Resource

The ultimate landlords' guide to compliance & regulation

01.

An introduction to your responsibilities as a landlord

According to the latest data revealed by the Treasury, the total number of landlords in the UK is over 2.5 million.

According to the latest data revealed by the Treasury, the total number of landlords in the UK is over 2.5 million. Despite recent changes to the buy to let sector (including tougher mortgage and tax rules), it hasn’t deterred people from becoming a landlord. And it’s no surprise, with the average gross rental income (before tax and other deductions) being £15,000.

In fact, the private rented sector is now the second largest tenure in England, and makes up a fifth of all households. Almost half of landlords only own one property, while 48% of private rented sector tenancies are dominated by the 17% of landlords with five or more properties.

> Box percentages

With the inevitable responsibility that comes with managing rental properties, what are the main reasons for becoming a landlord?

46% of landlords became a landlord because they preferred property to other investments
44% did so to contribute to their pension
34% said they wanted to supplement earnings or income
7% did so to provide a home for a relative, child or friend
6% inherited or were given their first rental property

However, not all started out with the same intentions:

4% became a landlord to let property as a full-time business
53% of landlords bought their first rental property with the intention of renting it out
32% did so to live in themselves

In recent years, the government has been trying to make improvements to ensure the housing market works for everyone. As part of these efforts, there have been a number of policy changes affecting private landlords since 2010. These include:

Buy to let

Tax changes for Buy to Let landlords

(e.g. landlords can no longer deduct mortgage interest payments from taxable income, or get wear and tear allowance on furnished properties)

Stamp Duty

Changes to the Stamp Duty Land Tax

Mortgages

Tightening lending criteria on Buy to Let mortgages

Rent Sector

Growing role of the Build to Rent sector

Source: English Private Landlord Survey 2018

02.

The latest landlord legislation

In this guide, we’ll explore the latest legal obligations for properties rented under assured shorthold tenancies (AST).

Tenancy agreement

Your obligations and the penalties for non-compliance

ASTs are the most common form of tenancy. In fact, by default, tenancies will be AST. But whether you’re new to letting or have been a landlord for decades, it’s worth having a reminder of what is – and what isn’t – an AST. According to GOV.uk:

A tenancy can be an AST if all of the following apply: A tenancy cannot be an AST if:
You’re a private landlord or housing association It began or was agreed before 15 January 1989
The tenancy started on or after 15 January 1989 The rent is more than £100,000 a year
The property is your tenants’ main accommodation The rent is less than £250 a year (less than £1,000 in London)
You do not live in the property It’s a business tenancy or tenancy of licensed premises
It’s a holiday let
The landlord is a local council

Landlords should be aware of the number of criteria which have to be met – not only at the start of any tenancy, but throughout – to make sure it complies with UK law.

As private renting continues to become the norm in the UK, increased government oversight has put the pressure on landlords, who are currently lagging behind when it comes to complying with some of the key legal requirements. With an additional 1.8 million households estimated to become private renters by 2025, it’s time to get fully informed of all the relevant regulations.

Projections for UK housing tenure, share of households

Line graph showing projections for UK housing tenure, share of households

Projections for UK housing tenure, share of households

Bar chart showing projections for UK housing tenure, share of households

Obtaining consent to let a property

If you secured funds for your property with a residential mortgage, you’ll need to get a consent to let agreement before renting that house. It gives you permission to let your house without having to remortgage to a buy to let arrangement.

If you own your property as a leasehold, before you let it out, you must check the freeholder agreement. You may have to get consent from the freeholder, provide them with all AST contracts and potentially pay a fee – it all depends on the wording of your lease. You might not be allowed at all, or there could be different clauses affecting the way you can rent your property out (e.g. not to students).

For all other rented properties, it used to be that licenses were only a problem for House of Multiple Occupation (HMOs). But now, in order to let your property under AST legally, you’ll need to check whether its in an area covered by the Selective Landlord Licensing Scheme. If it is, it’s a legal requirement for landlords to obtain a license and pay the fee set by your borough. You will require a license for each property.

It can be a frustrating extra cost for landlords, especially as new research shows that the most expensive landlord licence costs 21 times more than the cheapest. The cost of a new license from local authorities ranged from just £55 to £1,150.

