If you are a homeowner and find yourself posted away from your home, you may be faced with the decision about what to do with your empty house.
Renting your house out may well be the answer. You can cover the mortgage or the cost of the SFA and possibly make a bit of money on the side. However, as a landlord there are lots of legal pitfalls and if you get it wrong you can find yourself in hot water. To keep you on the right side of the law, here are our top ten tips for renting your house out while you are away.
- Check your mortgage
Lots of mortgage providers have terms in the mortgage agreement which prevent you from renting out your home. You need to check your agreement carefully and if you are in any doubt you should speak to your mortgage provider. If the agreement does prevent you renting the property you may be able to negotiate a variation with your provider. If they do not agree you may have to re-mortgage first.
- Get your paperwork in order
Becoming a landlord means a lot of admin.
• Licence: Your local authority may require you to have a Rented Property Licence and keep to the conditions of that licence. It is a criminal offence to not have a licence or to breach the conditions. If found guilty you can be fined up to £20 000.00 and the rental income can be taken from you.
• Energy Performance Certificate: This certificate shows how energy efficient your home is and how much on average it will cost to heat; it is valid for 10 years. You must have one of these and give a copy to your tenant. You must also make sure your home is in Band E or above.
• Gas Safety Certificate: You will need to have all the gas appliances checked and have an up to date gas safety certificate to give to your tenant.
• Insurance: You must make sure your building and contents insurance will cover you and any of your possessions if the property is rented out. It is also a good idea to get Landlord Insurance which covers you if your tenant does not pay rent or if you have to evict them.
Yes, that’s right, if you are going to make more than £2,500.00 a year in rent then the Tax Man would like a share. You will need to make a tax return and will be sent a bill to pay, it will not come out at source like your pay. It is a good idea to speak to an accountant to see what the most tax efficient way to deal with this is.
- Prepare the Property
As ever, preparation is the key to success. You need to ensure your property is fitted with smoke alarms and carbon monoxide detectors. You should also make sure everything is in a good state of repair (see number 8). Lock away or put into storage anything you do not want to be broken or lost (hope for the best but plan for the worst!). Finally, take photographs of everything left and everywhere in the property and make sure you back the pictures up. This is your record of the condition of the property when you hand it over to the tenant. These pictures can save you expensive arguments in court about the condition of the property.
- The Tenancy Agreement
This is the contract between you and your tenant. It must set out the terms of the tenancy and the obligations of both you and your tenant. It must also contain certain legal information including an address your tenant can send legal documents to. The Tenancy
Agreement is your protection if anything goes wrong but if it is faulty it will leave you vulnerable. There are a number of templates available online to download for free or for a small fee. However, you get what you pay for so shop wisely! We suggest you only have a six month tenancy period in the agreement. The agreement can be renewed but if things change it gives you flexibility.
- Deposit Protection
You will want to take a deposit up front (usually between 4 and 6 weeks rent) so that you have a pool of money to pay for any damage caused by your tenant or to cover any missed rent. However, this is not your money, if it is not needed it goes back to the tenant. For many years, landlords would refuse to return deposits on spurious grounds and treat it as a perk. To stop this, you must now put the money into a government approved scheme immediately after you receive it. The scheme will look after the money until the end of the tenancy and try to resolve any disputes that arise. If you do not put the money in a scheme you cannot evict your tenant and they can sue you for the money plus three times
the deposit e.g. f you fail to protect a £1250 deposit you can end up paying £5000.00 to your tenant.
- Checking your tenants
These are the strangers you are trusting to live in your family home, not trash it and return it to you at the appointed time; it is a particularly good idea to do some checks. You are entitled to ask for references from previous landlords and you can conduct credit checks to make sure they can pay. It is also a good idea to check on the property during the
tenancy. The tenancy agreement should contain a clause allowing an inspection at least every 6 months. The Government also requires you to check that your tenants have the right to rent
property in the UK. As the Landlord you must:
• Check an original item of identification (a list of acceptable identification documents
is available online) to make sure you have the right to live in the UK legally.
• Check the documents of any other adult occupiers aged 18 or older living at the property, even if they are not named on the tenancy agreement.
• Make copies of the documents and securely store them throughout the tenancy and for at least one year afterwards.
• Make follow up checks where identification is time-limited e.g. a student visa
• Return original documents once you have finished the check.
If you fail to do this you can receive a civil penalty notice (£1000 for first timers) but if you ‘had reasonable cause to believe’ your tenants did not have the right to rent and you rent to them, you commit a criminal offence and can face up to five years in prison and an unlimited fine.
- Repairs and Problems
You are responsible for all structural and exterior repairs e.g. roofs or windows and for the boiler and the appliances. Pest infestations e.g. rats are down to you as well. If the boiler breaks down or there is a serious leak you will be expected to have this fixed within hours not weeks. You are also responsible for replacing broken down appliances. If you are overseas or going to be unable to arrange this at short notice you will need to appoint someone to do it for you. This can be a friend or a professional agent. Whoever you appoint, the buck will stop with you, so make sure they are reliable.
- Returning Home Unexpectedly
You must bear in mind that your new tenant is allowed the ‘quiet enjoyment’ of the whole property for the duration of the tenancy (with limited exceptions). So, if you come back earlier than expected or have some leave back home you will need to have somewhere else to stay. If the initial tenancy period has expired there is a way to evict your tenants early, but it will take months not days.
- Evicting your tenants
Sometimes things do not work out and you need to force your tenants to leave. This usually happens because they are not paying the rent or are damaging the property or are being antisocial to the neighbours. Sometimes it is because you need your property back. You cannot simply force someone to leave, that is a criminal offence, and they can also sue you for it and you will have to pay damages. To evict someone, you will need to go through the Courts.
If the rent is more than two months in arrears or the property is being seriously damaged, or the tenants are being antisocial e.g. having noisy, drug fuelled parties, you can apply to the Courts to evict them under s.8 of the Housing Act 1988. If you need your house back, then you can apply under s.21 of the Housing Act 1988. Do not try and do this by yourself as it is highly technical, and it is very easy to make expensive mistakes. If you make one, then the Court may force you to start again or adjourn your case. If they are not paying rent or you are having to stay elsewhere that can be very expensive. Hopefully, you took out Landlord Insurance which will pay for a lawyer. If not, then paying for the advice is often cheaper than one or two simple mistakes (an adjournment may mean 2-3 months of unpaid rent which will cost you thousands of pounds.)
If you follow all our tips, hopefully you will have a successful posting and come back to your home in good order, ready for your next job!
This article is commentary and not legal advice. If you have a query relating to a case (or anything else) and require independent advice, you ought to speak to a specialist solicitor or public access barrister. All of our guides are relevant to the legal jurisdiction of England and Wales at the time of writing.