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Investor Guide...
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Show Prospective Tenants Around
The Property – before you show a potential tenant your property, think
about your safety; always tell someone exactly where you are going, the details
of who you are meeting, what time you will be leaving and returning; and any
contact telephone numbers. Show the property in daylight hour’s if possible. Be
organised enough to know the approximate costs of Council Tax, Water, Sewage,
Gas and Electricity, if the prospect tenant asks. Plan to show a selection of
potential tenants around the letting property uk. Some may not even turn up, despite sounding
enthusiastic on the phone – this is just a fact of life. Full name and Date of birth Current address and previous address
(if less than 3 years) Occupation, time at company, address
of employer (for reference) Need to acquire Housing Benefit for
rental payments? Name, role, address, telephone of
guarantor (if applicable) Children, pets, smoker preferences Next of kin/ emergency contact
telephone number Name and address of character
referee Banking details (for reference) –
sort code account number, branch address Obtaining Tenants References
– the purpose of checking up on tenants is fairly obvious – to avoid the risks
of renting your property out to unreliable or dishonest tenants; sitting
tenants, bad tenants, late payers and tenants who disappear still owing rent,
will all result in lost profit, stress and hassle. Ideally you want a tenant who
can easily afford the rent, pays on time, will look after your property as if it
was their own home. Avoiding Fraudulent Applicants
- you should collect information independently of the tenant, so as too avoid
for possibility of fraud. If you know where the employee works, it becomes easy
to trace a tenant who has left owing money. In the worst-case scenario (need to
regain possession), you will be able to use any false information innocently
collected from referencing as part of the tenancy agreement. This means that in
a breach of the agreement, if written information originally provided by the
tenant was later found to be false, you can rely on the Housing Act Ground 17,
to assist in the speedier removal of the tenant. Employment Reference - ask the
tenant the contact details of their employer and ask permission to contact them
for a written character reference and whether they believe they can cover the
rent. You need to establish the length of time they have been in employment as a
basic measure of financial and geographic stability. If your tenant has just
started their new job quite recently, it is a good idea to ask for a reference
from their previous employment. Any additional comments by the employer should
be welcome. For the self-employed tenant, ask for 2 years accounts submissions
and/or a reference from their accountant. Past Landlord Reference - if the
tenant is already renting they may be arrears – this is of course of key
interest to you. So their previous landlord should be able to comment on their
reliability/ unreliability. Beware if the tenant is in areas and the previous
landlord would be happy to see the back of them, they may not be as forthcoming
about the tenant’s character. For the vast majority though, most landlords would
be quite willing to comment. Post or fax them a standard letter asking about the
dates and rental value of the tenant; asking about their reliability of paying
rent and in looking after the property. Credit Reference – there are
a number of credit checking agencies that can assess the financial stability of
your possible tenant. They operate using integrated databases containing
histories or poor credit ratings (CCJ’s), criminal records, previous addresses,
spending profiles etc. Specifically a lot of data is linked to a postal code
address. Socio-economic data can also be gathered based on the quality of the
geographic area where the tenant previously lived. All factors taken together
add up to a person’s overall credit rating. If you are planning a company let,
you must do a credit check on the company (as opposed to the employee/ tenant).
Bank Reference – in theory,
the tenant’s bank will have access to their payment and income history,
reliability to repay debt, overall financial situation and be in a strong
position to provide information to you to help you make a judgment on your
prospective tenant. Clearly the Bank will only consent to providing a reference
following written permission from the customer/ tenant. The cost is around £10.