If you fail to find out whether your area is covered by a scheme, you could be charged. As one example, Gateshead council are quoted as saying: “If the landlord of a property in a selective licensing area doesn’t have a licence, he/she commits an offence that may be punishable by a fine of up to £20,000.”

Freehold agreement
AST Contracts
Selective Landlord Licensing Scheme

Checking tenants’ right to rent

Since February 2016, it has been the landlord’s responsibility to check any prospective tenants have the legal right to rent property in the UK. These are known as ‘Right to Rent’ checks, and, according to GOV.uk, must be done for all tenants aged 18 and over, even if:

They’re not named on the tenancy agreement
There’s no tenancy agreement
The tenancy agreement is not in writing

It’s against the law to just check people you think might not be British citizens. You have to carry out these checks for any prospective tenant. You need to:

01.
Ask your tenants for original documents which prove they can live in the UK.

Examples of documents

List A (group 1)
These permit the holder permanent right to rent in the UK.
List A (group 2)
To prove they can live in the UK, they must show a combination of two of these documents.
List B
These permit the holder to a time-limited right to rent in the UK.
UK passport UK birth or adoption certificate A valid passport endorsed with a time-limited period
EEA/Swiss national passport/identity card EEA/Swiss national passport/identity card Non-EEA national residence card
Registration Certificate or document certifying permanent residence of EEA/Swiss national Benefits paperwork Biometric immigration document with permission to stay for time-limited period
UK immigration status document endorsed with unlimited leave A letter from a UK Government Department or Local Authority
A letter from a UK further or higher education institution
Evidence of current or previous service in UK armed forces

02.
Ask your tenants for original documents which prove they can live in the UK.

03.
Make copies of the documents to keep, recording the date you checked them against official recommendations.

If they don’t have the right documents, you can use the landlord checking service from the Home Office. They’ll find out if the tenant is allowed to rent without the documents for the following reasons:

The Home Office has their documents
They have an outstanding case or appeal with the Home Office
The Home Office told them they have ‘permission to rent’

In the 2018 Private Landlord Survey, only 62% of landlords had carried out a ‘Right to Rent’ check for their most recent letting, compared to 87% of agents.

Landlords with larger portfolios were more likely to have carried out a ‘Right to Rent’ check for their most recent letting compared to smaller landlords, but the risk is great for all landlords. You can get an unlimited fine or be sent to prison for renting to someone who is not allowed to stay in England.

Proof of identification

Electrical safety and fire safety standards

Any responsible landlord will want to keep their tenants safe, and maintain their property to a high standard so that risks are kept to a minimum. But what are your legal responsibilities? It’s best to look at the individual laws which cover rented properties:

Gas

The Gas Safety Regulations 1998

This placed a duty on landlords to make sure all gas appliances, pipe work and flues are maintained to a safe condition. To do so, you’ll need to get all your gas appliances checked annually by a Gas Safe registered engineer. They’ll provide you with a Gas Safety certificate, which you should keep. You should give any new tenants a copy of this before they move in.

This regulation won’t apply if your property doesn’t have a gas supply.

Fire

Fire safety, from the Housing Act 2004 and the Regulatory Reform (Fire Safety) Order 2005

As part of your responsibility to provide safe accommodation, all residential properties in England and Wales should comply with building regulations (be aware that fire safety regulations for purpose-built flats and property adapted into flats could be different).

If you provide furniture in your property, this will need to meet the fire resistance requirements in the Furniture and Furnishings Fire Safety Regulations 1988.

The Smoke and Carbon Monoxide Alarm (England) Regulations 2015

One of the key responsibilities for landlords is fitting and testing smoke alarms and carbon monoxide alarms. Landlords in England are required to include:

Gas Safety
Fire alarm
Smoke and Carbon Monoxide Alarm
Smoke alarms Carbon monoxide alarm
Have at least one installed on every storey Have one in any room used as living accommodation, where solid fuel (e.g. coal or wood) appliances are
Check that every alarm is in proper working order on the first day of a new tenancy

Electrical

Plugs and Sockets (Safety) Regulations 1994

Under this regulation, any plug, socket or adapter must comply with current standards. This includes the requirement for all plugs to be pre-wired, and live and neutral pins on plugs to be part insulated.

