11 Jul A Conveyancer’s 9 Top Tips for Landlords
Many of our clients buy properties as an investment with the intention of renting them out. Often this can be very successful and profitable, particularly in a rising market, but there are still things you need to be aware of to make sure you maximise your investment.
Here is a list of our top tips for landlords from a Conveyancer‘s point of view.
- If you are buying a flat or any other leasehold property, make sure the lease allows subletting and if so, on what terms. If the lease says you can’t sublet, your landlord can take action against you if you breach your lease. Even if you can let the property out, make sure you comply carefully with any terms such as getting a licence from your landlord.
- If you can let your property, make sure you have a proper tenancy agreement between you and your tenant. If it’s residential property you want an Assured Shorthold Tenancy. If it’s commercial property, you want a sublease or a licence. You are at risk if you let someone in to your property without a proper signed agreement. In particular, it could be very difficult to recover rent and/or get them to move out if you want the property back. You also want to take a deposit in case they don’t pay their rent or do any damage – this must be covered by a proper agreement or there could be significant consequences. There are more details on this below.
- If you are buying a property that already has a tenant in occupation, make sure you check the tenancy agreement carefully, or even better, get us to do it for you. There are all kinds of things you might need to know but which might not be obvious. For example, if a tenant of residential property has been in occupation for a long time under an old style tenancy agreement, it may be practically impossible to get them to leave and the rent might be protected so there may be a limit to how much they have to pay.
- If you are granting an Assured Shorthold Tenancy, you would normally take a deposit (eg between one and three months’ rent depending on how good their credit rating is). This money MUST be kept in the Deposit Protection Scheme. If you keep the money yourself or give it to anyone else, and your tenant finds out, they can take you to court and claim compensation of up to three times the amount of the deposit plus their costs.
- If you are letting commercial property and you are taking a deposit, it should be protected by a rent deposit deed. This will cover the terms on which you hold the money, the circumstances in which you can use the money during the tenancy agreement, when where and how you have to return it and whether you have to pay any interest on the amounts you are holding.
- Whether it’s residential or commercial property, take an inventory of the property listing it’s contents and condition, before your tenant takes occupation. This is good advice even if you are letting the property empty, as your record of the condition of the property will help you if your tenant damages the property or has made any changes that you haven’t agreed to. If there are going to be any furnishing left in the property, then these should also be recorded on the inventory so that if anything is missing or broken you can claim for it against the deposit.
- If you want your tenant to move out you may need to take legal advice before you do anything because if you get it wrong, it can be very expensive. You can only have a tenant leave if either the tenancy has come to an end or they are in breach of their lease such as they have stopped paying their rent. Even some breaches might not be enough to give you grounds for removing them, so here are some key pieces of information for you to take into account.
- If you have a tenant of residential property you MUST have a court order to evict them and if the tenant still won’t leave you MUST get a proper bailiff to evict them. We know it might be unfair, especially if the tenant hasn’t been paying their rent or has damaged your property but it can end up costing you more if you do it wrong and in an extreme case it could involve the police. Don’t risk it! Go through the process properly.
- With commercial property you may not need a court order, but it’s still important to do it correctly and at the right time so you should still take legal advice. In brief terms there are two types of lease. Protected tenancies and unprotected tenancies. When an unprotected tenancy comes to an end, you can force your tenant to leave, and you can change the locks if they refuse to move out, but you should still check with a solicitor to make sure you are doing it right. If it’s a protected tenancy, you will have to give them the offer of a new lease on commercial terms (ie you can’t just double the rent to get rid of them). There are a few situations when you might be able to refuse to grant them a new lease (such as if you need the premises for yourself) but you should check that you fall properly within the criteria. In either type of lease, if your tenant stops paying the rent, you may be able to just change the locks, but it may depend on the wording of your lease.
- If the tenant moves out before the end of the tenancy agreement, whether residential or commercial, you may have a claim for the loss of rent between when they left and when they should have left. However, it is advisable to try and relet the property as soon as possible as you may have an obligation to mitigate your losses.
- The aftermath. When tenants move out there can often be damage to the property. No matter how careful they have been, there are likely to be marks on the walls and scuffs on the doors, which is why we’ve suggested above that you take an inventory. If it’s residential property, you may be entitled to the costs of the repairs. This would come out of the deposit. If it’s commercial property, they must put the property back in the condition that it was in at the outset. This can include taking out fittings that the tenant has installed, even if those fittings are in good condition and arguably add to the value of the property.
Don’t let all of these warnings put you off. Property as an investment can be very successful, but it’s a good idea to know what the risks are, and if you need any more advice before you make a decision, we’d be happy to help.
Disclaimer – our articles are designed to give you guidance and information. There is no substitute for proper direct advice, particularly as everyone’s circumstances are different. If anything in this article may affect you, please contact us for advice that is specific to your circumstances.