- What is an accidental landlord?
- Landlord insurance
- Mortgages and leaseholders
- How to rent: letting agents
- Safety and certificates
- Do you need a licence?
- Finding tenants
- What to provide in your rented property
- Financial management and utility bills
- Maintenance and repairs
- Rights of landlords and tenants
- Tax on landlord rental income
Every year, thousands of people in the UK become accidental landlords, pushed into renting out a property for the first time.
It can be a daunting experience for those who never planned to become a landlord, with a raft of rules and regulations to negotiate, not to mention tax implications, dealing with tenants, and making sure you have the right insurance cover.
In this article we look at the responsibilities, and risks, that come with being an accidental landlord.
A surprisingly large number of landlords do not become landlords by choice. Estimates vary on just how many accidental landlords there are in the UK, from 10% to 30% of all properties.
There are a number of reasons people need to rent out a property unexpectedly, including:
- moving in with a partner and having a ‘spare’ house, or being unable to sell it;
- working abroad or in a different part of the UK and renting their property while they’re away;
- inheriting a property;
- economic circumstances, such as being unable to pay the mortgage.
If you are currently living in your property, or have recently moved out, you’re likely to have a standard home insurance policy covering your building and contents.
This policy will not cover you once you start renting out your property, and you must inform your insurer of the change in circumstances and take out a new policy on the correct basis.
There are a few things to consider on the insurance front, depending on whether your property will be empty, in the course of renovation, or rented out immediately.
You need to tell your insurer if your property is unoccupied. Most insurers restrict cover for homes left empty for more than 30 days, so you will need specific unoccupied property insurance, available for between one and 12 months.
Similarly, if your property is undergoing renovations before being let to tenants, you will need home renovation insurance.
Once your property is let to a tenant, you will need a dedicated landlord insurance policy, which covers your buildings but can also include any furniture or other contents you provide. Your tenants are responsible for insuring their own contents. Landlord insurance is not a legal requirement, but buildings insurance is likely to be a requirement of your mortgage, if you have one.
Provides cover in the event of a tenant defaulting on their rent, including any legal costs you may face for evicting a tenant.
Just like with insurance, you must inform your mortgage provider that you are renting out your property.
Standard residential mortgages are not suitable for a rented property, although your existing lender may grant you permission to rent for a limited period under your existing mortgage.
Failing that, you’ll need to switch to a buy-to-let mortgage, either with your existing lender or a new one.
You can expect to pay an arrangement fee, there may be penalties for ending any existing fixed rate deal early, and your new interest rate may differ from your current rate.
Interest rates on buy-to-let mortgages are often higher than for standard mortgages, as are arrangement fees, while you may be offered a lower loan to value than on a conventional mortgage.
If you are looking to rent out a leasehold property, make sure you check the terms of your lease. Some do not permit subletting.
As an accidental landlord, you may want to consider handing over much of the management of your property to a letting agent.
Agents can do as little as finding a tenant or as much as the complete day-to-day management of your rental, including collecting the rent, organising repairs, responding to tenant queries and helping with disputes – in return for varying levels of fees.
You can choose between online letting agents or a high street agent with a physical office.
Online agents have evolved in recent years, and can offer fixed-fee tenant finding services or fully managed packages. Overall, many online agents are cheaper to use than your local High Street agent, but if you’re renting for the first time and want to be able to pop in and chat to your agent, you may prefer to pay a little more for personal service.
Whichever you choose, do your research and check online reviews before committing.
There are certain safety requirements and certifications that come with being a landlord. After all, you are now responsible for the safety of your tenants, not just yourself. These are all legal requirements. Please note, this is not an exhaustive list and legislation can change. For the most up to date guidance, please consult the relevant Government site for your country – gov.uk, mygov.scot, and nidirect.gov.uk.
Gas safety: you must have all gas appliances, pipes and flues checked annually by a Gas Safe engineer, and must provide the CP12 certificate to tenants when they move in and annually for the length of their tenancy.
Electrical safety: a full electrical safety inspection must be carried out by a qualified engineer at the start of the tenancy, and every five years thereafter. Any work required must be completed within 28 days. Any appliances supplied, like fridges or toasters, must be in a safe condition throughout the tenancy.
Energy Performance Certificate (EPC): you must provide tenants with an EPC, which measures the energy efficiency of the property, either at the viewing or before the tenancy agreement is signed. Only properties with a “pass grade” of E or better can be rented out.
Fire safety: there is no fire safety certificate, but you must fit at least one working smoke alarm per floor, fit a working carbon monoxide monitor in any occupied rooms with a solid fuel burning appliance, and ensure that any furniture provided meets the fire resistant requirements Furniture and Furnishings (Fire) (Safety) Regulations 1988.
Legionella risk assessment: despite its low risk, you must carry out a risk assessment under the Control of Substances Hazardous to Health Regulations (2002).
How to rent: the checklist for renting in England: you must provide tenants with an up-to-date copy of a document called How to rent: the checklist for renting in England. Similar documents apply in Scotland and Northern Ireland.
Fit for human habitation: your property must be “free of hazards which are so serious that the dwelling is not reasonably suitable for occupation in that condition”. Such hazards include damp, poor ventilation, problems with drainage and hot and cold water supply, and an unsafe building or layout.
Read our complete guide to landlord responsibilities for more detail.
If you are renting a property to five or more people from more than one household, some or all of whom share communal facilities, you will need a licence for a ‘large house in multiple occupation (HMO)’.
Some areas of the UK run separate licensing schemes, so it’s best to check with your local council before renting.
Before you can start advertising your property, you need to settle on a rent to charge. Check out property websites to gauge the market rate for similar properties, and don’t overcharge if you want to rent your property quickly.
