DOWNER & CO has recently produced a detailed LETTINGS BROCHURE as a helpful, initial guide for Landlords. For your free copy, or to arrange an appointment with one of our professionals, without obligation, please contact us. Meanwhile, we set out below a summary of some of your first questions as a Landlord:
Do I Pay Tax On The Rental Income? Yes, Schedule D tax is payable on all profit produced, but allowable items against tax include mortgage interest, insurance premiums, DOWNER & CO fees, repairs and depreciation of furniture and furnishings. Please note that this differs if you are going to live abroad. This information is given only as a basic guide; all our Landlords are strongly advised to seek specialist advice from an accountant.
Who Pays The Utilities? The Tenant is made responsible directly to the appropriate suppliers on the day the tenancy commences.
Do I Have To Inform My Mortgage Lender? Formal consent to the letting must be obtained from your mortgage provider prior to letting out your property.
Are There Any Rules Regarding Contents Of A Property, Should It Be Fully Furnished, Furnished, Part Furnished Or Unfurnished? No, there are no strict rules but both expectations and reality can vary in different areas of the country and even within different niche sectors within the local markets. Generally, a property offered as "fully furnished" would contain all the main fixtures, furnishings and fittings, white goods etc., plus the standard crockery, cutlery, glassware, pots and pans etc., that a reasonable tenant would normally use on a day to day basis At the other end of the scale an "unfurnished" property would normally be provided only with such basics as carpets, curtains, light fittings and white goods. Clearly, there are infinite variations between these two extremes of what might be included. Therefore, the critical aspect, whether you are a Landlord or Tenant, is to make sure that everyone clearly understands which main items are, or are not, included before finalising the Tenancy Agreement.
What About Safety Regulations For Rented Property? There are specific legal obligations and responsibilities on a Landlord with regard to Fire safety for Furniture & Furnishings, Gas supply and appliances, plus Electrical wiring and appliances. Prior to letting your property we will provide you with all the relevant guidance concerning the following regulations: The Furniture and Furnishings (fire) (safety) Regulations 1988 The Furniture and Furnishings (fire) (safety) Amendment Regulations 1993 The Gas Safety Regulations 1994 (Installations and Use) Electrical Equipment (safety) Regulation 1994 The Low Voltage Electrical Equipment (Safety Regulations) 1989 Part 'P' Building Regulations (Electrical Safety in Dwellings) Building regulations (Smoke Alarm) 1991
What About Insurance? Landlords and tenants should take care to review any existing policies when renting or letting a property for the first time as some standard insurance products will either not provide cover, or might place restrictions on cover, for rented property and/or its contents. A failure to inform your insurer that you are renting/letting a property could invalidate any subsequent claim. It is for a Landlord to insure the building and his/her contents, fixtures and fittings. The Tenants are responsible for insuring their own possessions. There are various specialist insurance products designed for Landlords and Tenants and rented property: - Buildings, Contents, Legal Expenses, Emergency Repair cover, Rental Guarantee cover etc.
What About An Inventory/Schedule Of Condition? This is an essential document that provides a written benchmark, which should be amended, updated and recreated before the beginning of each new tenancy. A properly constructed Inventory/Schedule of Condition details the fixtures and fittings and describes their condition and that of the property generally. Such a document should be seen as a necessary investment that helps protect the interests of both Landlord and Tenant. This document is included in our fee.
Is it Necessary to Inform the Bank/Building Society? Yes. Formal consent must be obtained from your bank/building society.
What Is A Tenancy Agreement? A Tenancy Agreement is a legally binding contract between a Landlord and Tenant that sets out both the legal and contractual responsibilities and obligations of the two parties. It should be written in plain and intelligible language (no unnecessary jargon!) and its terms and clauses should be fair and balanced, taking account of the respective positions of the parties and should not mislead about legal rights and responsibilities. Landlord and Tenant should take care to individually negotiate any particular terms or conditions that are important to them or especially relevant to the particular let or property.
