Being a Landlord
Leaseholders who want to sublet must always check the lease to see what subletting covenants it contains. Whilst most leases will allow it they usually require permission to do so being granted by the freeholder.
Landlords have three options as to how their rental properties are managed:
1: Lettings Only/Landlord Management
In this option the letting agent will carry out the following:
- The marketing of the property;
- Providing advice about what rent the landlord should ask for;
- The finding of a tenant and subsequent reference checks if required;
- Providing the tenancy agreement.
With regard to point 4, the tenancy agreement is likely to be an Assured Shorthold Tenancy as it is the most common form of tenancy agreement in the UK. Initially the tenancy could only be implemented with a minimum term of six months and if not renewed it became a periodic tenancy. The duration would depend on whether the rent was paid monthly or weekly. However, tenancies entered into on (or after) 27th February 1997 do not need landlords to give tenants an initial fixed term tenancy but allows them to grant a periodic tenancy from the outset.
Landlords must however be aware they cannot gain possession of a tenancy before 6 months (even if the tenancy was only originally agreed for less than that).
AST’s are used in the following circumstances:
- The tenant is an individual;
- The dwelling is let as a separate accommodation;
- The dwelling is the tenant’s main or principal home;
- The Landlord does not live on the premises.
They are not used in the following circumstances as they are what are commonly known as ‘common law’ tenancies and will be outside the Housing Act:
- The tenancy began before 15th January 1989;
- The tenancy was previously a protected tenancy;
- Rent comes to more than £100,000 per annum;
- Rent is less than £250 a year – this becomes £1,000 in London;
- Business tenancies;
- Tenancies of licensed premises;
- Holiday let;
- The landlord is a local council;
- The landlord lives on the premises.
- Tenancies of property let with more than two acres of agricultural land, or an agricultural
If there is no tenancy then, if the tenant requests it, information in the form of a statement of terms must be provided by the landlord containing the following;
- The date on which the tenancy began;
- The rent payable under the tenancy and when the rent is payable;
- Any rent review term applicable to the tenancy; and
- In the case of a fixed term tenancy, the length of the fixed term.
Once the tenancy agreement has been provided the landlord then takes on all the management of the property when the tenancy starts. The agent will usually charge a one-off fee for their work in getting to this point and payment will normally be based on the rent (usually one month). The agent is also likely to charge the tenant an administration fee (for the same reason). Both the landlord and agent must be in agreement about what the amount of the tenancy deposit should be and make sure that tenants receive protection for those deposits .The landlord will then have to give proof to the tenant that the money is in one of the three government-approved deposit protection schemes (2 insurance-based and 1 custodial-based).
Landlords will need to ensure that the properties are fit to rent before and during a tenancy by making them electrically safe, gas safe, and smoke and carbon monoxide safe. If they should want to evict their tenant, whether it is a case of wanting their properties back (with no breach of the tenancy having been commited by the tenant) or by the tenant having committed one or more tenancy breaches, they must be aware of how to do it correctly.
They will also need to aware of their repair obligations.
2: Tenant Finder/Rent Collection
Self explanatory and again whilst the agent will usually charge a one-off fee they may also add a small monthly percentage for rent collection. The landlord will deal with repairs, and regaining possession at the end of the tenancy if the tenancy is not renewed.
3: Full Agent Management
This covers all aspects of management including repairs that can either be carried out without requiring the permission of the landlord or those which the landlord prefers to deal with. Rent collection, commencement of the tenancy and the first steps of bringing a tenancy to an end such as serving notice (but not proceeding to court action) are also provided.
This level of service will naturally be the more expensive option.
The PRS has taken over from councils and housing associations as the biggest provider of rented homes in this country. Being a landlord is not easy and they have seen the introduction of the stamp duty surcharge of 3% and the scrapping of the 10% tax relief for wear and tear to the property. Mortgage tax relief has also been phased out.
Many landlords also see their regulatory burden to be downright wrong in some areas. For example they are now required to check the immigration status of their tenants and landlord licencing has really taken a hold across many London Boroughs (started by the London Borough of Newham) as well as other parts of the country.
Even their power to evict when there is no fault on the part of the tenant has made tougher since the introduction of the Deregulation Act 2015 which now provides 2 different notice regimes along with steps brought in to curtail evictions under what has become commonly known as those of ‘retaliatory eviction’.
There is no doubt that for many people, renting is a preferred choice of tenure and it works really well for both parties but for far too many, they are forced to rent because they cannot afford the deposits needed in order to purchase their own homes. There is also the issues facing leasehold tenure which seems to be turning the market on its head, with the Leasehold Knowledge Partnership being at the forefront of (ongoing) leasehold reform.
Interesting times for both sectors!