In practice, a bank reference is useful but not very revealing and Banks tend to
be more conservative in the general information they provide. They do not want
to upset their customers and only present a point in time view based on their
tenants current financial situation. A more practical approach might simply be
to ask to view the last three to six months of bank statements – some people may
be naturally be wry of this, so it might be more comfortable if you do this with
the tenant rather than taking copies away. If a tenant is creditworthy it should
not be a problem. Character Reference – a
character reference can be useful, as long as the reference comes from a local
professional person (doctor, policeman, director). You must ask what their
relationship is with your prospective tenant and how reliable they consider the
person to be. You must exclude accepting a character reference from all family
members (for obvious reasons). Guarantor – in order to
guarantee that you will receive the rent (where you are concerned about the
tenants ability to consistently pay rent), you can demand that a “guarantor” be
provided. If your prospective tenants will be students, references will be a
problem – they are unlikely to have an employment history, previous landlord or
banking history. In this case you should ask your prospective tenant for a
guarantor – this is a person that accepts financial and legal responsibility for
the prospective tenant. This heavy burden is usually placed on their parent’s
shoulders or a close family friend. If you are letting to a company, a senior
manager or Director should be sought as the guarantor. You must undertake a full
set of references on the guarantor (as if they were going to be your tenant). In
addition, it is advisable to ask for a written agreement be signed by the
guarantor ensuring rent and costs are paid if your prospective tenant does
default. Your solicitor should have this standard form of agreement. The “Dodgy” Tenant – be very
aware of the characteristics of dishonest tenants. Do they want to pay the
deposit in cash? Are they in a rush to enter the property? Have they pressured
you into agreeing the tenancy before reference checks are complete? Have you
personally spoken on the phone with their employer? (don’t accept a paper copy
produced by the prospective tenant). Collecting Rental Deposits –
if you are not using an agent you should collect the deposit yourself from the
tenant (usually one and a half times monthly rent) plus one months rent in
advance, at the same time the tenancy agreement is signed (see 7.14). If you are
using an Assured Tenancy Agreement (AST - see 7.14) there is no maximum rental
deposit – but the industry norm is 6 weeks. If you are planning to use an agent,
the agent would normally hold the deposit in a bonded separate bank account,
acting as an independent third party stakeholder between you and the tenant. What is an Inventory? – an
inventory is an accurate written description of your property and its contents,
providing evidence in the event of a future dispute regarding the property
and/or its contents. An inventory will protect you and the tenant from disputes,
as it is a document you both sign up and agree to, before the tenancy begins.
The inventory should list all the contents of your property and give details of
the condition of the property itself for both you and tenant's reference, at the
end of the tenancy. Check in is not as emotive as check out (as the tenants
deposit money is as stake) – so the more practical and objective you can make it
for your tenant, the less potential stress and concern will be caused. Welcome and Hand Over Keys -
when you finally hand over the keys make sure you have one set, the agent has
one set (if you are using an agent) and the tenants have two sets (including any
other keys for the windows, padlocks, alarm, garages etc). Personal touches and
first impressions really do count… If you cannot personally welcome your tenant
to their new home, leave a note or card; detail utility companies telephone
numbers as well as local information on restaurants, take-away, bus and train
timetables, maps, local emergency telephone numbers etc. If there is a burglar
alarm at the property remember to write down the code in your note. Include your
contact details and the agents contact details (if you are using one). If you
can personally show the tenant around, remember to point out where and how to
use the main cooking appliances, meter box, smoke detectors, electrical mains
fuse box, stop cocks and burglar alarm. The Planning Office -
information on all aspects of planning and building control, including listings
of Council Planning Offices and local relevant services and suppliers.
www.theplanningoffice.co.uk
Bathroom Manufacturers
Association - provide the public with clear, concise information on
products, to make the purchase of a new bathroom easier and safer
http://www.bathroom-association.org Kitchen Specialists Association -
professionalism and excellence in the design, supply and installation of fitted
kitchens, bathrooms, bedrooms and home offices.
http://www.ksa.co.uk DIY Fix It – offers free
advice to help prepare and maintain your investment property.http://www.diyfixit.co.uk Association of Residential
Management Agents (ARMA) - focus on block management of residential
property, particularly leasehold, company landlords.
http://www.arma.org.uk The National Approved Letting
Scheme - (NALS) is a defined minimum standard for residential lettings and
management that a NALS agent must provide.
http://www.nalscheme.co.uk
Letting Property UK
Collect Holding Deposit - if a tenant wants to let your new letting property
uk, ask for a non-refundable holding deposit (which will eventually be
deducted from their initial rent) of say £100. This is a strong sign of
commitment and will give them re-assurance the letting property uk is now off the market
from other prospective tenants i.e. you are holding the property for them
subject to referencing and contract. If they pay by cheque, wait until the
cheque clears before taking the property off the market - keep showing other
possible tenants around in the mean time. Indeed, log all interested
tenants contact details in case your new tenants references do not
give you confidence and you change your mind (or they change their mind for what
ever reason). Give them all a call back to thank them for their interest and let
them know that the property is unfortunately off the market. Remember, if your
first choice falls through you may have a ready supply of good reserves waiting
in the wings. Make sure you give your new tenant a formal receipt
for the holding deposit.
