Smiths Residential - Landlord Information

Landlords Guide

FOREWORD

The purpose of this guide is to provide an insight into letting a property legally and professionally.

Whether managing a portfolio or cautiously considering renting your own home for the first time, there is much to consider.

PAYMENT OF RENT

Where Smiths Residential Limited are instructed to process rent payments and/or manage your property rent will be forwarded to you within three working days of receiving cleared funds from the rent due date (except in exceptional circumstances) less agreed deductions.

RENT GUARANTEE & LEGAL PROTECTION — Highly recommended

Irrespective of the number of references one obtains, we cannot see into the future. Letting a property is not an exact science and circumstances do change. Redundancies, broken relationships etc are not covered by references, they only report on past performance. To combat this Smiths Residential Limited strongly recommend “Homelet” Premier and Premier PLUS. These are insurance policies offering peace of mind, knowing your rent is guaranteed as well as legal expenses, in the unlikely event of a difficult tenant refusing to leave, covered for as long as your tenant remains in occupation, or until the end of the fixed term (which ever is the sooner, subject to terms and conditions, further details available on request)

REFERENCES

Once a tenant is secured, references will be available for inspection by the Landlord prior to the signing of the Tenancy Agreement. Ultimately Landlords must satisfy themselves as to the suitability of any tenant introduced.

INDEPENDENT REFERENCING AND CREDIT CHECKING

An independent referencing company will research the Tenant’s employment & financial history, investigate credit worthiness and may speak to previous Landlords (if any) before providing a written report. Landlords should be aware that the past performance of a tenant does not necessarily guarantee their future conduct or their ability to pay the rent — it is, like all references, historic. Whilst this is often a helpful guide, circumstances do change which cannot be foreseen.

SAFETY LEGISLATION & DUTY OF CARE

Due the number of injuries and fatalities that have occurred due to untested gas or electrical appliances old and dangerous wiring and sub-standard, non - fire retardant furniture, legislation now exists to make every landlord legally responsible for ensuring the properties they let are safe.

The legislation specifically covers the safety of gas and electrical appliances and soft furnishings. Landlords also have a Duty of Care to ensure the electrical installation is safe.

No Landlord ever consciously sets out to harm a tenant. Nevertheless if an accident does occur for example, due to faulty wiring, one must be able to demonstrate in a Court of Law, that ‘Due Diligence” was shown. In the case of electrical wiring, this is done by ensuring an electrician tests the installation and provides a written report confirming it is safe. The eyes of the law are then likely to focus on the electrician who approved the installation and not you. You will have taken every reasonable precaution.

The penalty for failing to comply with statutory safety legislation is a maximum fine of £5000 and/or six months imprisonment FOR EACH OFFENCE! In the case of an injury or fatality resulting from non-compliance, considerably harsher penalties may apply.

In the event of civil proceedings being brought against a Landlord for failing in their Duty of Care to a tenant resulting in serious injury or a fatality, damages awarded to the victim or the victim’s family will be decided by the court.

Furthermore in the event of damage to your property resulting from non — compliant appliances, installation or furniture you may also invalidate your contents and buildings insurance.

THE LEGISLATION

The Gas Safety (Installation and Use) Regulations 1994

“The Gas Appliances (Installation And Use) Regulations 1994” requires all gas appliances in rented properties to be checked by a CORGI registered gas installer annually. Any faults found must be promptly rectified (also by a CORGI registered gas installer) and detailed records kept. A copy of a current inspection certificate together with evidence that remedial work (if any) has been carried out must be left at the property.

The Electrical Equipment (Safety) Regulations 1994

Every portable electrical appliance must be tested to ensure it is safe unless brand new and proof of purchase can be supplied. A report from an electrician on legitimate headed paper must confirm that all the items on your list have been tested and are safe. Defective plugs and frayed flexes must be replaced and any appliances failing the test must be removed. Instructions regarding the safe operation of appliances must be supplied.

The Furniture And Furnishings (Fire) (Safety) Regulations 1988 (As Amended In 1989 And 1993)

All soft furnishings supplied must be fire retardant. The regulations apply to beds and mattresses, headboards, sofa beds, futons etc, nursery furniture, garden furniture, scatter cushions and seat pads, pillows, bean bags, loose and stretch covers for furniture. Compliant items will be labelled.

Bed bases and or mattresses should carry the label “BS 7177.”

