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The ultimate guide to renting out your property

Whether you are an ‘accidental landlord’ or are considering moving into property investment and letting full-time, renting out properties come with many responsibilities, issues and challenges.

Here is some advice for renting out your property if you are a first-time landlord.

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Why rent my property?

There are many reasons why people decide to rent out their property. The most basic reason is financial. It could just be a short-term objective, while they are living somewhere else and don’t need to sell the property. The rental income covers the mortgage payments and gives an extra source of income. It could be to begin a business and build a portfolio of rental properties.

How to rent out your property?

You can either choose to manage the rental yourself or ask a letting agent to manage the administration and management of the property. You will also need to decide how to offer your property. You could choose to offer it as a single property or divide it into a House in Multiple Occupation (HMO). For example, HMOs bring in more income but will involve more expense converting the property and more responsibility.

Talking to your mortgage lender

If you are considering renting out your property for the first time you will need to speak to your existing mortgage lender. If the length of the property rental will be less than 12 months your lender may give you consent or permission to let your property on your existing mortgage terms. A long term rental may mean that you will have to transfer to a ‘buy to let’ mortgage.

Landlord licensing

Licensing schemes for landlords are in operation in some areas of the UK. These are designed to improve the standards of property management. There are three types of licensing scheme:

  • Mandatory licensing – it is illegal to let out a HMO in England and Wales without a license
  • Additional licensing – this also applies to HMO landlords. An additional license may be necessary if a council feels that HMOs are not being properly managed or the terms of a mandatory licence do not extend far enough
  • Selective licensing – some local councils will ask all landlords in its area to apply for a licence, or to take a ‘fit and proper person’ test

Check with your local council if they operate a licensing scheme. A license will cost a small annual fee.

How much can I rent my property for?

Knowing what rent to charge will depend on the size of the property, the facilities it has access to, the rental price of similar properties in the area and the average incomes of prospective tenants. Making your rent charge too expensive will make your property less attractive to tenants. Setting it too low could make it more difficult to choose a good tenant. There are numerous rent calculators available online for you to get an idea of the kind of rent to charge.

Tax and national insurance

Rental income counts as taxable income. Income tax is calculated on the profit you make as a landlord, so you will need to deduct any expenses first. Mortgage interest payments also qualifies for 20% tax relief.

The amount of income tax you pay will depend on the tax band you are in, your other sources of income and if the property is owned by you or a company. The first £1,000 of any income from property is tax free. Any income above this will need to be declared in a self-assessment form.

There are also implications for National Insurance contributions. Landlords only have to pay Class 2 National Insurance contributions if their profits are above £6,725 per year and if the following all apply:

  • Being a landlord is their main job
  • More than one property is rented out
  • New properties are being purchased by the landlord

What are the legal responsibilities for landlords?

Gas and electrical safety responsibilities for landlords

It is a legal requirement for landlords to conduct regular gas safety and electrical checks on their properties. The Gas Safety Certificate check should be conducted annually by a gas safe registered engineer. It is an inspection and test of all the gas appliances and systems in a property.

The Electrical Safety Regulations require a check of the electrical installations in rental properties every five years. The check should be conducted by a member of the qualified and competent person scheme. Landlords must provide copies of the gas and electrical safety certificates to their tenants.

Fire safety regulations

Landlords should ensure that a range of fire safety measures are in place in their property. This includes installing smoke alarms on every floor and a carbon monoxide alarm in every room with a solid fuel burning appliance. Tenants should have access to external or internal escape routes, and furniture and furnishings must be made from fire resistant materials. Fire extinguishers are legal requirements in HMOs.

Right to rent checks

Right to rent checks are mandatory for landlords and letting agents. Landlords must ensure that before a tenancy can be agreed or begin, they have proved that a tenant is in the UK legally, and has the right to rent a residential property. Landlords are liable for significant fines if checks are not made, or tenancies commence with tenants who fail the checks. 

Find out more about how landlords can check on the immigration status of their prospective tenants on our dedicated Right to Rent page.

Tenancy agreement

Once you have found a tenant you will have to draw up a tenancy agreement, a written contract that sets out the obligations of both parties. Assured shorthold tenancy agreements are the default type of agreement for private tenants in England and Wales. There are standard templates available online that can be used as the basis of your document, such as this one.

Protecting your tenant’s deposit

Landlords have a legal obligation to protect the deposit of their tenants, and return the deposit to tenants at the end of the tenancy, minus any reductions or costs. Landlords can ask their agent to do this for them, but can never ask the tenant to do it. Landlords must use a government-backed tenancy deposit scheme in all circumstances, even if the deposit is paid by a third party such as a parent or friend of the tenant.

Landlord insurance

Landlords do not have to take out specialist contents and buildings insurance for their rental properties, but it is highly recommended that they do. Standard insurance policies will not cover landlords for issues such as tenants not paying rent or causing damage to the property. Landlord or ‘buy to let’ insurance will include extras such as public liability cover, loss of rent, emergency cover and legal expenses. Premiums could be higher depending on the tenants you are renting to. Students will be seen as a greater insurance risk than professional people.

What rights do landlords have to take back possession of their property?

A number of options are available to landlords if they need to gain possession of their property. The primary method of eviction of a tenant in an assured shorthold tenancy is through a Section 8 or a Section 21 notice. A Court order can be obtained to claim possession if the occupiers of the property have no rights to occupy (such as squatters); the landlord can agree with the tenant to surrender the property, or prove that the property has been abandoned by the tenant or occupier.

How can a letting agency help?

As you can see, a first time landlord has plenty to do before and during a tenancy, and has many responsibilities to their tenants. Property management isn’t for everyone, so if you are thinking of renting out your property, haart can help with our full management service. A dedicated property manager oversees all communication with the tenant, including conducting repairs and replacements.


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