Collect Personal Information – be prepared with a form for them to
complete either on the spot or post back to you, requesting their personal
details. The following should be obtained in order for you to initiate
referencing:-
Types of References – using the results of the information collected soon
after you took the holding deposit, you can now request five main types of
references to vet the potential tenants reliability and suitability:-
Deposit Payment Methods - avoid accepting cheques from your new tenant as
this will cause a delay while you wait form them to clear. A bankers draft is
ideal because it is instant, guaranteed and secure. There will be a nominal
charge from the bank to produce this, which may put your tenant’s nose out of
joint. Cash is less of an option these days, for more expensive, professional
rentals – as it’s insecure and sometimes awkward to keep track off. At the same
point as you accept the rental deposit, insist on the setting up regular
automated rental payments through the use of a regular monthly standing order
(you can get a standard order form from your bank for the tenant to fill in).
Purpose of the Rental Deposit - the purpose of collecting a deposit is to
act as a “bond” to pay for any potential damages caused by your tenants during
their tenancy. Therefore, the deposit is used as security, following the final
check out, (once the tenants finish their tenancy) to pay for replacing items
that may have been accidentally or deliberately broken or damaged. Deductions
from the deposit can only be taken out following the tenant’s permission in
writing (remember it is the tenants money not yours). The deposit should be
returned in full if there is no damage to your property (even if there is some
inevitable wear and tear) – you, the landlord pay for wear and tear NOT the
tenant - it is normal to expect some ageing of furniture. Never allow your new
tenant to enter the property before funds have been cleared and in your bank
account and the tenant has also signed the tenancy agreement…
Signing of the Tenancy Agreement - Never try and draft this legal
document yourself (unless you are a solicitor). You should get your tenant to
sign the agreement before they take possession of your property. Two copies
should be prepared (the original and counterpart), which should both be signed
by your tenant. You keep the original copy and give your tenant the counterpart.
It is always prudent to ask for a witness to sign in the presence of the tenant
signing, in the unlikely event of any future legal disputes
Main Functions of the Tenancy Agreement - the AST protects you, the
landlord and the tenant’s statutory rights. With the AST, you will be
entitled to increase the rent periodically with the addition of a clause in your
AST. If you are letting to sharers, you need to make sure a clause is added
making each individual jointly named and responsible for the rental commitment
(a “joint tenancy”). If one person leaves, for whatever reason, the remaining
sharers are responsible for all of the rent.
Additional Clauses –If you are using a letting agent, they will have
their own version of the AST, incorporating additional clauses to protect you
from local risks and the very latest national regulatory amendments.
Help Tenant Contact Utility Companies – now that your tenant has paid
their deposit and signed the tenancy agreement, they must contact the utility
companies to register for imminent use. Some companies will only allow tenants
to do this from the day they enter a property. Make their life simpler by
providing name, addresses, telephone of the following utility companies:- gas,
electric, telephone, sewage, water, TV licence and council tax. Remember to also
include the meter readings, box numbers and other unique identifiers. Log these
yourself, so that when check out time arrives in 6 months, resolving
administration becomes simpler.
Inventory Check In - whether you are letting a furnished or unfurnished
property, it is essential that a detailed inventory take place before the
tenancy begin.
How and When Should I Prepare the Inventory? - post a copy of the draft
inventory to the tenants approximately three days before the tenancy is due to
start, so they know what to expect. Note all the items in terms of their
individual description, quantity, condition (e.g. scathes and stains) and the
room location. This should include the state of any gardens – hedges, lawns,
beds – should all be handed back as you left them – neat, trimmed and cared for.
In addition, note safety labels of furniture (regulatory implications), numbers
of keys and any safety manuals for appliances. In other words, the more detailed
and thorough you make the inventory, the less likely a dispute will occur at the
end of the tenancy, (regarding any dilapidations and subsequent deposit
deductions). Use a camera or camcorder if you are really concerned, as there is
no way that written words can dispute recorded pictures. Remember to note all
the meter readings for gas, electric and water (if metered) on check in day.
Once your tenant is happy, ask them to sign and date two copies (one for them
one for you) which you must also sign.
Further Reading
National Federation of Residential Landlords – medium sized association
promoting ethical an professional letting management processes
http://www.help4landlords.org
