Whether you are moving in with a new partner and already own a property; your boss has tempted you with a sought-after secondment in a far-flung office or maybe, as we all are, you are feeling the squeeze and want to consider increasing your income. Whatever your reason for letting your property, it is important to make sure you have done your research.
Georgina Rayfield, Apiary Life Expert
What to think about when considering letting out your Property
Whether you are moving in with a new partner and already own a property; your boss has tempted you with a sought-after secondment in a far-flung office – who wouldn’t want to spend two years surfing on Bondi – or maybe, as we all are, you are feeling the squeeze and want to consider increasing your income by moving in with a friend or letting out one of your rooms. Whatever your reason for letting your property, it is important to make sure you have done your research and completed all of the necessary steps.
The most common type of tenancy in the UK is called an Assured Shorthold Tenancy agreement (“AST”). In fact, most new short-term tenancies are automatically ASTs provided they fulfil certain requirements. However, it is important, to make sure you know what agreement you are entering into. For example, you cannot have an AST if you also still live in the property, and instead you might be looking at a licence, which affords less protection.Whatever type of tenancy you are entering into it is important that you do your research and take legal advice where necessary. Disputes, whilst not always avoidable, can be costly and time consuming and it is best to put in place a clear structure and documentation at the outset.
Many letting agents can assist you with putting in place the relevant documentation but if you are considering going out on your own to avoid those costly agent’s fees then consider using the Government’s Model Agreement and always take legal advice if you are at all unsure.
So, you have found a tenant, you know what type of agreement you are putting in place, you are ready to go, right? Well almost, there are still certain things you need to think about. To help you with this process, we have put together this handy list of things to remember when letting your property whether or not you are using an agent:
1. Mortgage – if you are currently living in your property under a residential mortgage, you will need consent from your lender to let your property to a third party. It is vital that you contact your bank before you enter into any arrangement and your bank may have specific requirements as to what you can and can’t do. In some circumstances, a fee may be payable, or your lender may adjust your interest rate.
2. Your Landlord – if your property is leasehold you may also need consent from your Landlord or Managing Agent. It is time to dust off that folder your solicitor gave you when you bought the property and find your lease to check whether there are any terms governing subletting. It is important that you review the terms of your lease carefully and fulfil any conditions set out by your Landlord ahead of signing that tenancy agreement or seek legal advice where necessary.
3. Insurance – consider putting in place a new Landlord’s home insurance policy as your existing policy may not cover you when you sub-let. This may also be a requirement of your mortgage provider. Consider also whether you are letting the property furnished or unfurnished and take out appropriate insurance as necessary even if it’s just to cover the white goods.
4. Your Tenants - It is a legal requirement to check that all tenants living in the property can legally rent residential property before the tenancy starts. Make sure you have seen the appropriate documentation before signing the agreement.
5. Permissions- You also need to consider whether you have the appropriate licenses to let out the property in the manner you are intending, for example, houses of multiple occupation (“HMOs”) where the property is rented to five or more unrelated people require a special license from your Council and there are special regulations governing HMOs that are rented to three or more unrelated people.
6. Safety safety safety – there are stringent safety requirements that you need to meet as a Landlord and it is crucial that you ensure that you have completed any necessary alterations to or inspections of the property before letting it to a third party. Things to think about include: installing the legally required level of fire detection equipment such as smoke and carbon monoxide alarms, gas safety (your property should be checked by a Gas Safe-registered engineer at least every 12 months), Electrical safety (you may also need to have an electrical inspection of your property every five years) and it is also important to consider product and fire safety regulations in relation to any furniture you are leaving in the property including for example blind safety.
7. Inventory – consider preparing an inventory of any items you are leaving in the property and a report as to their condition, photos which are time and date stamped may also be helpful to document condition as recollections can fade.
8. References- Get references for your tenant(s) or ask for proof of income. Your letting agent can do this for you if you are using one, but if not, make sure you do your research including credit checks. Repossession procedures are costly and lengthy, and it is best not to unknowingly put yourself in a position where you need to consider evicting a tenant.
9. Deposits - If you take a deposit, ensure that it is protected using a government approved tenancy deposit scheme.
10. Required documents - You are required to send your tenants a copy of the Government’s “How to rent:the checklist for renting in England [https://www.gov.uk/government/publications/how-to-rent]”, your gas safety certificate and an Energy Performance Certificate before entering into a tenancy agreement you may also need to provide a copy of your electrical safety report.
11. Tax- There may be additional tax and national insurance to pay in relation to the rental income you are receiving. Certain tax reliefs are available (e.g.the Rent a Room Scheme which allows you to earn up to £7,500 per year tax free if you are letting furnished accommodation in your home) but it is important to understand what you need to pay and when or take advise if you are unsure.
