Top Legal Tips for Landlords
Are you thinking about becoming a residential landlord? If so, you hopefully understand the importance of written tenancy agreements already. We've put together some other top tips to help you get the legal side of things right.
1. Types of tenancy agreements
We can't over-stress the importance of having a good, written tenancy agreement in place. It protects the interest of both you (the landlord) and your tenants and provide the basis for a good landlord/tenant relationship. Of course, you need to have the right agreement in place. As a private landlord there are 2 main types of tenancies to consider: an 'assured shorthold tenancy' ('private residential tenancy' in Scotland) and a 'licence to occupy'.
Assured shorthold tenancy agreements
An assured shorthold tenancy is the normal kind of tenancy formed when you let a property you own to 1 or more tenants as a private residence. It doesn't matter if you rent the property out as a whole or as individual rooms: if you don't live in the property then you almost certainly will be forming an assured shorthold tenancy agreement. This form of tenancy is highly regulated by law and you need to follow the correct procedures in order to meet your legal obligations. Your tenant has substantial legal protection and a right to reside in the property. In general, you can't end such tenancy agreements without giving considerable notice based on a lawful reason.
Licence to occupy
If, on the other hands, you're simply letting out a room in your home i.e. taking in a lodger then a different kind of tenancy is formed: a licence to occupy. A licence to occupy gives your lodger (tenant) the right to occupy a room in your house and share some of the other facilities of the house with you.
This type of licence to occupy is often known as a Lodger Agreement. Such a tenancy agreement does not grant the same wide-ranging rights to the tenant and it is much easier to bring the agreement to an end.
Even though taking in a lodger is a lot less complicated then setting up an assured shorthold tenancy, it is still wise to have a legally sound, written agreement in place.
2. Property Inventory
Before your tenants move in you should go around the property and compile a complete and detailed inventory of all the furniture and fittings in each room. You should also record the decorative state of each room including any existing defects or damage. All of this needs to be documented in an inventory that both you and your tenant(s) review, agree and sign before the tenancy begins.
A good and accurate inventory can be immensely useful should any disputes arise about the state of the property when the tenant leaves.
Photographs can be useful but you need to be careful to ensure that any photographic evidence is accepted by both parties. A camera time/date stamp on a photo may not be adequate 'proof' should a dispute arise. If you are using photos as part of your property inventory then it would be sensible for individual photos to be dated and signed by both you and the tenant. Digital photos that are printed as part of an inventory should also be clearly authenticated.
3. Deposit Schemes
If you take a deposit for a property let on a short assured tenancy then you must deposit the money in a government approved tenancy deposit scheme (TDS). You cannot keep the money in your own bank account. Any deposit you take must be lodged with one of the approved TDS within 30 days.
Landlords who don't comply with the requirement to use a TDS can be fined an amount up to three times the value of the deposit.
As well as keeping the deposit money in a TDS, you are also required to give your tenant information about the TDS and their rights.
4. Right to Rent Checks
If you are a landlord in England or Wales then you have a legal obligation to carry out various immigration checks to ensure your tenants have the right to rent. This applies whether taking in a lodger or renting out a property on short assured tenancy agreements. It does not apply to holiday accommodation.
These checks must be carried out and documented before any tenancy agreement is made. If you don't carry out the checks, don't do them correctly, or rent your property to someone without the right to rent then you can face some pretty hefty penalties including imprisonment.
Quite often you will be able to meet your legal obligations as part of the normal identity checks you will perform e.g. your tenant produces a valid UK or EEA passport as identity. In other cases, you may need to consult the Right to Rent Code of Practice to figure out what documents you need to see to confirm your tenant's right to rent. The right to rent checks also have to be carried out without causing 'unlawful discrimination'.
Landlords in Scotland do not have to carry out these checks (yet).
5. Ending tenancy agreements
Ending any tenancy by mutual agreement is usually straightforward. A tenant will often not have the right to terminate a tenancy during any fixed period, but thereafter will generally be able to terminate giving (typically) 4 weeks' notice. Difficulties can arise, however, when you (the landlord) seek to end a tenancy when the tenant would prefer otherwise!
Evicting a Lodger
If your lodger shares a kitchen, bathroom or living room with you then they are an 'excluded occupier'. If they don't share any facilities with you then they are an occupier with 'basic protection'.
You only need to give 'reasonable' notice if your lodger is an excluded occupier. You don't have to give written notice. The length of notice you need to give is usually the same as their rental period e.g. if they pay rent weekly then one weeks' notice. If your lodger doesn't leave at the end of the notice period then you're allowed to change the locks (and must return any belongings).
Evicting a lodger with basic protection is a bit more formal. You need to give them a written 'notice to quit', usually with 4 weeks' notice. If they don't leave they you need to go to court to get them evicted.
Evicting a Tenant
Evicting tenants, for whatever reason, can be a long and frustrating process. It is highly regulated and the correct forms and processes must be followed. The main legal forms for landlords (in England and Wales) are the Section 8 Notice and the Section 21 Notice.
A Section 8 Notice is used to start the process of regaining possession when the tenant has breached one or more terms of the tenancy agreement. There are a fixed number of grounds (legal reasons) that you can use to justify eviction using a Section 8 Notice. Some of these grounds are 'mandatory' (i.e. the court has to grant the landlord possession) while others are 'discretionary'.
A Section 21 Notice is for use when a landlord wants to regain possession of his property without the tenant having breached the tenancy agreement. The landlord doesn't have to give a reason for wanting to evict the tenant. The format of this notice is set out in law and is referred to as Form 6A. Certain notice periods have to be observed. A key thing to note is that a Section 21 notice will be invalid if the landlord has not given the tenant the following documents (which, really, should be provided at the beginning of the tenancy):
- Energy Performance Certificate
- Gas Safety Certificate
- a copy of the official 'How to Rent ...' checklist
The process for landlords in Scotland is different. A brief overview is given in our Fact Sheet on PRTs.