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Buy to Let Landlord Tips

In your decision to become a buy to let landlord, you are agreeing to take responsibility of the building that will become someone’s rented home.

Becoming a landlord is not a decision that should be taken lightly. It will be your responsibility to ensure that not only the building is a safe place to live, but also that your tenants are reliable and can pay their rent on time.

This guide is designed to offer tips to wannabe landlords.

Please note: The information in this article is for research purposes only and subject to changing legislation. Please seek legal advice in this area if you wish to pursue the points made in this article further.

Join a Letting Scheme

If you are a first-time landlord, you should consider joining an approved letting scheme run by a professional body. This will ensure that you get the best advice and follow the best practices within the buy to let industry. The Royal Association of Residential Letting Agents (ARLA) is a good place to begin research.

Hire A Letting Agent

If you are new to letting, then setting up property management, through a letting agent, may be for you. Letting agents handle the day-to-day management of your property and tenants. They charge a fee, depending on the level of service you opt for. A letting agent’s services can range from finding tenants for you, to managing repairs.

When choosing which letting agents to go through, it is good to ensure that they are a member of the Association of Residential Letting Agents (ARLA) or the Royal Institution of Chartered Surveyors and National Association of Estate Agents. Most importantly, you should make sure that they are registered with a Property Redress Scheme and have professional indemnity insurance.

Tenancy Agreements

Drawing up a tenancy agreement can be tricky, so it is best to seek legal advice for this. Initially, it’s highly recommended you draw up a 6-month agreement, as many tenants prefer short term contracts and if they turn out to be bad tenants, you will only have to wait six months before replacing them. You will need to outline explicitly the rent sum per month and any utilities costs included, as well as details of the deposit protection scheme and home inventory.

Deposits

Your tenants will place a deposit on your property (usually one month’s rent) and under the tenancy deposit protection scheme, these funds will be protected. You will be responsible for ensuring that this money is put aside for when your tenant leaves, or if you need to withdraw funds to pay for damages/skipped rent payments. If you choose to furnish your rental property, or allow pets in residence, you may be able to ask for 6 weeks’ deposit to cover these costs of damages.

Deposits placed by tenants in assured shorthold tenancies agreements are protected by law under the Tenancy Deposit Scheme. It is the landlord’s responsibility to place these funds in a government protected scheme, not the letting agents. You can choose to put this money in an insurance based scheme, where the landlord pays a premium to the insurance company, to ensure these funds are kept safe. Alternatively, you can use a custodial scheme, where the tenant pays the landlord and the landlord, or agent, puts the money into the scheme.

You must gather the money within 30 days of the tenancy starting and give the tenants the following information;

• The property address
• Deposit sum
• The name of the scheme and contact details (for the tenant to contact, should they wish to dispute deductions)
• Name of a third party (letting agent, if applicable), who will be responsible for paying back the deposit
• Details relating to making a dispute and instructions on how tenants can obtain their deposit

Taking Money for Damages

If you need to use a sum of the deposit funds to make repairs, you can outline in the tenancy agreement your justifications for withdrawing funds, under the following conditions;

• Cleaning deductions – upon end of tenancy, should you need to hire cleaners to set-up for the next tenants.
• Damages – It is the tenants’ responsibility to repair or replace broken items and you can deduct money from their deposit at the end of the tenancy to cover this. You must show receipts before you can deduct funds. Also, you must ensure that you do not deduct under what is classed as ‘normal wear and tear’ to a property. For example, if the bath needs re-sealing after a couple of years, this will be your responsibility to fix. Please note: changes to tax rules in buy to let state that landlords can no longer deduct 10% from their tax bill to cover wear and tear. See more on this in our Guide to Buy to Let. Please also note that these tax rules are relevant at the time of writing and are subject to change.
• Unpaid Rent – If your tenants leave without covering part of their rent, you may deduct funds to cover your loss. If they owe more than the deposit funds, you may begin court proceedings to get the unpaid rent back.

