If you’re interested in becoming a landlord and letting out a property then this article will tell you a little about what you can expect. We talk about what it means to be a landlord and your responsibilities. While being a landlord can be a great money maker and many people run a business as full-time landlords, there are also a lot of downsides too. When you’re ready to take the next step, check out our guide “How to rent out your property”.

Landlord Guide

Landlord

If you rent out any of your property then you’re classed as a landlord, which then means you have certain responsibilities. Those responsibilities include:

  • Making sure all your rented properties are safe and have no health hazards.

You may need to have an HHSRS (Housing Health and Safety Rating System) inspection of your property to make sure there are no hazards; this will be because either the council has done surveys of similar local properties and believes yours may be a hazard, or your tenant has requested one. If a problem is found from one of the 29 health and safety areas they investigate they will either:

If a problem is found from one of the 29 health and safety areas they investigate they will either:

1

Issue you an improvement notice in which you will have to make amends

2

Fix the hazard themselves and then bill you for the work (can be very costly)

3

Stop you or any tenants from using the property

As long as your property is structurally safe and has been maintained regularly, including having the gas boiler serviced if you have one, then all should be fine.

  • Making sure all electrical and gas (if connected) services and equipment are all safe and maintained.
  • You must follow fire safety regulations with the installation of smoke and carbon dioxide detectors
  • Provide an energy performance certificate

You must also consider as a landlord whether you want to manage the property yourself or if you want an agency to handle the management of it for you. Not only can an agency/letting agent find you a tenant but they can also oversee them for you. The fee for this service is normally a percentage of the rental income each month and varies from around 8%–12%.

Personally we recommend managing it yourself, however it is your choice and that is often governed by personal circumstances.

Financial Responsibilities

You are legally required to protect your tenants’ deposit by placing it in a government approved scheme. You have no right to retain the security deposit that is lodged against any damage to the property or non-payment of rent if the tenant has met all their obligations and the ‘damage’ to the property is no more than you would expect from general wear and tear.

With the rental income, you will have to declare it. Like any business you will have to pay tax on your income minus any expenses. For this you will need to register as a sole trader and take a self-assessment test, check out our guide “How to set yourself up as self-employed”. You need to report income for rental over £2,500. If it is less than that amount then get in touch with the Self-Assessment Helpline. See our guide on claiming tax back on a rented property. If you have a mortgage on the property and if it is not a buy-to-let-mortgage you are meant to notify your lender. They are not obliged to grant consent for your property to be let out. If they do consent to it, they could load the interest rate or require an alternative mortgage deal to be taken out. If you have not yet applied for a mortgage we’d recommend knowing what their policy is if you are considering buying a property and moving in for a while before letting it out. You could always consider switching your mortgage to a buy-to-let one. However, there are people who let their property out without telling the lender which keeps the mortgage interest rate lower. If you decide to do this then just make sure your insurance is all in order too – you need to advise your insurance company which covers the building and contents that a tenant will be in occupation.

If you let your property and don’t tell your lender as we’re sure many people don’t, you could find yourself in a difficult position if your mortgagor finds out. The result may result in paying significant charges for breach of contract. Also if your insurance is just for private residential purposes and not a specific tenanted building insurance the insurer may refuse to pay out if your property burns down, etc. But if you keep up the payments every month what is the likeliness of them finding out? Well that’s up to you to decide.

Repairs and Maintenance

Just like the points above state that you must keep your property safe and make sure all electrical and gas services and equipment are maintained you will also have to carry out any repairs and keep the property well maintained so that everything is complies such as:

  • the structure of your property
  • basins, sinks, baths and other sanitary fittings
  • heating and hot water systems

If you decide to rent your property through an agency they will take of all this for you through regular checks. However if there is a problem the agency will still notify you. If you ask the agency to fix the issue they will then bill you whatever it costs. If you refuse to carry out a repair on your property, tenants have the following options available to them:

  • Start a claim through the small claims court for repairs under £5,000
  • Carry out the repair themselves and deduct the cost from the rent.
  • Ask the council to carry out an HHSRS inspection and they can take any subsequent enforcement action necessary.

If you are taking on major repairs because the property is deemed unfit to live in, you can ask the tenant to move out. Before this you need to agree in writing:

  • How long the repairs will last for
  • The tenant’s right to return
  • Details of any alternative accommodation

You can’t repossess a property to do repairs. However if they are major you can apply to the courts for your tenants to vacate the premises or end the tenancy. If you provide alternative accommodation they will be more likely to accept. If you carry out repairs while the tenant is still living there they may be able to claim a reduction on their rent, known as a “rent abatement”. This will depend on what repairs you are doing and how much of the property is unusable. After you have made the repairs or improvement, if there are substantial improvements you have the right to increase the rent depending on the current tenancy agreement.

Rental Pricing

Your tenancy agreement should include how and when you will review the rent. If your tenant has a fixed-term tenancy agreement, for instance 6 months, you can’t increase the rent during that 6 month period unless your tenant agrees. If you’re on a month by month rolling contract with your tenant, then you can increase the rent at the end of any month if you give one month’s notice of an impending increase in rent required. However, you can’t normally increase the rent more than once a year. Any rent increase must be fair when comparing to the average local rents. You can increase your rent by:

  • Renewing the tenancy agreement but with an increased rent
  • Producing a written document for you and your tenant to sign regarding the increase in rent
  • Use a Tenancy Form 4B as a notice proposing a new rent via the .Gov website

If the tenant believes the rent to be unfair they can ask an assessment committee to set a fair rent.

Settling Disputes

If you and your tenant have a dispute, then it’s always best to sort it out between yourselves rather than going to court. Some of the ways you can do this is speak to your tenants about the problems and try and work a solution. If they are being unreasonable, try writing a formal letter to the tenant about the dispute and write what you believe needs to be done and why. If you still do not agree then you can either try a mediation service or take your tenants to the small claims court if the problem relating to money is less than £5,000, or £1,000 if it’s about repairs to the property. The small claims court provides a free mediation service which can take place over the phone. In terms of advice about disputes, you can talk to a solicitor, though they may charge a fee for their time.

Overall being a landlord can at times be stressful, however the income it will generate for you will be more than enough to cover that stress. Make sure to check out our guide about “How to rent out your property” as there we show the actual steps that you can take to successfully rent your property out.

MME Team