Landlord legislation can be a bit of a minefield and keeping on top of your paperwork can feel like an uphill task – but it’s crucially important that you remain vigilant and ensure you meet your responsibilities and legal obligations (in fact they were our no.1 and no.2 in our top ten tips for landlords!).
We asked a panel of top landlord associations what the most important documents are for landlords…Here are the top 5!
1. Assured Shorthold Tenancy Agreement (AST)
No real surprise that the most important document is the AST. It’s the contract between you and your tenant(s) and sets out the details you both agree to abide by.
An AST can be adapted to suit any specific requirements you see fit – but it must remain balanced and fair to both parties. You may want the rights to enter your home or repossess as you see fit – but a court of law would take a dim view of a contract which was clearly one-sided.
Unsurprisingly most landlords will just get a copy AST from someone they know, or download one from an online resource. In essence there is nothing too much wrong with this approach – but just bear in mind that you are responsible for checking the contents of the contract.
Most landlord associations will provide sample AST agreements as part of their membership. The UK government also provides a model agreement – although it is worth noting that this agreement is for a two-year arrangement.
However you decide to proceed with your AST, it’s vital that you get the contract signed by both parties and copies made available to you and your tenant BEFORE you let the tenant move in.
2. Gas & Electrical Safety Certificates
It would be extraordinary to think that there is anyone left in the UK who doesn’t understand the risks and implications of not complying with relevant gas and electrical safety checks. But one quick search on the internet and you’ll find numerous accounts of rogue landlords who didn’t comply with basic safety regulations and have faced prison time.
Get this wrong and people can die. It really is as serious as that.
The document itself is not the important thing here, it’s what the paperwork represents. It signifies that you have taken your responsibilities seriously and ensured the gas and electrics within your buy-to-let property are working safely, as intended. That they have been maintained and checked periodically and approved for use.
No amount of checks and servicing will prevent every accident – but it’s vital you can prove you’ve taken your landlord responsibilities seriously to avoid potential criminal action.
3. Property Inventory
A good property inventory is designed to take the guesswork out of any disputes between landlord and tenant when it comes to the condition of the property and any fixtures and fittings supplied by the landlord.
Get this wrong and it’s almost inevitable someone will feel aggrieved at the end of the tenancy. Either the tenant will be upset if a landlord is withholding some of the deposit for damage they feel is normal wear and tear, or the landlord will be upset about some damage caused by a tenant who is claiming it was there when they arrived.
Completing the inventory should be a two-way process with a high level of open communication; walking and talking through the building and agreeing as you go. Many landlords opt for an independent inventory service. This removes and emotion from the situation and provides a balanced approach, less likely to cause distress. But whichever route you decide to take a solid inventory is a must.
We’ve produced an essential guide to your property inventory list which you can find here.
4. Good landlord insurance
We know the cynical ones amongst you will assume we dropped this one in – but it actually featured regularly in our feedback. Quality landlords insurance (maybe they were all being nice to us!!).
We see insurance as the third step in any appropriate risk management process. You MUST complete steps 1 and 2 first. The steps are:
The identification of risk
Being able to step back and recognise the potential risk factors is a skill in itself. We can all spot the rotten fence around a big hole in the ground, but sometimes the risks aren’t obvious and you will need some help in identifying them.
That’s where other landlords, landlord associations or insurance brokers can help. Being able to ask others is important; it’s not all about fire, flood and storm damage anymore. Understanding the risks, both physical and financial are crucial to comprehend your potential financial liability.
The mitigation of risk
Step 2 is all about doing something about step 1. If you’ve spotted the rotten fence and you ignore it and something happens, you’re liable. If you fix it, and document that fact, you’ve mitigated the risk and reduced or removed your exposure.
Mitigation of risk is about doing everything you can to reduce the likelihood of something happening or the severity of the outcome if it does.
The insurance of risk
Once you’ve identified the risk and mitigated the risk, as far as you can, then what’s left is what you insure against. With a buy-to-let property that’s the building, any contents, home emergency, legal expenses, rent guarantee and other landlord liabilities. If you have an HMO or a block of flats you will need a different type of insurance policy.
You can also cover a wide range of other risks such as unoccupied properties, excess protection or serviced accommodation, Airbnb etc.
But the options don’t stop there. You can reduce or increase your exposure based on the quality of your insurance. Some policies will cover a wide-range of risks such as loss of keys, unoccupancy periods, loss of rent, malicious damage, fixtures and fittings while others will limit the cover.
Similarly you can reduce your premium by taking a higher excess – where you, effectively, cover more of the financial risk yourself.
Whatever you decide a good quality landlord insurance policy will limit your exposure to costs that otherwise may be too expensive to bear
5. Your communications
Our final ‘document every landlord needs’ is actually not one document – but, all of them. Well, all of the communications you have with your tenants, agents, tradesmen etc.
Get things in writing first. We all love the concept of “I’m a man of my word.” But it won’t help you pay the mortgage when a tenant defaults on their rent. So, get it in writing.
Get into a good habit of ‘filing’ your e-mails. A folder for each property is usually a good idea, but however you decide to do it, keep all your communications. You never know when you’ll need them.
We’re sure you’ve got a stack of other recommendations on the best documents for a landlord but hopefully this is a good starting point.
We’ve produced a checklist you can download which will help you keep on top of all your obligations and documentation.