There are a number of ongoing costs to consider when letting a property, including:
Letting agent fees, if applicable
Income tax and capital gains tax (CGT)
Unpaid rent and void periods
Some of these costs are tax deductible including letting agent fees and landlord insurance.
Managing the property yourself
Being a landlord requires an investment of time as well as finance. You will also need to be able to maintain a business relationship with the tenant. For example, if rent is late, you may need to assert your legal rights. If you do not have the time to manage your rental property, appointing a letting agent may be the suitable solution.
Appointing a letting or managing agent
Many landlords choose to appoint a letting or managing agent. There are different levels of service available. These are:
Let only - finding tenants, drawing up the tenancy agreement, handling the inventory
Full property management – all of the above, plus and day to day management of the property
Legislation and compliance
There are certain compliance and legislative responsibilities that landlords must adhere to. These include:
Consent to let must be obtained for every rental property
Tenant deposits must be placed in a government backed Tenancy Deposit Protection Scheme (TDS)
With every new tenant, an Energy Performance Certificate (EPC) is required
Gas safety regulations must be met
The electrical system and appliances must be safe
Fire safety regulations must be met
There are various documents and areas of ongoing administration that are required in order to let and manage a property. The extent to which you are involved will depend on whether you are managing the property yourself or appointing an agent to manage the property for you. Key areas to consider include:
Letting agent contracts
Tenancy agreement and Section 21 notice (notice to quit)
Inventory (at the beginning and end of a tenancy)
Tenancy Deposit Protection Scheme and Section 213 notice
Compliance – gas and fire safety, EPC
Repairs and maintenance
Your tenant should bring any issues that arise to your attention (or to your agent if one has been appointed). If you manage the property yourself, you will need to find a suitable tradesperson to make any necessary repairs. If a letting agent is managing the property, they will use one of their approved contactors to provide a quote for the work, which you will then need to agree to before the work is carried out.
Once your property is let you will have effectively given possession to the tenant. However, you will still need to protect your asset and ensure there are no issues. You may therefore wish to arrange property inspections at intervals throughout the tenancy. (these will usually be carried out by your managing agents if you have one)
It is important to remember that unless it is an emergency, if you want to access the property you must provide your tenant with at least 24 hours’ written notice. Many landlords arrange for their property to be inspected quarterly.
It is your tenant’s responsibility to ensure that their rent is paid every month of the tenancy. If you manage the property yourself, you will need to agree how you receive the rent and at what frequency. If you appoint a letting agent, they will be able to arrange this for you and also chase any late payments.
A letting agent will have a good knowledge of local market conditions and will be able to advise on negotiating rent increases. If you decide to manage your rental property yourself, you will need to keep up to date with local market and ensure that you are increasing rent in line with the terms of the contract and relevant legislation.
Private Rented Property Licensing
Various London Local Authorities have introduced Compulsory Landlord Licensing. This means that as a Landlord you are not legally able to rent your home unless you hold a Licence or have applied for one. A license is required for each property and applications can be made on line with the relevant Boroughs. We can help you or make the application for you if required.