Let and manage yourself
- What do you need to know about letting regulations?
- How to ensure you stay legal
- Choosing an agent _________________________________________________________________________________________________________
Handling the letting and management of your property yourself means you do not have an agent deducting money from the rental income every month. However, does it really represent a saving for you?
Your time is valuable and it may not always be possible for you to spend time organising property adverts, carrying out viewings and checks, completing paperwork and handling all the various maintenance issues and tenant problems that will need to be dealt with periodically.
Particularly if you are new to letting a property whether it is your own home or an investment property, it may be better to pay a qualified letting agent to handle the workload, especially as their fees are tax deductible.
The hassle element is certainly one reason why so many landlords engage letting agents, but there is a more important benefit, and that is to do with legal compliance of letting a property.
What do you need to know about letting regulations?
Firstly, there is the complexity of referencing tenants and ensuring you have all the correct paperwork. You must make sure they are legally able to live in the UK and that they can afford the rent.
Your buy-to-let mortgage terms and conditions may require you to reference the tenant and you may need to ask for a guarantor.
This can be a complex process so you need to know what paperwork needs to be completed and how to carry out an effective credit check. In addition, the deposit must be protected in a government-licensed scheme and the tenant issued with paperwork relating to that scheme.
The tenant may offer to pay six or twelve months’ rent up front, which might sound attractive, but this could be a warning sign that they intend to carry out illegal activity. Some criminals target amateur landlords for example to use their property to grow cannabis and knowledge of how to spot the signs before they move in and ruin your property or even when they have begun is definitely a skill all landlords and letting agents require.
There are more than 100 rules and regulations that you, as a landlord, must abide by in order to let your property legally. Existing rules are often amended and new ones are being added all the time and you must be sure that you can keep on top of them.
You need to be aware of proposed changes currently out for consultation, anticipate how plans could affect your property investment business and take any necessary steps required to comply with new legislation – at the right time and in the right way.
Changes can take months or even years to become law and there may be several policy amendments along the way, so it isn’t always easy to keep up to date, which can be time consuming too.
For example, in 2015 there are plans to introduce legislation making it illegal to carry out ‘retaliatory evictions’.
This is when a landlord evicts a tenant for complaining about the standard of the property, whether that is repairs or maintenance that they have not carried out.
If those changes come into force and a tenant stops paying their rent because you haven’t carried out repairs that they have requested, you will not be able to issue them with a Section 21 Notice without attending to those repairs.
If you are not aware of the details of new legislation such as this, you could fall foul of the law and incur significant legal costs to rectify the situation, in addition to the rent that you may not receive.
To complicate things further, many regulations, especially those relating to Health & Safety and Houses in Multiple Occupation (HMOs), vary from one local council area to another and are interpreted differently in different areas – even within the same region.
England and Wales used to have the same regulations but Wales is now moving over to its own mandatory registration and licensing legislation. Scotland letting legislation is completely different as is Northern Ireland.
Over and above legals relating directly to letting a property, other laws landlords and letting agents need to keep up to date with are consumer rights, planning laws and building regulations.
How to ensure you stay legal
If you do choose to let and manage yourself, as an absolute minimum you should join the Residential Landlords Association (RLA) or National Landlords Association (NLA) and/or your local authority landlord accreditation scheme. This should ensure you are informed about proposed changes when they are announced and then kept up-to-date with the introduction of new laws. If you are letting in London, you should also apply to join the London Rental Standard, which requires that you show yourself to be a fit and proper landlord and that your properties meet a certain standard.
Doing this will give you the ‘headlines’, but it is still up to you to familiarise yourself with the details, ensure you understand what applies to you and are able to implement changes.
Choosing an agent
As it currently stands in England, anyone can set themselves up as a letting agent, even if they need to become a member of a property redress scheme, so it is important to choose one that is self-regulated.
This means they are a member of the Association of Residential Letting Agents (ARLA), the National Approved Letting Scheme (NALS) or the Royal Institution of Chartered Surveyors (RICS).
Although, by law, every agent must now belong to a redress scheme, in case their clients have any grievances or disputes. Members of these organisations have additionally agreed to abide by a code of conduct, operate to a certain standard, have Client Money Protection insurance to protect your rental income and are likely to hold industry qualifications.
In terms of fees, all should be transparent and advertised upfront on their website or in writing.
Be aware that those charging very low commission rates may be overcharging for certification and other management costs. On average, annual fees are likely to be around £2,000 a year in London and around £1,000 outside the capital and remember that these fees are tax deductible so, as long as the agent is providing a good service, engaging them should represent good value for money.
Also check how much they charge tenants - which should be under £300 in London and under £200 outside London - to make sure they are being fair to your customers.
Although managing yourself may initially seem a good way to save money, consider what industry knowledge you have and your ability to keep up with your legal obligations. Knowing the amount of time you have available is important – especially if you have several properties.
Agents who are members of industry bodies are professionals, dealing with this business on a daily basis, so it is wise to consider utilising their expertise, especially if you are letting a property for the first time.