All other soft furnishings should carry the label “CARELESSNESS CAUSES FIRE”.

If these labels are not attached to an item, then regardless of the reason, unless you can provide proof of purchase, it must be removed from the premises.

Our Advice

The legislation may seem daunting but we deal with this every day on every property we let. The regulations must be taken seriously and as a professional letting agent we will guide and help you to ensure that you comply and that your property is safe.

Compliance need not be expensive. We can arrange all the checks on your behalf.

Replacing non - compliant furnishings or electrical appliances is NOT always necessary - we let many, properties without soft furnishings or certain electrical appliances.

SMOKE DETECTORS

The installation of at least one smoke detector on every floor is recommended. Battery powered smoke detectors often cost less than £10 each and may save lives. It is important however that these are regularly checked. All new homes built after June 1992 must be fitted with mains operated smoke detectors on every floor.

THE LANDLORD & TENANT ACT 1985

Section 11 of The Landlord and Tenant Act 1985 requires Landlords to:

Keep in repair the structure and exterior of the premises including drains, gutters and external pipes.

Keep in repair and proper working order the installation for the supply of water, gas, electricity and for sanitation.

Keep in repair and proper working order the installations for space heating and water heating.

TAXATION

Rental income is liable to tax whether or not the landlord resides in the UK. Tax is generally levied on rental profit. Mortgage interest, agency charges, furniture depreciation, repairs and maintenance is all taken into account. Landlords are recommended to seek independent tax advice.

Overseas Landlords

Under The Finance Act 1995 landlords must apply for an exemption certificate to be issued to the agent permitting rent to be paid to the landlord gross. Only the Landlord can make the application which, if granted, will be issued to the agent directly. Application forms may be obtained from our Management Department.

Until an exemption certificate is received we are legally obliged to withhold a percentage of the net rental income as a provision against tax

A tenant paying rent directly to an overseas landlord should still withhold tax. The landlord has a duty of care to make the tenant aware of this.

TYPES OF AGREEMENT

Under the Housing Act 1988 it is only possible to create three types of tenancy:

An Assured Tenancy - can be for any length of time (no maximum or minimum) but is not generally recommended to Landlords as this type of Tenancy offers security of tenure to the Tenant. As a result, gaining possession can be difficult.

To create an Assured Tenancy under the Housing Act 1988 the following criteria must exist:

a) The Tenant(s) must be an individual.

b) The Tenant must occupy the premises as his/her main home.

c) The annual rent cannot exceed £25,000 per annum.

d) The Landlord must not enjoy Resident Landlord Status.

An Assured Short hold Tenancy - is a form of Assured Tenancy that offers limited security of tenure to the tenant and as a consequence, providing all the required criteria are met, possession is guaranteed. To create an Assured Short hold Tenancy the following criteria must be met in addition to the criteria creating an Assured Tenancy.

e) The Landlord must give the Tenant at least two months notice in the event that possession is required.

A Non-Housing Act Tenancy - must be used where any of the criteria “a” to ‘d” are not met. A typical example is a company let.

OBTAINING POSSESSION

Landlords must give at least two months notice under Section 21 of The Housing Act if possession is required at the end of, or after the expiry of a fixed term tenancy agreement.

This is obtained by serving a Notice Requiring Possession. Unless otherwise stated in the Tenancy Agreement, tenants paying their rent monthly are required to give a months notice whilst tenants paying weekly need give four weeks notice. Whilst the term of an Assured Shorthold Tenancy can now be for less than six months, a court can still not evict a tenant under Section 21 of the Housing Act until a term of six months has expired. There are other grounds for eviction i.e. non payment of rent where it is not necessary to give two months notice.

THE PROTECTION FROM EVICTION ACT 1977

It is a criminal offence to threaten, or forcibly evict a Tenant. Only a Court may evict a tenant after due process of law.

TENANT DEPOSIT PROTECTION SCHEME – New Rules Regarding Deposits

Under the Housing Act 2004, the government is required to introduce mandatory, universal tenancy deposit protection. Tenancy Deposit Protection will apply to all Assured Shorthold Tenancies in England and Wales where a deposit is taken.

This new legislation comes into force on the 6th April 2007. What this means is that any Assured Shorthold Tenancy agreement entered into on or after the 6th April 2007 and a deposit is taken, the tenant’s deposit must be protected through the Tenant Deposit Protection scheme.

