to furnished properties.

Furnished or unfurnished, all properties are supplied to a tenant with floor coverings, wall coverings, fixtures and fittings and the state or condition of these needs to be noted before a tenant moves in if the landlord’s investment is to be protected.

Quantifying ‘condition’

This is a much-debated issue and a good inventory will include a glossary of terms which will define the exact meaning of the word for the purposes of the inventory document.

The glossary should feature at the front of the inventory.

The glossary should refer to: Brand new / unused condition: possibly still in original packaging, or with new tags / labels attached

Good condition: signs of slight wear, generally lightly worn

Fair condition: signs of age, frayed, small light stains and marks, discolouration

Poor condition: extensive signs of wear and tear, extensive stains / marks/ tears / chips but still functional

Very poor condition: extensively damaged / faulty items, large stains, upholstery torn / dirty, pet odours / hairs

The inventory will provide a detailed and comprehensive description – ideally supported by photographic evidence – of the property, with specific reference to the existence / condition of the décor, fixtures, fittings and contents.

Comments need to be made in relation to the colour, make, model and condition of each item – basically, there needs to be as much detail as possible to provide an accurate and objective assessment of the property.

As a rule of thumb, lofts and cellars are not normally included in an inventory, unless specifically agreed or used as part of the living accommodation.

Top tips for landlords:
Contents:

• to prevent any discrepancies, it is always best to have a property professionally cleaned prior to the tenants moving in, and to gain a receipt for this service
• if the tenancy includes access to the garden make it clear from the outset as to whether or not a tenant will be responsible for reasonable maintenance of this area
• make sure all meters are read at the start of the tenancy
• include in the inventory, a list of appliance manuals / warranties (if they exist)
• Photographic evidence is hugely advantageous and is particularly useful for highlighting unusual or expensive items and areas of damage. If a photograph is taken of a mark / scratch, it is useful to incorporate a tape measure / ruler to give some sense of perspective.

Otherwise, if a scratch has been recorded but not measured, significant further damage can be inflicted with no course of redress.

The Check-In – Cleanliness

Occupancy – the length of occupancy will also need to be taken into consideration – the impact of a two-year occupancy may vary enormously to the toll of a 6-month occupancy.

Equally, when a tenant has enjoyed a five-year stay in the same property, it becomes very difficult to prove unacceptable wear and tear.

Smokers

Consent for smokers or pets in the property will have implications on the expected condition of the property at the end of the tenure.

The tenancy agreement may contain specific clauses relating to the required care and attention of particular items / amenities which the tenant has access to during the term of his / her stay.

Disputes relating to fair wear and tear often centre on common themes which include:

Cleanliness

What one person deems to be acceptable may be considered to be sub-standard by another. The important point to remember when it comes to assessing cleanliness is that agreement is reached at the check in stage.

For instance, if a property was noted as dirty at the check in and either the agent or landlord arranged for professional cleaning to be carried out after the check in, then the tenant is required to ensure that the property is vacated in a professionally clean condition.

The landlord or agent need to ensure the receipt for the professional clean at the check in is provided although the tenant must be given the opportunity to clean the property to a professional
standard themselves at the end of the tenancy should they wish to do so.

Fixtures and fittings

Tenants need to be made aware of the fact that if they choose to introduce new items, which need to be fixed to the walls, agreement must be received from the landlord in advance.

Failure to do this will result in the landlord asking for these items to be removed and making a claim to restore the wall back to its former state.

Brand Appeal

Most items in the property will have a pre-determined life span but this will also be influenced by the quality of the product, accepting that certain brands have an enhanced reputation for withstanding wear and tear, which is usually evidenced by an extended warranty.

If a landlord chooses to furnish the property with cheaper, non-branded goods, it is only fair to accept that these may not last the duration of the tenancy.

Typical examples of fair wear and tear v damage

If the landlord permits children and / or pets at the property, light scuff marks to walls, particularly stairs,

The Check-Out

A final inspection of the property should be undertaken prior to the tenant actually moving out, once completed.

Tenants should not be allowed to re-enter the property unless specific arrangements have been agreed with the landlord or agent.

A copy of the original signed inventory should be used as the basis of discussions between the landlord or agent / inventory clerk and tenant.

Each room should be visited and the condition of décor/ fixtures / fittings and contents should be compared with that witnessed at the beginning of the tenancy.

If redecoration works have been undertaken, the Check Out report should note whether or not these have been done to a professional standard.

As per the Check-In procedure, all meters should be read and keys checked to ensure they fit the appropriate locks.

All keys should be returned at this point.

Where changes are noted in the condition of the property, it should be detailed whether or not these can be construed as acceptable wear and tear.

If they are not regarded as fair wear and tear, who should be responsible for making the necessary improvements to restore the property to its former condition.

A forwarding address for the tenant should always be confirmed at the Check-In and contact numbers secured.

Depreciation

If an item or fixture / fitting is damaged and a replacement is required, then the replacement cost is subject to a Depreciation Deduction. This means, that unless the item was brand news at the start of the tenancy, the landlord cannot charge the full cost of replacement for damaged / missing items.

• Carpets – 3-5 years
• Furniture – 3-6 years
• Lawnmowers – 2-3 years
• Kitchen appliances – 2-5 years
• Small electrical goods eg kettles, hoovers, food processors) – 1-3 years
• Painting / decoration – 3-5 years

Typically, any calculations on the replacement cost of an item should be made as a percentage of the replacement value. Here is an example:

A lounge carpet was in fair condition, with some worn areas and numerous light spot marks at the commencement of the tenancy.

It could be reasonably be assumed that the carpet was of medium / good quality and approximately 3 years old. The replacement price is estimated to be £500.

The carpet has been completely ruined by the tenants, with numerous cigarette burns and heaving staining to all areas. The only solution is to replace the carpet.

As the carpet was of medium / good quality the life expectancy would be estimated as five years. This would equate to £100 per year.

However, as the carpet was already three years old at the commencement of the tenancy, it is now four years old, meaning that it only has one more year before it reaches its anticipated life expectancy. Therefore the most the landlord can claim for in terms of replacing the carpet is £100 (I year expected lifetime x £100).

Failure to observe the above protocol may result in the break down of what should be a harmonious relationship between landlord and tenant – and most importantly, will also activate the inconvenience and enormous distraction of a potential dispute case.

This article was originally provided by Professional Inventory Company, “No Letting Go” www.nolettinggo.co.uk and has been reviewed and updated by Tom Entwistle

View Full Article: UPDATED: The importance of the residential property Inventory