There’s no legal requirement to get your plugs – or any other electrical equipment – inspected. However, as part of the wider responsibility to keep your rented properties safe and free from health hazards, you need to pay attention to best practice electrical safety. For anything supplied as part of the tenancy, this includes:

No accessible live parts
Correct plugs fitted and fused correctly
No worn or frayed leads
Plug sockets firmly fastened to the wall All appliances (e.g. cookers, fridges, washing machines) should be serviced and in good working order
All appliances (e.g. cookers, fridges, washing machines) should be serviced and in good working order

To maximise safety, it can be beneficial to get routine checks done conducted by qualified electricians. The most common are:

PAT testing
Electrical Installation Condition Reports

But are landlords keeping up with the requirements? For many legal duties, the percentage of landlords reporting meeting them is less than expected.

Plug Socket
Plug Socket
Plug Socket

Compliance with legal requirements - management and maintenance

Bar chart showing compliance with legal requirements - management and maintenance

Source: English Private Landlord Survey 2018

Legionnaires’ disease

Once you’ve heard of this requirement, you won’t forget it. One of the more unusual duties, landlords must assess and control the risk of tenants being exposed to Legionella bacteria. It causes an infection, with symptoms similar to pneumonia, known as Legionnaires’ disease.

Because it’s commonly contracted through inhaling droplets of contaminated water, the best control measures you can take are to:

Flush out the water system before letting a property
Check any cold water tanks have a proper lid to stop any debris getting in

Keep a record of any work or assessments you do to reduce the risk of legionella.

You can also ask your tenants to keep up more regular maintenance, such as cleaning shower heads. As with any problem, they should let you know as soon as possible if there are any issues with the water system.

Cold water tank

Energy Performance Certificates

From October 2008, landlords have been required by law to provide tenants (including potential tenants) with a copy of the Energy Performance Certificate (EPC) for their property.

But what does an EPC show? They can only be produced by a Domestic Energy Assessor or a Home Inspector who is a member of an approved Government Accreditation scheme. They come to the property to assess a number of energy-related features. The end report gives you an accurate insight into the property’s:

Energy efficiency
Environmental impact

Ratings are provided on a scale of A-G – A being the best. It’s a great way for potential tenants to compare the energy efficiency of different properties, but it’s also useful for landlords looking to make improvements. The report is split into four sections:

The performance and environmental impact of the property
Estimated energy use based on standard occupancy assumptions
Summary of energy performance features
Recommendations for improving the energy efficiency

Recommendations from an EPC could help you:

Cut fuel bills
Improve energy efficiency
Help cut carbon emissions

In the 2018 Private Landlord Survey, 84% of landlords had provided an EPC to tenants in their last letting, compared to 95% of agents.

With the latest requirements (from April 2018) forcing landlords to make sure any property rented out has a minimum energy performance rating of E, it’ll become a priority not only to have a certificate but to make improvements to inefficient properties.

The new requirements apply to new lets and renewals of tenancies, and will apply to all existing tenancies on 1st April 2020. If you don’t comply, you could face fines of up to £5,000. The good news is that EPCs last for 10 years.

In government discussions over the long-term energy performance within the private rented sector, a much more ambitious aim was set. The aim – “where practical, cost-effective and affordable” – is to have as many of them as possible to be upgraded to EPC Band C by 2030.

Energy Certificate
Energy Certificate

Making repairs

To keep up with many of these legal requirements, you will need access to the property – to either inspect it or make repairs. If it is currently rented out, you need to give reasonable notice to your tenants. It’s best to arrange a time that’s suitable for your both, although your tenancy agreement should state the recommended time (at least 24 hours’ notice).

As a landlord, you’re responsible for the following maintenance:

Brick wall repairs

Any repairs to the exterior and structure of the property, including problems with the:

  • Roof
  • Chimney
  • Walls
  • Guttering
  • Drain
Broken water pipe

Making sure water, gas and electricity supplies can be used by the tenants.
Any equipment for supplying these must be kept in working order

Property damage

Fixing anything damaged as a result of attempting to make repairs

If you do not make repairs to your property, and it affects the health and safety of the people living there, they could legally:

Carry out repairs themselves and take away the cost from their rent
Start a claim for any repairs under £5,000
Ask the council to inspect the house under the Housing Health and Safety Rating System (HHSRS) – inspectors will look at 29 health and safety areas (e.g. personal hygiene, sanitation and drainage) to score how hazardous they are