Deposits held under an Assured Shorthold Tenancy agreement entered into before the 6th April 2007 your deposit will be held and continue to be held under the old rules during the fixed term and any statutory perioidic tenancy thereafter. However, should you wish to renew your tenancy on a fixed term basis at the end of the fixed term the new rules will apply and the deposit must be registered with the scheme within 14 days of the new tenancy commencement date.

ENERGY PERFORMANCE CERTIFICATES (EPC)

EPC,s are required on all rented properties from 1^st October 2008, if a new tenant takes occupation.

THE INVENTORY

This is an important legal document forming an integral part of the Tenancy Agreement.

Unfortunately many Landlords fail to realise its importance (both in legal and financial terms) and try to “save money” by preparing their own inventory.

More often than not this proves a false economy, as amounts cannot be withheld from a tenant’s deposit in compensation for loss or damage unless it can be proved that the loss or damage was actually caused by the Tenant.

Technically the document should be called an “Inventory and Condition Report”, as an inventory simply list the contents of a property will be useful only in the event of items missing and not damaged. If the condition of the particular item is not accurately described and the inventory was signed by the tenant prior to taking occupation, how can it be proved that the tenant caused the damage?

Unfurnished properties also require an inventory and a ‘check in’ and ‘check out’report. Presumably there will be wall and floor coverings, kitchen and bathroom fittings etc the condition of which also needs to be described.

Where a dispute cannot be resolved amicably by referring to the contents of the inventory, check in and check out reports then details of the disputed amount will be sent to the ADR (Alternative Dispute Resolution) who will base their decision on the contents of the inventory, check in and check out reports. Their decision is final and cannot be appealed.

In these circumstances we strongly recommend that you allow us to draw up the Inventory.

INSURANCE

The landlord should insure the premises and their own contents, including public liability for the full period of the tenancy. Smiths Residential can arrange competitively priced buildings and contents insurance on behalf of the Landlord. Should you not require this service, you must advise your insurers that the property is to be rented. Failure to do so may invalidate the policy.

GROUND RENT AND SERVICES CHARGES

The landlord is responsible for the payment of ground rent and service charges (not utilities) throughout the tenancy. Where Smiths Residential are instructed to manage the property arrangements may be made for such payments to be deducted from rents received.

PERMISSION TO LET

You will usually require written authority from your Lender before a tenancy is granted. In the case of a leasehold property permission is also required from the Freeholder. You should also check with insurers to ensure cover is extended to rented property.

GARDEN

It is wise to ensure the garden is tidy and well maintained before the tenant takes occupation..

GENERAL CONDITION

In our experience the better and cleaner the property the easier it is to secure a good tenant. Good tenants do not generally rent properties in poor condition. We therefore recommended that Landlords ensure carpets are clean; attend to any internal decoration required prior to a tenant taking occupation. The tenant is not obliged to leave the property any cleaner upon vacating that it was when they took occupation.

BUY TO LET

The “Buy to Let” scheme was established to allow private investors to acquire properties to let without the need to pay commercial rates of interest. Mortgage lenders involved in the “Buy to Let” scheme now take into account the level of projected rental income likely to be generated from the property.

One of the reasons for the change in lending criteria and the lowering of interest rates for private individuals is the number of professional letting agents with bonding schemes to enhance security for investors and lenders. Indeed many lenders insist that Buy to Let properties are let and managed via Bonded Agents.

It is recommended that you discuss your proposed purchase with a local Bonded agent. They will have the experience and local knowledge to give advice on the right type of property to buy based on demand in the area, rent levels, location, condition etc. Buying a property of the wrong type or in the wrong location may increase the amount of time the property is empty and thus producing no rental income. Similarly condition and decoration will also directly affect the length of time it takes to find a suitable tenant. This results in lost rental income and reduces the value of your investment.

Always remember that buying to let is a business. There will be repairs to be undertaken and other maintenance issues. There will be periods when the property is empty, most Buy to Let lenders prefer the property to be managed by a professional agent. To summarise, work your figures out carefully and plan on a medium to long term investment. We will be happy to speak to you about any Buy to Let ideas you may have.

CHOOSING AN AGENT

When selling a property it does not matter to many homeowners which estate agent they use as long as the agent finds them a buyer at the right price. Ultimately if the buyer damages the property or fails to pay the mortgage, it is their property and their problem.

