Letting a Property
Minimising the Risks
At a time when residential property sales are difficult to achieve a common option considered by property owners is to place a tenant in their property.
Whilst this can be a reasonable solution, and many people invest in property to generate income on this basis, there are considerable risks.
If a tenant ceases to pay rent within a matter of months thousands of pounds in rent can be lost and this can create financial difficulties if there is a pre-existing mortgage on the property. Attempting to evict the tenant often requires a Court Order because most local Councils will not re-house a tenant who is deemed to have made himself intentionally homeless (generally a Court Order appears to be required to confirm that this is not the case).
A resentful tenant may in such circumstances also leave a property in a poor condition costing hundreds if not thousands of pounds in repairs.
There are steps that can be taken to minimise these risks:
- Ensure suitable references and credit checks are obtained from the tenant before he or she moves into the property.
- Ensure that the tenant is provided with an up to date and comprehensive Tenancy Agreement.
- Ensure suitable references and credit checks are obtained from the tenant before he or she moves into the property.Ensure that the tenant is provided with an up to date and comprehensive Tenancy Agreement.
- Consider the provision of a Guarantor (who should also be credit checked).
- Provide tenants with a 6-month Assured Shorthold Tenancy as opposed to a 12 month Tenancy (subject to serving the correct notices, a Landlord has an absolute right to possession on expiry of a fixed term).
- Ensure the property is inspected on a regular basis.
- Act promptly once rental arrears begin to accrue.
At the same time you should also be careful not to give the tenant any excuse for withholding rent by not complying with your legal obligations, for example the maintenance of the property’s gas and electrical safety.
A common Landlord error is failing to ensure that the tenant’s deposit is dealt with appropriately i.e. by placing it into a custodial scheme or taking out deposit protection insurance. Not only can this prevent a Landlord from successfully bringing possession proceedings, it can entitle a tenant to compensation of up to three times the value of the deposit.
Landlords letting out a single property to multiple tenants need to identify whether they have created a House of Multiple Occupation (“HMO”), in which case a licence will sometimes need to be obtained from their local authority – depending on the licensing terms of the relevant authority. The failure to have a licence for an HMO under the Housing Act is a criminal offence but it should be remembered that the definition under the Act can be different to the licensing definition of a local authority.
For advice on Landlord and Tenant matters including the preparation of Tenancy Agreements and possession proceedings, please contact Patrick Farrington, Partner or Patrick Nelson, Associate on 01785 211411.
20 January 2011
The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances. (50587)