Landlord Insurance

Landlord insurance is an essential for buy to let investments. There are many specialist insurers in this sector and the insurance will cover things like the building itself, contents cover, rent guarantee insurance, emergency boiler repairs, landlord liabilities and loss of rent.

You may be offered insurance by your buy to let mortgage lender, however, you are not obliged to take that specific product recommendation. You will however, need to arrange an insurance policy for your rental home/s. Seek advice from and independent financial advisor, who can help you find a good deal.

Please note: Check the ‘sum insured’ in your policy, as this is the total amount paid if something disastrous happens (like a fire). Make sure you are not paying too much or too little into your insurance premiums. You can do this by getting accurate estimates of the rebuild value of the property, from an expert.

Inventory

Listing all the contents of a furnished rental is essential if landlords wish to protect their belongings. If this is not done and signed off by the tenants and then something gets damaged within the time of the tenancy, the burden of proof for damages lies with the landlord. To list a thorough inventory for the tenancy agreement, you will need;

• A detailed list and description of the condition of all furnishings placed within the property.
• Details of the décor and the state it is in at the start of the tenancy.
• Photographs of areas and furniture, to document its condition at the start of tenancy. You may need to have these signed and dated by the tenant, so that you agree at the start that this was the condition of the home/furniture when they moved in.

Maintenance

Annual safety checks are required, by law, for all buy to let properties in the UK. These include;

• Gas Safety – Landlords must get a Gas Safety Certificate annually for each buy to let property they own. This certificate must then be issued to your tenants. Only gas-safe registered engineers are legally permitted to conduct these checks.
• Electrical Safety – All lighting fixtures and sockets must be tested and all appliances must have the CE mark (this means the manufacturer of said electrical item is aligned with EU legislation).
• Fire Safety – By law, all buy to let properties must pass a fire safety check and have clear access to escape routes at all times. They must also have fire safe furnishings, alarms, and carbon monoxide detectors-  in good working order. A smoke alarm needs to be fitted on all floors and a carbon monoxide detector must be installed in all rooms with fuel burning devices. You may also wish to install a fire extinguisher.

Rent Increases

Within your tenancy agreement, you must have outlined how rent will be increased (if applicable) and when it will be reviewed. You usually cannot raise the rental price more than once a year. If tenants have signed an agreement, you cannot review the rent until after the fixed term ends, or you have you tenants’ permission. You will need to ensure that any increase is fair and in line with average rental costs in the local area.  Seek legal advice if you wish to do this.

Tenants’ Rights

Your tenants have the right to live in your buy to let without harassment. This means that as a landlord, amongst other things, you must give 24 hours’ notice if you wish to visit the property, you cannot just ‘drop in.’

Tenants are also protected from harassment in the form of illegal eviction (this is where the procedures for eviction have not been followed correctly). Harassment is a criminal offence and you can be prosecuted for trying to force a tenant to leave your property with abusive or threatening behaviour, carrying out unnecessary repairs to annoy the tenant, or cutting off services.

How to Evict a Tenant

If you wish to legally evict a tenant, you will need to do the following;

• Give a Notice for Eviction – at least two months is required to do this. Your right to evict must be written within the tenancy agreement, so the tenant knows this could be a possibility from the start. Landlords must also supply this notice in writing, along with the exact date for eviction.
• Possession Order- If the tenant fails to leave after you have given proper notice, you can go into possession orders. You cannot usually give these for short tenancies, so not within the first six months of a tenancy. If you are looking for missed rent within the first six months, you must wait until the contract is up before claiming for rental arrears. Please seek proper legal advice on these procedures.
• Accelerated Possession Procedure – This is a ‘sped-up’ eviction notice, where the tenant can be evicted within six to ten weeks. Please seek legal advice on these notices.

Becoming a landlord is a massive responsibility, however, there are associations and letting agencies that can help you along the way. If you are considering becoming a buy to let landlord, talk to an independent mortgage broker. They may be able to help you find the best buy to let mortgage for you, with free advice and quotes.