Choosing the right letting agent is much more important because you will be allowing a complete stranger to live in a property that is still yours. It therefore matters very much that the tenant looks after the property and it matters very much that they pay the rent because it is still your property.

A bad tenant can cost an unfortunate landlord thousands of pounds in legal fees, lost rent and dilapidation’s etc. Some Landlords assume that the more agents they instruct, the more they increase their chances of finding a good tenant. In our view, the more agents you instruct,the more you increase your chances of finding a bad tenant. There is nothing wrong withspeaking to several agents before deciding which to use but only instruct one. A less reputable agent may decide not to risk having the property let by a competitor and may try to persuade you to accept any tenant in order to secure their commission they are also likely to place unsuitable tenants in let only properties than in properties they manage.

WHY CHOOSE SMITHS RESIDENTIAL LIMITED?

We manage one of the largest property portfolios in the local area.

We are Bonded Members of The National Approved Lettings Scheme (N.A.L.S).

We are Bonded Members of Association of Residential Letting Agents (ARLA).

We are members of the Tenants Deposit Scheme for Regulated Agents (TDSRA).

Our senior personnel have over 20 years experience.

We hold Professional Indemnity Insurance of £500,000.

We have a separate management department with specially trained staff & sophisticated computer back up.

We will help you to ensure compliance with all Statutory Safety Legislation.

We undertake to forward your rent to you within three working days of us receiving cleared funds from the rent due date.

Our Tenancy Agreements are specially drafted to maximise income and provide you with the maximum protection.

We offer a professional inventory service to help avoid disputes.

We offer Rent Guarantee and, or Legal Protection Insurance.

We can arrange Buildings and, or Contents Insurance.

We can arrange independent credit referencing.

We have a constant supply of private and corporate tenants.

We insist on a minimum deposit of one month’s rent from every tenant.

All our contractors have full public liability insurance.

We can offer specialist advice on Buy to Let Investment.

We can arrange an Energy Performance Certificate (EPC)

Experienced and trained staff

SERVICES

Tenant Introduction

Accompanying of tenants on viewing appointments (unless by special arrangement).
Producing and supervising the signing of the tenancy agreement.
Ensuring compliance with current Gas, Electrical & Furniture Safety Regulations prior to tenant taking occupation.
Obtaining references.
Independent Credit Referencing Service.
Guaranteed Rent & Legal Protection Insurance (subject to terms & conditions) available on request.
Obtaining deposit from Tenant.
Registering the deposit with the TDSRA (available on request).
Professional Inventory Service (available on request).
“Check in” and “Check out” Service (available on request).

Rent Processing

Accompanying of tenants on viewing appointments (unless by special arrangement).
Producing and supervising signing of the tenancy agreement.
Ensuring compliance with current Gas, Electrical & Furniture Safety Regulations prior to the tenant taking occupation.
Obtaining references.
Independent Credit Referencing Service.
Guaranteed Rent & Legal Protection Insurance (subject to terms & conditions) (available on request).
Obtaining deposit from Tenant.
Registering the deposit with the TDSRA (available on request).
“Check in” and “Check out” Service (available on request).
Professional Inventory Service (available on request).
Forwarding of rents received, less agreed deductions - to be paid directly into a designated account via our bank.
Arranging for Tenant to sign standing order mandate.
Sending of Rent statements.
Sending of late rent reminders.

Full Management

Accompanying of tenants on viewing appointments (unless by special arrangement).
Producing and supervising the signing of the tenancy agreement.
Ensuring compliance with current Gas, Electrical & Furniture Safety Regulations prior to the tenant taking occupation.
Obtaining references.
Independent Credit Referencing Service.
Obtaining deposit from Tenant and registering the deposit with the TDSRA (Tenant Deposit Scheme for Regulated Agents).
Serving Section 21 Notice Requiring Possession.
‘Check in” and ‘Check out’ service.
Professional Inventory Service (available on request).
Forwarding of rents received, less agreed deductions - to be paid directly into a designated account via our bank.
Arranging for Tenant to sign standing order mandate.
Sending of Rent statements.
Sending of late rent reminders.
Guaranteed Rent & Legal Protection Insurance (subject to terms & conditions).
Supervising signing of inventory and condition report by Tenant.
Final inspection when Tenant vacates.
Property Visits.
Advising Landlord of any breaches of the Tenancy Agreement as made aware.
24 hour emergency repair help line.
Recommended and qualified contractors with public liability insurance available for maintenance issues.