Once you have your property to let, it is worth remembering that it could take several weeks for a suitable tenant to be found.
Preparing your property for let
There are a number of issues to consider before you are able to put your property on the market for let.
Choosing an agent
Once you have decided to let your property you may decide to employ a letting agent to put your property on the market.
Marketing your property
A letting agent will discuss the best way to let your property and the rental income to expect from the let. You will need to sign a contract with the letting agent marketing your property.
Agreeing the let
Once you have found suitable tenants for the property, you will have to agree the terms of their let which will involve some negotiation. On agreement, it is highly recommended that formal documentation be signed between the landlord and tenant setting out the terms and conditions of the let.
Preparing your property for let
Whether you have let a property before, or this is the first time, when you let a home there is a lot to think about:
What is an Assured Shorthold Tenancy and when should I use it?
If the rent on the property is less than £25,000 per year and you rent your property to private individuals, the tenancy automatically becomes an Assured Shorthold Tenancy (AST). An AST usually lasts for 6 to 12 months, unless you agree a fixed term for the tenancy in advance with your tenant.
When the fixed term of the tenancy has expired the landlord is able to gain back possession of the property provided they give two months written notice to the tenant. In addition, if the tenant owes at least 2 months or 8 weeks rent on the property you can apply through the court to seek a possession order.
Will the deposit be covered by the Tenancy Deposit Protection?
Under new legislation you are advised to ensure that your property is covered for Tenancy Deposit Protection, which will require all deposits to be covered under a scheme from 6 April 2007.
What are the health and safety requirements?
Before you let your property you must make sure by law that it and its contents comply with various safety regulations, including:
- Furniture and Furnishings (Fire) (Safety) Regulations 1988, as amended 1993
- Gas Safety (Installation and Use) Regulations 1998
- Smoke Detectors Act 1991
- Electrical Equipment (Safety) Regulations 1994.
Landlords are required to produce certificates meeting these regulations where appropriate and should ensure that a Portable Appliances Testing (PAT) for all electrical appliances is undertaken.
Other considerations before letting your property In addition to all of the above, you will also need to make sure you have:
An agreed inventory of all items left in the property and a property condition report
Obtained permission from your mortgage lender (if you have a mortgage on your property) or told your freeholder
Advised your insurers and highlighted what items within the property you will be insuring and those that will fall to the tenants to insure.
Choosing a letting agent
You can advertise and manage your property yourself, but it can be a lot of worry and hassle. Many landlords use an agent to market / or manage their property. Make sure you get written confirmation of the agent’s terms, conditions and costs for acting on your behalf before signing anything.
Most tenants look for properties through letting agents. In general, a letting agent will:
- Advise on the right length of tenancy and rent to charge
- Advise whether to let out your property unfurnished, partially furnished or furnished
- Promote your property to potential tenants
- Handle the letting process
- Prepare the tenancy agreement.
Marketing your property
Once you have your property ready and if you have employed a letting agent to undertake the letting for you, they will discuss the best way to let your property, whether this be to multiple or single tenants.
The letting agent will also discuss the rent to expect from the let, taking into consideration the type of property, age and the fixtures and fittings to be included in the let.
The letting agent will offer advice on the best way to find tenants for your property and will advertise the property on your behalf in order to find suitable tenants. The agent will undertake the viewings and ensure that the property is let.
If you employ an agent to undertake the letting, you will need to sign an agreement with them which outlines their charges and the length of the contract. It is important that you understand the contract before you sign as you don’t want to sign into a lengthy tie-in.
Agreeing the let
Once you have found suitable tenants for your property you will need to agree the terms and conditions of the let with them. Essentially, it is at this point that you must determine who is responsible for what. Who looks after the property and its tenancy will depend on the terms of the tenancy agreement you have. But here are a few of the more usual responsibilities:
Landlord’s responsibility to:
- Repair the property
- Pay the building insurance
- Pay any ground rent and service charge where applicable
- Insure any items, such as furniture and kitchen equipment included in the property
- Not discriminate on the grounds of sex, race, sexual orientation, age, religion, marital status or disability
Letting agent’s responsibility to:
Get written references for the prospective tenant. Usually these include:
- Credit referencing check
- Current and previous employer(s) to confirm both if the tenant is a permanent employee, and their salary
- Current and previous landlord(s) to confirm whether the rent was paid on time, is not outstanding and that the property was kept in good condition
- Where needed, guarantor’s references
- Ensure an Assured Shorthold Agreement (where appropriate) is completed
- Obtain the necessary deposit and initial rent
- Complete the inventory checks on the property.
Tenant’s responsibility to:
- Pay the rent and deposit
- Pay or make a contribution towards the bills, as well as any other costs agreed and stated clearly in the tenancy agreement, such as:
- Inventory and tenancy agreement costs
- Administrative charges
- Responsibility for Council Tax, water rates, gas, electricity, telephone charges, television licence fee, etc
- Return the property to you at the end of the tenancy in the same condition as at the start of the tenancy allowing for fair wear and tear.
Here’s a brief summary of the various costs to consider when letting your property:
Gas and electrical testing
You will need to ensure that you have tested all gas and electrical appliances to ensure they comply with current safety standards. This will need to be undertaken by a qualified professional and there will be charges made for this service.
Our partners Mortgage Advice Bureau work with Legal & General to provide you with buildings insurance for your buy-to-let property, designed to give you peace of mind at every stage of your life, from buying your first property to expanding your portfolio.
You will be insured against loss or damage to your buildings from many causes, including but not limited to:
- Fire, smoke, explosion, lightning or earthquake
- Malicious acts or vandalism
- Storm or flood
- Subsidence, heave or landslip
- Theft or attempted theft
- Escape of water
- Falling trees
The insurance will also cover your legal liability to third parties up to £2 million and can be extended to cover accidental damage, legal expenses and rent guarantee (this option covers unpaid rent for up to a year whilst trying to gain vacant possession). Conditions and exclusions apply, full details are available on request.
Letting agent’s fees
There are likely to be fees incurred for employing an agent to undertake the administration and management of your property. Charges vary from one agent to another, so it’s worth checking on fees in your area.
Repairs and maintenance
Any repairs or maintenance that is required on the property will need to be paid for by the landlord.
You may have to put some of your furniture and furnishings in storage if the tenant brings his/her own belongings. The costs of storage will need to be covered by the landlord.
Landlords are liable to pay tax on gross income received from rent. Further information can be obtained from the Tax Office.
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