What Kind Of Tenancy Agreement Will Be Used? The most common form of tenancy agreement used is an "Assured Shorthold" (an AST) under the 1988 Housing Act (amended 1996). This type of tenancy offers the most flexibility to both Landlord and Tenant, has straightforward notice procedures for bringing the tenancy to an end and a special Accelerated Possession court procedure should tenants fail to vacate. If certain specific conditions are met relating to the proposed letting, a "contractual" non-housing act tenancy must be created. One example of this would be what is commonly referred to as a Company Let where the tenant is a bona fide registered company. Another would be where the annual rent equates to over £25,000. Very rarely, a prospective Tenant may be offered a full "Assured" tenancy that gives very significant and potentially long-term security of tenure to a tenant and, for which a Landlord can only get possession in very limited circumstances. Downer & Co Lettings Ltd "professional Legal" agreements are much more comprehensive than those bought in a local stationers or Post Office. Our agreements are constantly updated through lengthy consultations with RICS, ARLA and our legal advisors Pain Smith Solicitors.
Joint And Several - What Does That Mean? Where there is to be more than one (adult) person living in the property, the tenancy will say they are "jointly and severally" responsible. This expression means that, jointly, the tenants are liable for the payment of all rents and all liabilities falling upon the tenants during the tenancy, as well as any breach of the Agreement. Individually each tenant is responsible for payment of all rent and all liabilities falling upon the tenant, as well as any breach of the Agreement until all payments have been made in full.
What About The Tenancy Deposit? It is quite common for a deposit of an amount equivalent to a month and a half's rent be held during the tenancy against the satisfactory performance by the tenant of all the various obligations under the tenancy agreement - but mainly, those relating to the cleanliness and condition of the property. The relevant clauses in the Tenancy Agreement should set out who is to hold the deposit (e.g. agent or landlord), whether interest is to be paid or not, what the deposit can be allocated for and the end of tenancy procedures and timescales for its refund. It is recommended that the tenancy deposit (bond) be held during the tenancy by the member agent as "stakeholder" between the parties involved. This means that at the end of the tenancy the agent should obtain the agreement of both sides before making any deductions for damage, cleaning etc. New regulations came into effect on the 6th April 2007 which made it a legal requirement for all deposits will have to be covered by a tenancy deposit protection scheme. Downer & Co (Lettings) Ltd can confirm that they are official members of the Tenancy Deposit Scheme (TDS) (no. G01652). The negotiator that you are dealing with will be able to elaborate on the legal implications and the schemes available should you wish to hold the deposit yourself.
What Is A "Break-Clause"? This is a clause sometimes inserted into a fixed term tenancy, typically if the initial fixed term is for a year or more. A break clause will usually be worded in such a way as to allow either Landlord or Tenant to give two months written notice at any stage after a particular date or period of the tenancy, thus terminating the tenancy earlier than the end of the original fixed term.
What Happens If Either Party (Landlord Or Tenant) Unexpectedly Wish To End An Existing Tenancy Early? There are only limited ways in which this can happen. The Landlord cannot make the Tenants move out, nor can the tenants lawfully walk away from their obligations to fulfil the contract. Either party might request of the other that a formal "surrender" of the tenancy be allowed. It would then be up to the parties to agree the terms and conditions of such surrender. This might include some financial compensation for inconvenience or costs incurred.
How Often Can The Rent Be Increased? In general terms, rent of an existing tenancy can only be increased once every twelve months. Where an Assured Shorthold Tenancy continues as a statutory periodic tenancy, a specific prescribed form (a section 13 notice) must be used to notify tenants of a proposed increase in the rent. It is usual, if creating a longer fixed term tenancy at the outset, or one with a binding option to renew, to include a clause that allows for an increase of the rent on an annual basis, typically linked to, or as a multiple of, the Retail Price Index (RPIX) or similar.
