Welcome to the Henley Charles property management guide. If you are considering renting out a property, this guide will give you a comprehensive overview of the entire process including:
- Benefits of renting a property
- Preparing a property for rent
- Tenancy types
- Finding and referencing tenants
- Tenancy agreement and deposit protection
- Landlord insurance and tax
- Legal responsibilities of a landlord
- Repairs and maintenance
- Managing rent and rent increases
- Ending a tenancy
Whether you are a first-time prospective landlord keen to enter this lucrative market or an experienced property owner considering options, this guide will provide an up-to-date appraisal of the current private rental landscape.
Can I rent out my property?
The short answer is yes, but before renting out a property, there are important considerations to bear in mind. Firstly, most residential mortgages will require formal consent from the lender before the property can be marketed.
In some cases, this may be a straightforward approval from the lender, who will then supply you with documentation to this effect. Some lenders may charge a fee for the approval, which could be a one-off charge, additional interest on your mortgage repayments, or both.
Approval is a vital step. Without it you could find yourself in breach of your mortgage terms and your insurance may even be invalidated.
For owners of leasehold homes or apartments, there may be conditions within your lease restricting your ability to rent out your property. Typical contracts require notifying the freeholder or gaining written consent, so it’s worth checking your lease document to avoid a breach of your contract.
Finally, there may be restrictions imposed by your Local Authority, for example limits on houses of multiple occupancy (HMOs) or covenants that prohibit rentals. Before you start on your property rental journey it’s important to undertake due diligence with your Local Authority, and you may wish to seek legal advice on the matter if you are uncertain.
Benefits of Renting a Property?
One of the main benefits of renting out a property is, of course, a steady income stream which can cover your mortgage repayments and ongoing maintenance costs. For many property owners this provides a long-term investment, helping them plan for the future.
As property values will increase over time, owners are also likely to benefit from the capital growth of their asset in the future.
Renting your property can also provide a flexible approach, allowing owners to retain it for future personal use, build up a portfolio of properties, or to allow them to wait until market conditions are more favourable before selling a house.
How Can I Rent out my Property?
This property management guide looks at the two contrasting approaches to renting out a property – self-management and letting agencies.
Self-managed lettings are hands-on by their nature. This includes everything from marketing the property, conducting viewings, liaising with and vetting prospective tenants – and that’s before an agreement has even been reached. There are also the legal and compliance requirements, from deposits, contracts and legal compliance to safety checks and ongoing maintenance. Whilst self-managed lettings negate the costs of agent fees, they can be challenging for many landlords.
Letting agencies, on the other hand, charge an agreed fee for partial or full property management services. Some agents offer tenant sourcing only, including marketing the property and vetting candidates. Most agencies, however, offer full property management services including tenant sourcing, legal and compliance services, maintenance support, and crucially, the expertise to ensure a successful letting. This approach is favoured by many as it saves time and removes the stress of property management.
At Henley Charles, we have years of experience in full property management services. Contact
us today for more information.
Preparing Property for Rent
This section of our property management guide is designed to help prospective landlords understand the practical steps they need to take in order to get a property ready for the rental market.
To achieve maximum interest and maximum rental value for the specific property, the first consideration is the condition of the property. Well-presented homes will attract more prospective tenants, allowing you greater scope with your monthly yield.
Before renting out a property, cosmetic improvements will go a long way in making it stand out for the right reasons, but it’s also important to check thoroughly for any repairs that need to be made. This applies to both the fabric of the building and the fixtures, fittings and appliances inside. In addition to making the property more marketable, this is also a vital step in terms of safety.
In terms of safety, there are also legal requirements to comply with, for example, ensuring smoke alarms are fitted and working, and having a valid electrical certificate supplied by a qualified electrician.
Furnished properties are attractive to short-term renters, although there is a higher initial outlay, and it’s crucial that furniture meets fire safety regulations.
Unfurnished properties tend to appeal to longer-term tenants and have lower upfront and maintenance costs.
Tenancy types
Choosing the right type of agreement for you and your property is central to the success of your venture.
