15th September 2022
Renting out property can be a secure and potentially lucrative investment, but it comes with a number of time-consuming and costly responsibilities.
The government even created a ‘How to Rent’ checklist, specifically to help tenants check that you’re fulfilling these obligations – and if you aren’t, the penalties could range from withheld rent to fines or a prison sentence.
In this guide, we’ve summarised some of the main duties you’ll have as a residential landlord in England and Wales, but you should always seek professional guidance before signing your first tenant.
Of course, if you’d like to skip the stress altogether, our highly-acclaimed property managers can take care of everything for you, allowing you to enjoy your investment without shouldering the demands that come with it.
One of your most important responsibilities as a residential landlord is to keep your property safe and free from health hazards. This means the property must be safe when the tenant moves in, but must also be well maintained throughout their tenancy.
It’s your duty to make sure all gas and electrical equipment is safely installed and maintained, to fit and test smoke and carbon monoxide alarms, and to make sure the property follows the government’s fire safety regulations.
Depending on the wording of your contract, you’ll typically be responsible for repairs to:
If you own a block of flats, you’ll also be responsible for maintaining shared areas like the lobby and staircases, and for making sure that the building is insured.
Remember, you have a legal right to enter your property to carry out this work, but you need to give your tenants at least 24 hours’ notice.
If you don’t carry out repairs promptly, you could be taken to small claims court. Our property managers are able to coordinate repairs quickly and efficiently by liaising with our network of trusted contractors, to make sure this never has to happen.
Energy efficiency is more important than ever in the combined crises of climate change and rising fuel costs.
For this reason, landlords are legally required to provide a valid Energy Performance Certificate (EPC) when renting out a property.
The EPC gives a rating from A (most efficient) to G (least efficient), as well as recommendations about how to reduce energy use and save money. It was made law for landlords in 2008, and a minimum rating of E has been required for all tenancies since 2020.
Under current proposals, the minimum EPC rating is set to rise again – soon, rented properties will need a C or above. This will apply to new tenancies from 2025, and extend to all tenancies in 2028.
If you’re investing in a rental property, it’s therefore worth checking the EPC certificate before making an offer. Improvements to energy efficiency can be very expensive, particularly on an older property, so it’s important to take these costs into account from the beginning.
Before signing a new tenant, it’s your duty to check they have the right to rent property in the UK.
To have the right to rent, your tenant must be 18 or older with one of the following:
If your tenant is only permitted to be in the UK for a limited time, you must do a follow-up check after 12 months (or sooner, if their leave to remain ends).
If you don’t do these checks and a tenant is found to be renting illegally, you could get an unlimited fine. More seriously, you could get a five year prison sentence if it’s thought you had ‘reasonable cause’ to doubt their right to rent.
Right to rent checks and other important tests (for instance, checking references) will be taken care of by your property manager when finding you the best tenant.
Unsurprisingly, it’s your responsibility as a landlord to pay income tax on what you earn. The amount you actually pay will vary, however.
If you’re renting out a property you own, then the first £1,000 of your rental income is tax-free. Anything over this amount must be reported to HMRC, and will be collected via either PAYE (if it’s between £1,000 and £2,500) or a Self-Assessment tax return (£2,500 and over).
If you rent out property as a business, with profits exceeding £6,725 a year, then you also have to pay Class 2 National Insurance. Generally speaking, it counts as a business if being a landlord is your main job or you rent out more than one property.
As a residential landlord, you can claim tax relief on certain costs, including letting agents’ fees, buildings and contents insurance, maintenance and repairs, council tax, and services like cleaning or gardening.
It’s important to take proper tax advice from an independent expert, both to ensure compliance and for guidance on how to structure your investment. Black Brick can refer you to leading tax advisors for this.
Tax isn’t your only financial obligation as a residential landlord. You’re also responsible for protecting your tenants’ deposit through a Tenancy Deposit Protection (TDP) scheme.
A TDP scheme guarantees that the deposit will be returned, if the tenant:
If there are any disputes, the deposit is protected in the scheme until the issue is resolved.
You don’t have to protect a deposit if it’s given as a ‘holding deposit’ before the tenancy is signed. However, the money will still need to go into a TDP scheme once the person becomes a tenant.
You also don’t have to use a TDP scheme if you’re given a valuable item (like a car) in place of a standard deposit.
There’s a lot of legislation around renting out a property, and even a small change can be catastrophic if it means you’re no longer fulfilling your responsibilities as a landlord.
When working with an expert property manager, you know that your property is fully compliant, running efficiently, and making a profit – leaving you free to enjoy your investment.
To learn more, speak to our friendly team of property managers today.
We would be delighted to hear from you to discuss your own property requirements. For a non-obligatory consultation, please contact us.