Rights Of Access To The Property - What Are The Rules? A landlord, or his agent, or someone authorised to act on his behalf has a right to view the property to assess its condition and to carry out necessary repairs or maintenance at reasonable times of the day. The law states that a landlord or agent must give a tenant at least 24 hours prior notice in writing (except in an emergency) of such a visit. Naturally, if the tenant agrees, on specific or odd occasions to allow access without the 24 hours prior written notice, that is acceptable. A clause in the Tenancy Agreement which tries to diminish or over-ride a tenant's rights in this respect would be void and unenforceable.
Repairs & Maintenance Issues A Landlord, in very general terms, has a legal responsibility to repair the structure and exterior of the property, including drains, gutters and external pipes; to keep in working order the installations for the supply of gas, electricity and water; and, for the installations for the provision of space and water heating. The Landlord also has other legal responsibilities relating to the safety of such items as gas, electricity and furnishings as well as the general standard or fitness of the property for habitation. A Tenant has an implied covenant to act in a "tenant-like manner". Broadly, this means to report disrepair promptly, to take reasonable steps to ensure that neither the Tenant nor guests damage the property, its fixtures and fittings, to do the minor day to day things any home-occupier would normally do e.g. replace light bulbs, fit a new battery in a smoke or CO2 detector, tighten an odd screw which has come loose on a door handle etc. To keep the property reasonably warm and aired to help prevent condensation or freezing of pipes; to leave the property secure when absent from it; to keep the garden and other areas reasonably tidy and free from rubbish.
Are Tenants Entitled To Know The Name And Address Of Their Landlord? Yes, there are many areas of law covering this and it is a criminal offence for an agent (or whoever is collecting the rent) to fail to provide, without reasonable excuse, this information within 21 days of formal written request by the tenants.
What About Renewals And Extensions Of A Tenancy? This is a very common situation and Downer & Co Lettings Ltd will normally negotiate between the parties and prepare the necessary formal documentation for a replacement tenancy or fixed term extension. If no further fixed term is created to follow on from the end-date of original term, and assuming notice to end the tenancy has not been served, the tenancy can simply continue as a "periodic tenancy" e.g. rolling on with the same terms and conditions.
How Is A Tenancy Terminated? The law governing ending a tenancy is relatively straightforward as long as the right timescales and procedures are followed, along with the use of the correct format of notice. The timescales, procedures and format will vary dependent upon the type, and the status of the tenancy at the time you wish to end the agreement. Downer & Co Lettings Ltd will be able to provide guidance.
What Happens If The Tenant Does Not Move Out After The End Of A Tenancy? First, try to quickly establish the reasons why. However, if a tenant does not move out after a tenancy has been lawfully terminated then the Landlord can apply to the Courts for a possession order. Under the Accelerated Possession Procedure (which can be used where the tenancy was an Assured Shorthold) the process is usually fairly quick and inexpensive. You will need to seek independent advice in respect of any action you wish to take under Section 8 or related litigation. Downer & Co Lettings Ltd will not be responsible for any legal action that may ensue between you and your tenant at any stage during the following tenancy.
Taxation Issues There are certain taxation issues that relate to the rental of property, especially if you are an overseas landlord. Please ask us about the NRL1 form and refer to your accountant or speak to the local tax office on how these issues are relevant to your personal circumstances.
Money Laundering In accordance with recent legislation it is now a legal requirement that we identify all our clients. Your help and co-operation in this will be gratefully received.
General Rental income and security deposits are handled or held by Downer & Co Lettings Ltd exclusively through a separate client account. Rental income is disbursed immediately and security deposits are held until the termination of a tenancy, under the provisions of the lease. Being a firm of Chartered Surveyors all our client funds are protected under an insurance scheme regulated by the Royal Institution of Chartered Surveyors. This ensures that any clients' funds are safe at all time. In addition our clients' funds are subject to regular scrutiny by the company's auditors and the RICS. Downer & Co Lettings Ltd pay an annual premium to ensure this safeguard for our clients and we hope, at a time when other property-related bodies have had to abandon their scheme, that this gives an appropriate level of comfort to our clients and tenants No doubt you will have many more questions. The above this is just a small guide to help you get started, but there are many more things to take on board.