Landlord’s Guide to Renting out a Property

We have put together a guide for landlords with the help of GOV.UK, containing all the essential information a landlord needs to know about renting out a property. The article covers the basics of what constitutes an Assured Shorthold Tenancy (AST), how to write a tenancy agreement (as well as a link to our tenancy agreement template), and how to handle disputes, ending a tenancy, and some advice on financial planning.

Tenancy Types

A tenancy can be:

• Fixed-term, which runs for a fixed period of time
• Periodic, which continuously runs month-by-month or week-by-week

The most common type of tenancy is an assured shorthold tenancy (AST), and almost all new tenancies between a private landlord and tenant are automatically an AST. The following must apply for a tenancy to be an AST:

• The landlord is private (i.e. not council or housing association)
• The tenancy began after 14th January 1989
• The premises will be used as the tenant’s main dwelling
• The landlord does not live with the tenant

A tenancy cannot be an AST if any of the following apply:

• Rent is less than £250, or more than £100,000, per year (the threshold is slightly different for London)
• The tenant is a business or the premises is licensed
• The tenancy is a short term holiday let

Other types of tenancies, which are less common and which we will not deal with in this article, are:

• Excluded tenancies or licenses, for example to be used with lodgers living in your home
• Assured tenancies, for tenancies starting after 14th January 1989 but before 28th February 1997
• Regulated tenancies, for tenancies starting before 15th January 1989

Tenancy Agreements

An assured shorthold tenancy is protected in law, and there are a number of things that should be covered in the tenancy agreement. These are:

• Full names of tenant(s) and landlord(s)
• Address and clear identification of the premises
• Start and end (or duration) of the tenancy
• The amount of rent and how it should be paid
• Which bills are the responsibility of the tenant(s)
• The amount of deposit and how it will be protected
• Conditions of deductions to the deposit
• Tenant and landlord obligations

A tenancy agreement can also include a range of other things. Our template tenancy agreement which is available for just £5.99 includes all of the above plus many additional (optional) clauses to protect the landlord.

It is not possible to change a tenancy agreement without written and signed consent of both parties. However, a landlord is obligated to modify a tenancy agreement in favour of a tenant if for whatever reason it discriminates on the grounds of:

• Sexual orientation
• Gender
• Religion
• Pregnancy
• Disability

Responsibilities and Obligations

Landlords need to ensure that the premises are compliant with a range of legal and regulatory requirements. In summary these are:

• Protecting the deposit in a government-approved deposit protection scheme
• Obtaining an Energy Performance Certificate
• Ensuring that fire safety regulations are met
• Safely installing and maintaining all gas and electrical equipment
• Keeping the premises safe and protected from health hazards

Landlords are responsible for keeping the premises in good condition, which normally includes:

• Keeping the structure of the building in good repair
• Maintaining any common areas used by the tenant
• Ensuring the sanitary provisions are in good working order (e.g. wash basins, toilets and baths)
• Maintaining the heating and hot water system
• Repairing any damage caused by the landlord or their agent during previous repairs

The landlord has the right to enter the premises for inspection or maintenance provided that they give the tenant at least 24 hours’ notice, except if they need to act upon an emergency.

Disputes

If a landlord does not fulfill their obligations to maintain the premises (as above), the tenant can in some cases carry out the work themselves and deduct the cost from the rent, or the tenant can take the landlord to a small claims court for any repairs costing less than £5,000.

If a tenant does not fulfill their obligations, the landlord can in some cases apply for repossession via the courts (an online application can be made here), or take the tenant to a small claims court for any amounts owing below £5,000. The courts also provide a free mediation service for those who are keen to resolve an issue before it reaches court (recommended).

Whatever the circumstances, once a landlord has lawfully gained the right to repossess the premises, a tenant cannot be removed forcibly without an eviction order from the court. Landlords should be careful not to prejudice their legal rights by harassing the tenant or attempting to evict them illegally (e.g. by simply changing the locks).

Ending a Tenancy Amicably

It is always possible for the landlord to repossess the premises at the end of a fixed term, or after the first 6 months of the tenancy if the tenancy agreement contains a break clause, provided that the following conditions apply:

• The landlord has provided the tenant at least 2 months’ written notice stating the date that the tenant must leave
• The tenant’s deposit is correctly protected in a government-approved deposit protection scheme

A tenant can leave at the end of a fixed term, or after the first 6 months of the tenancy if the tenancy agreement contains a break clause, as long as they provide written notice to the landlord in accordance with the notice period stated in the tenancy agreement (which cannot be more than 2 months).

In the absence of a break clause, if the tenant unlawfully breaks the tenancy then they are liable to pay the full rent for the remainder of the fixed term stated in the tenancy agreement. However, it is recommend that if the tenant needs to leave early the landlord agrees to break the tenancy early provided that the tenant covers the cost of finding a new tenant plus any other reasonable out of pocket expenses.

Finance

Landlords are required to notify HMRC that they are renting out a premises, and tax needs to be paid on all net income above £2,500. It is possible to deduct allowable expenses from a landlord’s gross income, which may include:

• Professional or agents fees
• Insurance
• Mortgage interest (not repayments)
• Maintenance and repairs (excluding improvements)
• Ground rent and service charges
• Utility bills (if not paid by the tenant)
• Other direct costs for example stationery and telephone

The terms and conditions of most mortgages state that landlords are required to seek permission from the lender if they want to rent out their premises. If a mortgage provider discovers that the premises have been rented out without their permission, often they have the right to demand early repayment of the mortgage.