The most common tenancy type for private rentals in England is an Assured Shorthold Tenancy, often referred to as an AST. An AST agreement protects the landlord and the tenant by setting out the terms clearly from the outset, including:
- Start date and end of the agreement
- Rent to pay and on which date
- When and how the rent is reviewed
- Deposit amount and how it is protected
- Bills the tenant is responsible for
Fixed-term tenancies run for a set period, for example, six, 12 or 18 months, offering stability and predictability for the landlord. Periodic agreements are monthly rolling contracts after an initial fixed term. Depending on market conditions, long-term plans and the reliability of tenants, the choice is available.
Finally, some properties in England may require specific licenses depending on the rules set by the Local Authority, for example if you were looking to rent out an HMO.
Need help understanding which tenancy type is right for you? Speak to one of our experts today.
Finding and Referencing Tenants
Once you have worked through the steps outlined above in this property management guide, it’s time to find your tenants.
Attracting a wide selection of prospective tenants gives you the best chance of finding someone who is a good fit for you and your property. In order to gain maximum interest, your property will need to be presented in its best light, whether it’s viewed online, in a magazine or newspaper, or in a shop window.
Clear, professional photos and an accurate and compelling description will help you gain attention, and it’s a good idea to highlight those key selling points, for example off-street parking, local amenities or proximity to transport links.
Any reputable agency will be able to manage this process effectively for you, ensuring professional promotion that attracts a wealth of enquiries.
Your agency, if you have one, can also undertake the necessary checks before an agreement is reached and a contract is signed. These include credit checks, employment verification and references. Getting this step right will set you up for success and help you avoid the pitfalls of undesirable tenants.
In terms of Right to Rent checks, every landlord (or their appointed agent) is responsible for checking the immigration status of prospective tenants to ensure they are legally allowed to be in the UK. This can be done by checking passports or using the online Home Office verification service – and there are strict penalties for non-compliance.
At Henley Charles, we have years of experience in finding and vetting suitable tenants for our clients. Contact us for more information.
Tenancy Agreement and Deposit Protection
This section of our landlord guide looks at what tenancy agreement documents must cover and how to handle tenancy deposits legally.
The tenancy agreement sets out the terms of the rental to protect both the landlord and the tenant. Important areas to cover include names of all parties, rental amounts and due dates, responsibilities for maintenance, length of tenancy and any specific property rules.
In terms of deposits, the legal limit is usually capped at five weeks’ rent. All deposits must be protected by one of three Government-approved schemes – TDS, DPS or MyDeposits. Each deposit must be protected by one of these schemes within 30 days of receipt. Failure to do so could result in a fine of up to three times the deposit amount, and it could affect your right to evict a tenant should the need arise.
Landlord Insurance and Tax
Landlord Insurance and Tax is a crucial part of any worthwhile property management guide, helping owners to keep their properties protected and compliant with UK law.
For properties on the rental market, standard home insurance is not sufficient, and in many cases not valid. A specialist Landlord policy is needed to cover not only the basics such as buildings insurance, accidental damage and legal expenses, but also to offer rental-specific protection including landlord liability and loss of rent.
You will need to check with your mortgage lender to understand what type of insurance cover is needed to comply with their terms.
As with any income, rental income profits are taxable and must be declared to HMRC via a Self Assessment tax return. Keep a clear record of your allowable expenses incurred. This total will be subtracted from your total rental income to work out your exact profit, and in turn how much tax you should pay.
Legitimate expenses include:
- Letting agency fees
- Property maintenance and repairs (including boilers and showers, for example)
- Insurance premiums
- Accountants’ fees
- Safety certifications
- Utility bills (if paid by the landlord)
- Service charges
Legal Responsibilities of a Landlord
As a landlord, you will have various legal responsibilities. These can be undertaken on your behalf by your appointed letting agent. We have included an overview in this landlord guide:
Safety compliance – This is an obvious but sometimes complex area. There are certain responsibilities which landlords must meet both prior to and during a tenancy. These include annual gas safety checks, electrical safety inspections, CO2 and smoke alarms and safety glazing.
Tenants’ rights – Tenants living in your property will have the right to ‘quiet enjoyment’ of the premises which means you (or your appointed agent) have to give notice before entering the property. There will also be various obligations around prompt repairs and maintenance to the property as part of your letting agreement.
