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Landlords Guide/ Legal Requirements

Being a landlord is a big responsibility. By fulfilling your role as landlord effectively and efficiently, you'll give yourself the best possible chance of keeping your tenants happy and reducing the likelihood of the property being empty for long periods at a time.

There are a number of crucial documents you need to have organised before you let your property. The most important is the tenancy agreement as this is the legally binding contract between you and the tenants that will form the conditions of the let.

Tenancy agreement:

The tenancy agreement is a contract between you and the tenants. It specifies certain rights to both you and the tenants, such as the tenants' right to live in the property for the agreed term and your right to receive rent for letting the property.

Assured Shorthold Tenancy Agreement (AST)

Since the late 90's, the AST has been the most common form of tenancy agreement and sets out the obligations of both tenant and landlord. The most important aspect of this agreement is that the landlord has the right to repossess the property at the end of the agreed term. Despite its name, the agreement does not have to be short and can continue as long as both parties are happy for it to do so. There is no minimum term specified, either, although the tenant has the right to remain in the property for at least six months.

If the fixed term is for three or more years, however, a deed must be drawn up by a solicitor.

There are specific requirements linked to an AST that include:

  • The tenant(s) must be an individual (i.e. not a company)
  • The property must be the main home of the occupant
  • The property must be let as separate accommodation.

The landlord is normally obliged to provide the tenant with two months' notice if they want to terminate the agreement.

The agreement will most likely contain the following information:

  • Your name, the tenant's name, the address of the property which is being let
  • The date when the tenancy will commence
  • The duration of the tenancy from the start to the agreed finish of the occupation
  • The amount of rent payable, how often it should be paid, when it should be paid and when it can be legally increased.
  • The agreement should also state what other payments are expected, including Council Tax, utilities, service charges, etc.
  • What services as landlord you will provide, such as maintenance of common areas.
  • The notice period which you and your tenants need to give each other if the tenancy is to be terminated

The Landlord Inventory

This is one of the most important documents in the letting process. It details the contents of the property you will be leaving for the tenants to use and the condition they are in on the day the tenant moves in. It should also include any existing cosmetic blemishes, such as peeling wallpaper or flaking paint. You should be extremely thorough and give it your full attention.

On the day the tenant moves in, both the tenant and agent (or you, if you're letting privately) will be expected to agree the exact condition of the contents of the property. All parties will initial each page and sign it. Make sure every party has a copy of the signed document. This should avoid any unnecessary disputes about any damage that may be caused by the tenant during the tenancy.

When should the property inventory be checked again?

It is recommended that the landlord/agent schedule regular three-monthly inventory checks at the property in order to assess any damage that may have occurred. You must provide the tenant with sufficient notification of your intention to visit the property for this purpose (24 hours should be sufficient). It is most common, however, for a final inventory check to be scheduled on the day the tenant moves out.

Deposits:

It is common practice to request a deposit from the tenant prior to them moving in to protect you from damage caused by the tenant beyond normal wear and tear, or in case the tenant leaves without paying the rent. Some agents will handle this on your behalf. It is usually equivalent to one month's rent and is taken along with the first month's rent in advance.

The tenant should be provided with a receipt and a clear understanding of what the deposit is for and the conditions for its full return. You must return the money to the tenant within a reasonable period of time after the last day of the agreement if there is no damage to the property or its contents beyond normal wear and tear and if the rent payments are up to date.

If you do decide to withhold some or all of the deposit, you must notify the tenant as soon as possible in writing, stating how much money you are retaining and why. If possible, provide receipts of estimates or costs incurred to repair damage to the property.

The Tenancy Deposit Scheme

From 6 April 2007, new legislation was introduced to help tenants and landlords avoid and resolve disputes relating to the return and use of a tenant's deposit. Under the legislation, if landlords fail to protect the tenant's deposit, they may have to pay the tenant three times the value of the deposit.

Why are deposits protected?

The Deposit Protection Scheme is designed to make sure:

  • Tenants get all or some of their deposit back when they are entitled to it
  • Any disputes involving landlords and tenants over the return of the deposit are easier to resolve.
  • Tenants are actively encouraged to look after the property they are renting.

Whenever a deposit is taken from a tenant as part of an Assured Shorthold Tenancy, either by a landlord directly or a managing agent, it must be protected in one of the government-initiated schemes. There are two types of scheme, described as 'custodial schemes' and 'insurance-based schemes'.

Custodial scheme

The deposit is held by the scheme for the duration of the agreement and repaid at the end of the tenancy. It is also free to use. Within 14 days of being paid the deposit, the landlord or agent must provide details to the tenant of how the deposit is protected, including:

  • The contact details of the chosen tenancy deposit scheme.
  • The landlord or managing agent details.
  • How they can apply for the return of the deposit.
  • The detail concerning the purpose of the deposit.
  • What to do if a dispute arises regarding the return of the deposit.

At the end of the tenancy, if an agreement is reached between both parties, the deposit will be divided up (if required) and returned accordingly. If a dispute arises, the scheme will hold on to the money until the Courts or the dispute resolution service solves the disagreement.

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