Homes (Fitness for Human Habitation) Act 2018

More recently, a new law came into force to make sure all rented accommodation is “safe, healthy and free from things that could cause serious harm.” If this criteria isn’t met by landlords, tenants can take you to court. The court can then make landlords:

Carry out repairs or put right health and safety problems
Pay compensation to the tenant

Landlords are responsible for making sure their properties are ’fit for human habitation’. But there are some exceptions to the act too. Here’s a breakdown:

Example problems landlords are responsible for Things landlords aren’t responsible for
The building is neglected and in a bad condition Problems caused by tenant behaviour
The building is unstable Events like fires, storms and floods which are beyond the landlord’s control
There’s a serious damp problem Furniture not included in the inventory at the beginning
The layout is unsafe
There’s not enough natural light
There’s not enough ventilation
There’s a problem with the supply of hot and cold water
There are problems with drainage or the toilets
It’s difficult to prepare and cook food or wash up
03.

Managing tenants

The job isn’t finished once you have secured tenants for your property. Set yourself up for success by following the latest guidance for contracts, deposits and more.

AST Agreement

Writing up an AST agreement

An AST is a legal contract between you, the landlord, and your tenant. It sets out all the legal terms and conditions that you expect your tenant to follow.

As a result, it’s important to make sure all the I’s are dotted and the T’s are crossed. You can download templates from landlord associations, but always seek advice from a legal professional. Too many landlords have been using the same, potentially outdated contracts for years.

An AST is designed to offer security to the tenant and landlord. As long as the tenant abides by the conditions set out, they’re entitled to occupy the property for the agreed time. Some of the terms and conditions you need to include are:

What they may use the property for
What the tenants cannot do
Their responsibility for any damage
How much the rent is and when it is paid
The length (term) of the contract
Any break clause arrangement with details on how the landlord or tenant can terminate the contract
Any rent review clause

You need to provide the contact for tenants to sign before they move in. It’s important to get the contract right, and include details on different eventualities. For example, if you need to increase your rent, you can only do it if:

Your tenant agrees
The contract contains a rent review clause

A good rent review clause should set out when you can increase the rent, a method for how you would calculate the increase and how much notice you have to give tenants.

A more recent change you need to be aware of is The Tenants Fees Act (TFA) 2019. In the past, landlords or agents could’ve charged for the following:

Tenancy set-up fee
Inventory check fees
Check-out fees
Professional cleaning costs
Credit check fees
Inventory checklist

It is now illegal to charge for any of these. You’re also not allowed to charge additional rent at the start of any tenancy to make up for these prohibited payments.

Permitted payments include:

Rent
Payments on certain events e.g. tenants losing their keys
Fee for early termination of the tenancy
Council Tax
Utilities
TV Licence

You can also charge for tenancy deposits, holding deposits and fees for the changing, assignment or novation (someone taking over a contract) of the tenancy, but the amount is capped. If you fail to comply with TFA, you could face up to £5,000 per fee, or be prosecuted. Repeat offenders can be imposed a financial penalty of up to £30,000 as an alternative to prosecution.

TV License

The importance of deposit protection schemes

Deposit protection schemes are one of the better-known essentials for renting. Many potential tenants will ask you about them, and what arrangements you have in place.

It’s estimated that government-backed Tenancy Deposit Protection (TDP) schemes cover between 56% to 71% of households in the private rented sector, with around 3.4 million live deposits registered.

Most (60%) landlords returned the full deposit after their last tenancy ended, or just some of it (24%). When landlords have to keep part or all or the deposit, it’s usually because of damage to the property or contents, or because they need to get it professionally cleaned.

The beauty of a deposit protection scheme – for both tenants and landlords – is that there are agreed procedures for returning deposits, or disputing whether it hasn’t been returned. Unless the tenants do one of the following, they will get their deposit back:

Fail to meet the terms of your tenancy contract
Damage the property
Don’t pay their rent or bills

To correctly use a deposit protection scheme, you must put the tenants’ deposit in the scheme within 30 days of getting it. If you fail to protect the deposit within this time, or provide the people who paid it prescribed information, you could be liable to pay the tenant between one and three times the deposit amount. The prescribed information required will depend on what scheme you use. Tenants can claim this financial penalty for up to six years after the deposit was protected.