Documentation – Key documents must also be provided as part of the tenancy agreement, including an energy performance certificate (EPC), a How to Rent guide and details of the deposit protection.
Repairs and Maintenance
Landlords must keep properties safe and operational for tenants as part of their agreement. This could include maintenance on almost anything, from roof tiles and chimney linings to walls and windows.
Landlords should aim to respond promptly to concerns from tenants to ensure that the property remains safe and compliant. Failure to address issues, both proactively and reactively, could invalidate insurance as well as tenancy agreements.
When problems are raised by tenants, it’s a good idea to keep a log of the issue and communicate repair timescales with them. Keep a record of everything to avoid disputes further down the line.
Finally, make sure you are well-versed on what your responsibilities are as a landlord and those of the tenant. This will help you avoid costly pay-outs which you may not be liable for.
Electrical Safety
Landlords must ensure a rental property’s electrics are safe throughout the tenancy. This includes arranging a professional Electrical Installation Condition Report (EICR) at least every five years and completing any remedial work promptly.
Wiring, sockets, consumer units and fixed appliances must all remain in good working order.
Tenants should receive a copy of the EICR before moving in and after each inspection. Keeping your property’s electrical systems safe and well-maintained meets your legal requirements and helps prevent accidents and costly disruptions.
Gas Safety
Landlords must ensure that any property with gas appliances is safe and fully compliant. A Gas Safe registered engineer must carry out an annual Gas Safety Check, covering boilers, heaters and flues.
Once completed, a copy of the Gas Safety Certificate must be provided to tenants before they move in and within 28 days of each yearly check.
Any faults identified must be repaired promptly. Gas safety is a legal requirement and one of the most important steps landlords can take to protect their tenants.
Alarms (smoke and carbon monoxide)
At least one smoke alarm must be installed on every storey of your property used as living accommodation.
A carbon monoxide alarm must also be fitted in any room with a fixed combustion appliance, for example, boilers, gas fires, wood burners or fireplaces and oil-fired heaters.
Alarms must be tested and working at the start of each tenancy, and landlords are responsible for repairing or replacing them if they become faulty. Failure to comply with this law could result in a fine of up to £5,000.
Managing Rent and Rent Increases
When it comes to setting your initial rental prices, market knowledge is extremely valuable. Lettings agents have an in-depth knowledge of the local area and the price brackets. The condition of the property, location, demand and the tenancy agreement itself will all have an impact on the value.
In terms of rent increases, this depends partly on the tenancy type (whether it’s fixed-term of periodic). Fixed-term rents are fixed for the duration of the agreement, but can be amended once the tenancy period is completed. Periodic tenancies may include rent review clauses, allowing opportunity for rents to be adjusted mid-tenancy.
When the time comes to adjust rents, it is important to re-assess the local market to ensure you are still in line with similar properties and achieving the yield your property deserves.
To avoid conflict and ensure prompt payment, your tenancy agreement should dictate clear payment terms. You should also have defined steps to take should the tenant fail to make a payment, including formal written notices and the indication of further action.
Need advice on rental rates? Our friendly team will be more than happy to help. Contact your nearest Henley Charles office for details.
Ending a Tenancy
To end a tenancy before the end of a contract, a notice period is required. The length of this will depend on the legal route taken and the type of tenancy agreement (fixed-term or periodic). The two legal routes are:
Section 21 (no-fault notice) – allows a landlord to end the tenancy without giving a reason, as long as all legal requirements have been met.
Section 8 – used when a tenant has breached the tenancy agreement, such as falling into rent arrears or causing serious issues, allowing the landlord to seek possession on specific legal grounds.
Once the tenancy termination date has been agreed, the landlord or appointed agent must arrange a final inspection, documenting the property’s condition and recording any legitimate deposit deductions. The deposit (or remainder thereof) must then be processed and returned to the tenant.
This property management guide provides a comprehensive overview of the residential property letting process, from tenant sourcing and legal obligations to maintenance and rent.
At Henley Charles, our years of experience combined with our in-depth knowledge of the property market enable us to provide an unrivalled lettings agent service to landlords across the region.
If you would like more information on anything included in this blog, or if you’re ready to start on your property rental journey, please get in touch.