Whatever you decide, it is important to understand your rights and to take the appropriate legal advice where necessary. Contact one of our experts who can help guide you through the process.
What to think about when considering letting out your Property
Whether you are moving in with a new partner and already own a property; your boss has tempted you with a sought-after secondment in a far-flung office – who wouldn’t want to spend two years surfing on Bondi – or maybe, as we all are, you are feeling the squeeze and want to consider increasing your income by moving in with a friend or letting out one of your rooms. Whatever your reason for letting your property, it is important to make sure you have done your research and completed all of the necessary steps.
The most common type of tenancy in the UK is called an Assured Shorthold Tenancy agreement (“AST”). In fact, most new short-term tenancies are automatically ASTs provided they fulfil certain requirements. However, it is important, to make sure you know what agreement you are entering into. For example, you cannot have an AST if you also still live in the property, and instead you might be looking at a licence, which affords less protection.Whatever type of tenancy you are entering into it is important that you do your research and take legal advice where necessary. Disputes, whilst not always avoidable, can be costly and time consuming and it is best to put in place a clear structure and documentation at the outset.
Many letting agents can assist you with putting in place the relevant documentation but if you are considering going out on your own to avoid those costly agent’s fees then consider using the Government’s Model Agreement and always take legal advice if you are at all unsure.
So, you have found a tenant, you know what type of agreement you are putting in place, you are ready to go, right? Well almost, there are still certain things you need to think about. To help you with this process, we have put together this handy list of things to remember when letting your property whether or not you are using an agent:
1. Mortgage – if you are currently living in your property under a residential mortgage, you will need consent from your lender to let your property to a third party. It is vital that you contact your bank before you enter into any arrangement and your bank may have specific requirements as to what you can and can’t do. In some circumstances, a fee may be payable, or your lender may adjust your interest rate.
2. Your Landlord – if your property is leasehold you may also need consent from your Landlord or Managing Agent. It is time to dust off that folder your solicitor gave you when you bought the property and find your lease to check whether there are any terms governing subletting. It is important that you review the terms of your lease carefully and fulfil any conditions set out by your Landlord ahead of signing that tenancy agreement or seek legal advice where necessary.
3. Insurance – consider putting in place a new Landlord’s home insurance policy as your existing policy may not cover you when you sub-let. This may also be a requirement of your mortgage provider. Consider also whether you are letting the property furnished or unfurnished and take out appropriate insurance as necessary even if it’s just to cover the white goods.
4. Your Tenants - It is a legal requirement to check that all tenants living in the property can legally rent residential property before the tenancy starts. Make sure you have seen the appropriate documentation before signing the agreement.
5. Permissions- You also need to consider whether you have the appropriate licenses to let out the property in the manner you are intending, for example, houses of multiple occupation (“HMOs”) where the property is rented to five or more unrelated people require a special license from your Council and there are special regulations governing HMOs that are rented to three or more unrelated people.
6. Safety safety safety – there are stringent safety requirements that you need to meet as a Landlord and it is crucial that you ensure that you have completed any necessary alterations to or inspections of the property before letting it to a third party. Things to think about include: installing the legally required level of fire detection equipment such as smoke and carbon monoxide alarms, gas safety (your property should be checked by a Gas Safe-registered engineer at least every 12 months), Electrical safety (you may also need to have an electrical inspection of your property every five years) and it is also important to consider product and fire safety regulations in relation to any furniture you are leaving in the property including for example blind safety.
7. Inventory – consider preparing an inventory of any items you are leaving in the property and a report as to their condition, photos which are time and date stamped may also be helpful to document condition as recollections can fade.
8. References- Get references for your tenant(s) or ask for proof of income. Your letting agent can do this for you if you are using one, but if not, make sure you do your research including credit checks. Repossession procedures are costly and lengthy, and it is best not to unknowingly put yourself in a position where you need to consider evicting a tenant.
9. Deposits - If you take a deposit, ensure that it is protected using a government approved tenancy deposit scheme.
10. Required documents - You are required to send your tenants a copy of the Government’s “How to rent:the checklist for renting in England [https://www.gov.uk/government/publications/how-to-rent]”, your gas safety certificate and an Energy Performance Certificate before entering into a tenancy agreement you may also need to provide a copy of your electrical safety report.
11. Tax- There may be additional tax and national insurance to pay in relation to the rental income you are receiving. Certain tax reliefs are available (e.g.the Rent a Room Scheme which allows you to earn up to £7,500 per year tax free if you are letting furnished accommodation in your home) but it is important to understand what you need to pay and when or take advise if you are unsure.
Whatever you decide, it is important to understand your rights and to take the appropriate legal advice where necessary. Contact one of our experts who can help guide you through the process.
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