At the end of the tenancy, once you have both agreed how much they’ll get back, you have to return it within 10 days. If there are any disputes, the deposit will be held in the scheme until it’s resolved.

Schemes you can use in England and Wales are:

Deposit Protection Service Logo

Deposit Protection Service

MyDeposits Logo

MyDeposits

Tenancy Deposit Scheme Logo

Tenancy Deposit Scheme

How to evict a tenant

Although few tenancies end in eviction (7% in the last two years, according to 2018 Private Landlord Survey), it’s important to know how to legally end a tenancy. Problems with tenants can – and do – arise. The most common reasons for evicting or not renewing a tenancy include:

58% Rent Arrears
45% The tenant not caring for the property

There are two ways a landlord can end a tenancy:

Section 8 notice

If your tenant breaks any of the terms in the AST, you have grounds for ending the tenancy. This could be because they haven’t paid their rent for some time, they’ve damaged the property, or engaged in anti-social behaviour. You must provide them a Section 8 Notice to Quit – GOV.uk provides a sample form you can use (form 3).

Where a claim is for possession and rent arrears (Section 8), there will be a court hearing before a judge. Tenants can challenge these notices in court, based on reasons they think they shouldn’t be evicted or if you haven’t carried out your responsibilities correctly (including problems with the original contract).

Section 8 Notice

Section 21 notice

If you don’t have a specific reason to end the tenancy, there is another option. Sometimes called a no-fault eviction, section 21 notices are usually used if a tenancy ends, and a landlord doesn’t want to renew.

To do this, you have to give two months written notice. Changes in 2018 also mean it’s important to use an official form to issue a Section 21 Notice of Possession. If you have followed these rules and the tenant still refuses to leave, you can start the process of eviction. You will need a court order to forcibly remove a tenant.

These no fault evictions have come under criticism recently, and there is growing support to abolish Section 21. Although there’s recognition that the vast majority of landlords do a great job, there’s a risk they could misuse the balance of power Section 21 can give. As a result, the government has announced plans to create open-ended tenancies. As always, rules and regulations evolve, and this is something for all landlords to keep a close eye on.

Section 21 Notice

Types of landlord insurance to consider

There are numerous responsibilities landlords have to juggle, but fortunately for many different areas, insurance is available to help if things go wrong. To protect your investments, you may want to consider any combination of the following insurance products:

Buildings Insurance

Buildings insurance

If your property is damaged by a disaster (e.g. a flood), this will cover the cover of repairs. Most mortgage lenders expect you to take this out as standard, although for leasehold properties, the management company might already provide it.

Contents Insurance

Contents insurance

This will cover damage to your own possessions in the property – so anything included in the inventory. But it’s advisable for tenants to get their own contents insurance to protect their possessions.

Landlord Liability

Landlord liability

If your tenants – or even visitors – suffer an injury because of a fault with the property, you could be held liable.

Tenant default and legal expenses

Tenant default and legal expenses

You can get covered for the possibility of your tenants not paying rent, as well as protection for related legal fees you incur chasing unpaid rent or evicting a tenant.

Alternative accomodation

Alternative accommodation

If you’re contractually required to provide alternative accommodation if the property becomes uninhabitable, you can get cover for these expenses.

Home emergency

Home emergency

Emergency cover for any problems with plumbing, drainage, heating or power supplies, door or window security problems, can be a huge help to busy landlords.

Policies vary between providers in terms of what they cover, so do check what you’re paying for – and whether there’s any additional protection you need.

04.

Essential landlord checklist

Have you got insurance to protect your property against accidental damage?
Do you have an AST contract checked by a solicitor?
Have you checked the tenant’s right to rent?
Have you provided the following documents?
EPC
Gas Safety Certificate
The government guide ‘How to rent’



Have you made arrangements to protect the tenancy deposit in a UK government-approved deposit protection scheme?
Are you up-to-date with all maintenance checks and Legionella assessments?
If your property is furnished, do you have a detailed inventory (including a note of condition)?
Is that furniture fire resistant?


Have you had a gas safety check done every 12 months by a Gas Safe registered engineer?
Has this been signed and dated by the tenant?

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