Thinking of renting out your property? Here are the main legal issues you need to be aware of
Sangita Manek is partner at Blaser Mills Law
Renting out your property is a great way to create an additional income and increase your assets but going from ‘homeowner and occupier’ to ‘landlord’ can be overwhelming.
It’s crucial to understand the legal responsibilities you need to fulfil to protect yourself from potential disputes. Here are some of the main requirements you should consider to get off on the right foot.
Do your due diligence
First and foremost, you must carry out some basic due diligence, including informing your mortgage lender that the property is being let out to tenants, checking the immigration status of the prospective tenants and providing them with a “Right to Rent” booklet.
You must also ensure at an early stage that you have insurance in place to cover not only the building itself, but any potential claim by your tenants or visitors to the property.
Check your property is safe to let
Your property needs to be safe and ready for the tenant before you let it out. Fit and test smoke and carbon monoxide alarms and make sure you have an electrical safety certificate from a registered electrician for the electricals at the property.
Additionally, you need a certificate from a gas safety engineer to approve any gas appliances. All these checks must be done annually to avoid exposing yourself to criminal sanctions, such as a hefty fine and/or imprisonment.
If you’re letting the property out furnished, you’re also responsible for checking all upholstered furniture complies with the Furniture & Furnishings (Fire) (Safety) Regulations 1988, as well as obtaining an “Energy Performance Certificate” to inform prospective tenants about the property’s energy use and typical costs.
Record the condition of the property
Whilst it can be tempting to skip this to save costs, you should record the condition of the property at the start of the tenancy.
If you don’t have an inventory to prove the condition of the property when the tenants check in, you won’t be able to prove the property was damaged on check out, and you won’t have grounds to make any deductions from the deposit.
You also need to take gas, electricity and water meter readings at the time of check in, and to ensure the accounts for all utilities paid for by the tenant are in the tenant’s name.
That way, if they leave the property with unpaid bills, you are not legible to make up for any shortfall.
Read the small print
Many landlords are guilty of signing the tenancy agreements provided by their agents without reading them, but this is a huge risk.
Whilst these documents are often standard and may contain clauses that don’t apply to you, they may not contain all the clauses that are important to you. Take the time to read the agreement and add in any additional clauses as necessary.
After all, if things go pear-shaped, this document will help you enforce your rights.
As part of this, you should note that if your property is going to be rented by three or more tenants who aren’t part of the same household (i.e. a family) a House in Multiple Occupation (HMO) licence is needed.
HMO licences are valid for five years at a time and you’ll require a separate licence for each HMO you are running.
Register the deposit
Landlords are now obligated to put all deposits they receive into a government backed deposit scheme if they rent their property out on an assured shorthold tenancy which commenced after 6th April 2007.
If you fail to register the deposit, there can be consequences, including paying back the tenant up to three times their deposit – a very expensive price to pay.
Once the deposit is registered, you’re legally obliged to provide your tenants with Prescribed Information within 30 days.
This is a set of information relating to the tenancy, including the amount of the deposit, the property address, the name, address and contact details of the administrator of the tenancy deposit scheme with which the deposit is held, and the name, address and contact details of the landlord, tenants and any third parties who have contributed to the deposit.
Speak to your tenant around three months before the expiry of their tenancy agreement to establish whether they intend to stay at the expiry of the term.
Regardless of whether they plan to stay or leave, it’s crucial that you serve statutory notices to terminate their occupation at the end of their tenancy agreement.
If the term comes to an end and they don’t move out voluntarily (or new terms can’t be agreed) the Protection from Eviction Act 1977 states that you can’t evict a residential tenant without a court order.
If your tenant stays longer than he or she is welcome, you need to be ready to move with court proceedings to remove them from the property.
Make sure your check out process is completed carefully and by a reputable company – ideally the same that dealt with the check in. It is important either you or your agent are at the property when this is done so you can properly identify damage caused by the tenant which the tenant should pay for.
If the deduction from the deposit cannot then be agreed with the tenant, make sure you know the rules of the tenancy deposit scheme and follow them accordingly.
Speak to an expert
Being a landlord can be a complex and time-consuming job but, when done right, renting out your property is a rewarding venture.
If in doubt, seeking expert advice throughout the process can not only minimise liability issues, it can help save time and money in the long run. Make sure you choose a respected lawyer who understands the many nuances of your obligations. The correct legal counsel can go a long way in ensuring the process is as seamless and pain free as possible.