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Leaseholders who choose to become landlords have three management options they can choose from which are:

1: Lettings Only/Landlord Management

In this option the letting agent will carry out the following:

  1. The marketing of the property;
  2. Providing advice about what rent the landlord should ask for;
  3. The finding of a tenant and subsequent reference checks if required;
  4. Providing the tenancy agreement.

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).

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.

RENTING FOR 7 YEARS OR LESS

If properties are to be rented for 7 years or less landlords  (and their letting agents if they use one) are required by common law to ensure the safety of their property and its contents, so that no injury or damage is caused to the occupants, neighbours or to the public.

Managing flat interiors and the common areas  are linked through the Housing Health and Safety Ratings System because although it is primarily used for assessing the conditions of rented flats, it actually applies to all residential properties. Under Part 1, Chapter 1 s4 of the Housing Act 2004 (inspections by local authorities to see whether category 1 or 2 hazards exist) the legislation states that ”if an official complaint about the condition of any residential premises is made to the proper officer of the authority’ i.e.a complaint received by writing by a ‘justice of the peace having jurisdiction in any part of the district’,’ or the ‘parish or community council for a parish or community within the district’ and if the circumstances complained of indicate that any Category 1 or 2 hazard may exist on those premises or an area in the district should be dealt with as a clearance area, the proper officer must inspect the premises or area.

Landlords can be bound under any findings under this (and other legislation) and so are required to keep their rentals gas safe, smoke and carbon monoxide safe, and electrically safe. There should always be repairs procedure in place with access always arranged in advance (unless it is an emergency).

Landlords are also required to check the immigration status of their tenants under ‘right to rent’ legislation and ensuring that the tenancy deposits they receive are protected.
Note: There are signs though that the deposit schemes may be changing such as deposit free renting in the build-to-rent sector and apps offering tenancy insurance.

ACCREDITATION

If landlords are serious about their rental business and want to stand out from the crowd (and there are over 2m of them in operation in the PRS) then gaining landlord accreditation is a good idea. Scheme members will be required to take a mandatory training course and once accepted, will need to get regular continuing professional development (CDP) as a condition of membership. Members will also sign up to the scheme’s code of practice which then allows them to be recognised as ‘fit and proper persons’.

Local authorities usually run these schemes, along with landlord trade bodies such as the National Landlords Association (NLA). Other trade bodies are the Guild of Residential Landlords, and the Residential Landlord Association (RLA). The largest accreditation scheme is run by the London Borough of Camden, which is that of the London Landlord Accreditation Scheme.

There is also the Accreditation Network UK (ANUK) which is a central resource for tenants, landlords and scheme operators interested in accreditation of private rented housing. It provides support, expertise and promotes best practice for scheme operators.

We also have Safeagent, (formerly known as the National Approved Lettings Scheme) a not for profit accreditation scheme for letting agents, and landlords and the UK Association of Letting Agents (UKALA).

Additionally the requirement for landlords to be licenced is spreading across the UK after its introduction by the London Borough of Newham.

 SUMMARY

The PRS has taken over from councils and housing associations as the biggest provider of rented homes in this country but not only has there been a slow down of new landlords entering the market but many established landlords are selling some or all of their portfolios. There are a number of reasons for this:

  1. The introduction of the stamp duty surcharge of 3%:
  2. The scrapping of the 10% tax relief for wear and tear to the property by 2020 (landlords can now only deduct the cost of replacing household items like for like);
  3. Landlords can only offset 75% of their mortgage interest when calculating their tax bill with that reducing to zero by 2020 although they can claim a tax credit of 20% of their mortgage interest;
  4. Landlords who live abroad  are also bound by the same responsibilities and if out of the country for more than 6 months they must pay tax on any income they get from renting out property in the UK. If the landlord is a company or trustee, the rules about their usual place of abode apply.
  5. On 24th January 2019 the Communities Secretary announced that all landlords will be legally required to join an Ombudsman scheme with a 5K fine for non-compliance. The link to this will appear when published.

There is no doubt that renting can work but far too many people are forced to rent because they cannot afford the deposits needed in order to purchase their own homes. It seems strange though that so much legislation has been introduced to the detriment of landlords when the PRS is so heavily relied upon to offset the lack of social housing. Or is it that the rental sector is moving toward build to rent as the norm as some believe it to be? Only time will tell!

 

 

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