To advertise on the big property portals like Rightmove or Zoopla, you will need to use either an online or high street letting agent as they don’t take adverts directly from private landlords.
Once you’ve found a tenant, there are still some things you need to do.
- Conduct a right to rent check: in England you must, by law, check that all prospective tenants over the age of 18 have the right to be in the UK before you can rent a property to them. You may be able to check a tenant’s right to rent online. There is no requirement to check a tenants’ right to rent in Scotland, Wales or Northern Ireland.
- Carry out tenant reference checks: it’s not a legal requirement, but every landlord should carry out tenant reference checks to help you minimise the risk of getting a troublesome tenant. Tenant referencing is a condition of rent guarantee insurance.
- Proof of deposit protection: if you take a deposit from your tenant, it must be placed in a government-backed tenancy deposit scheme (TDP) within 30 days, with information provided to the tenant. There are three TPD options in England and Wales: Deposit Protection Service, Tenancy Deposit Scheme, and My Deposits.
You need to decide whether you are going to rent your property furnished or unfurnished.
In the case of an accidental landlord, where you may be moving into another property or working away, this may mean a choice between paying for storage for your furniture, selling it, or leaving it in place.
There are a few things to bear in mind if you are renting a property furnished, chief among them maintenance, replacement, and disputes.
In short, the more furniture you provide, the more you are responsible for and the more there is to go wrong.
Anything that breaks will need to be repaired or replaced, at which point there can be debates with the tenant about how and why it broke. Most landlords don’t need the hassle and choose to rent unfurnished.
The one exception is likely to be white goods. Tenants may have their own sofa and bed etc, but may expect to find a kitchen fitted with washing machine, cooker and fridge.
Provide a clear inventory
Whatever you do provide in your rental property, make sure you compile a full inventory, complete with photographs.
The inventory provides a snapshot of the condition of the property and its contents at the start of the tenancy and helps to avoid disputes further down the line.
It should be agreed and signed by both the landlord and tenant.
Arrange a tenancy agreement
Always use a written tenancy agreement, signed by both parties, which sets out the terms of the rental.
Most rental agreements are Assured Shorthold Tenancies (AST), which must be for a minimum of six months, but can be for longer. At the end of the agreed period, a new term can be fixed, or the tenant will move on to a periodic tenancy.
The tenancy agreement covers everything related to the tenancy, such as the rent amount, notice periods, and who is responsible for maintenance etc.
The government provides guidance and examples, but new landlords should take advice from an expert.
Becoming a landlord is like starting up a new small business, and you should approach it in the same way. Much of the admin aspect of being a landlord can be made easier by:
- Keeping your rental income in a dedicated bank account
- Paying for maintenance from the same dedicated bank account
- Keeping a rent book to ensure you have a record of each payment
- Maintaining a contingency fund for any unexpected repairs and maintenance
Unless there is a very good reason for it, do not include utility bills in the rent and make this clear in the tenancy agreement. You have no control over the energy use of your tenants and, with energy prices unpredictable, you could end up seriously out of pocket.
Make sure that all utilities – energy, water, broadband, council tax etc – are transferred over to your tenant. Provide meter readings to the utility companies yourself at the start of the tenancy and let them know who will be responsible going forward.
You will have a legal obligation to keep the structure of the property in a good state of repair, including the drains, gutters and external pipes.
The supply of gas, electricity, water, and sanitation must also be kept in good working order.
For example, boiler repairs would be your responsibility, as would repairing a broken banister or floorboard, or sorting a damp issue.
If you have supplied white goods these are also your responsibility – assuming the tenant has not misused them.
As we’ve seen, the accidental landlord has a range of legally binding responsibilities, but you also have rights too – after all, it’s your property.
In this section, we’ll look at the rights of both landlord and tenant.
Landlord’s right to inspect
Landlords have a right to periodically inspect their property with 24 hours’ notice and at a reasonable time. Inspections are essential to ensure the tenant is looking after the property correctly and can also help to flag up possible maintenance issues. It’s worth agreeing the frequency of inspections at the start of the tenancy and be reasonable with your requests – if it’s not convenient for the tenant, agree on a better time. Some landlord insurance policies will also require regular property inspections, check the terms of your cover to see what is required of you.
Tenant’s right to live in peace
While you, as the landlord, have the right to inspect, the tenant has a right to ‘live undisturbed’ and in ‘quiet enjoyment’ of their home.
Essentially, this means that the landlord cannot simply come and go as they please. Entering without permission would amount to trespass unless they do so to deal with an emergency, such as a fire or burst pipe to prevent flooding.
Dealing with bad tenants
Fingers crossed, having completed a tenant referencing process, and by carrying out regular inspections, your tenancy will run without a hiccup.
But bad tenants do happen, and you need to be prepared for them.
Be firm but fair with tenant requests, don’t allow repeated late rent payments, and seek legal help if you have a serious problem tenant. If you have legal and rent policies, you should always advise your insurer of late payments, or any other issue, which may give rise to a claim.
Don’t be hesitant to legally evict a tenant who is causing problems. Our guide to evicting a tenant shows you how to go about it.
Just like any other income, accidental landlords are liable to pay tax on rental income.
You will need to complete an annual self-assessment declaration, with any rent you receive subject to income tax.
You can deduct certain ‘allowable expenses’ from your income to reduce your tax burden, including the costs of:
- letting agent and accountants fees;
- maintenance and repairs;
- business costs, like running an office, stationery etc.
For more detail on the tax implications, read our extensive landlord tax guide, including tips of being tax efficient.
If you’re about to enter the world of the accidental landlord, it’s also worth downloading our landlord checklist, a step-by-step guide to becoming a landlord.