A Guide for Accidental Landlords: Renting Out an Inherited Property
Becoming an accidental landlord is a path many find themselves on unexpectedly. Whether you've inherited a family home or a property as part of an estate, renting it out can be a lucrative option, offering a steady source of income. However, the rental market is governed by complex legislation and high tenant expectations.
This comprehensive guide will help you navigate the journey, ensuring your property is compliant, appealing, and well-managed.
1. Understanding Your Legal Responsibilities
Renting out a property comes with significant legal obligations. Failure to comply can result in financial penalties, legal action, and damage to your reputation. Here’s what you need to know:
Essential Property Certifications
- Energy Performance Certificate (EPC): An EPC rating of ‘E’ or higher is mandatory. Renting a property with a lower rating can result in fines of up to £5,000 per breach.
- Gas Safety Certificate: Annual inspections by a Gas Safe engineer are required for all gas appliances. Non-compliance could lead to fines up to £6,000 per appliance or imprisonment in severe cases.
- Electrical Safety Standards: Electrical systems must be inspected every five years. Failure to comply can lead to fines of up to £30,000.
Adhering to Rental Legislation
- The Renters’ Rights Bill: This upcoming legislation will abolish Section 21 ‘no fault’ evictions, implement statutory rent increase procedures, and establish stricter property standards.
- Fitness for Human Habitation Act: Properties must be free from serious hazards such as mould, structural issues, or poor heating. Landlords failing to meet these standards can face legal claims and substantial fines.
- Deposit Protection Schemes: All deposits must be registered in an approved scheme within 30 days of receipt. Non-compliance can result in penalties of up to three times the deposit amount.
2. Preparing Your Property for Tenants
A well-prepared property sets the foundation for a successful tenancy. Here’s how to get your property rental-ready:
Repairs and Maintenance
- Inspect the property thoroughly for structural issues, plumbing leaks, and faulty wiring. Address these before marketing the property to avoid tenant complaints and legal disputes.
Cleaning and Presentation
- Deep clean the property and ensure all fixtures are in working order. For unfurnished properties, consider staging photos to make the space appealing.
Inventory Documentation
- Create a detailed inventory of the property’s condition and contents. This will serve as evidence in case of disputes over damages at the end of the tenancy.
3. Setting Up a Tenancy
Starting a tenancy involves more than handing over the keys. Proper preparation ensures a smooth landlord-tenant relationship.
Tenant Screening
- Conduct comprehensive checks, including:
- Credit Checks: Assess financial reliability.
- Employment Verification: Confirm stable income.
- References: Contact previous landlords to ensure positive rental history.
Drafting a Tenancy Agreement
- Use a legally compliant tenancy agreement that outlines the rights and responsibilities of both parties. Include clauses on rent payment, maintenance responsibilities, and notice periods.
4. The Risks of Non-Compliance: Why You Need a Letting Agent
Managing a rental property independently may seem cost-effective, but it carries significant risks if you’re unfamiliar with legal requirements. The consequences of non-compliance are severe, and here’s why partnering with a professional letting agent like Nicholsons Estate Agents is invaluable:
Liabilities for Non-Compliance
- Financial Penalties: Landlords can face fines of up to £30,000 for breaches such as inadequate electrical safety or failing to address serious hazards.
- Tenant Compensation Claims: Under the Fitness for Human Habitation Act, tenants can sue landlords for unsafe living conditions, leading to costly court cases.
- Prosecution for Illegal Evictions: Evicting tenants without following proper legal procedures can result in criminal charges and compensation claims from tenants.
Benefits of Using a Letting Agent
Nicholsons Estate Agents can safeguard you against these risks by providing:
- Compliance Assurance: Ensuring your property meets all legal standards, from certifications to tenant documentation.
- Expert Marketing and Tenant Selection: Our team handles everything from professional photography to thorough tenant referencing, reducing the likelihood of rent arrears.
- Full Management Services: From regular property inspections to managing tenant issues, our Essential Management service provides peace of mind while protecting your investment.
By relying on experienced professionals, you minimise your exposure to liabilities while maximising your property’s rental potential.
5. Protecting Your Investment
Rent Protection and Legal Expenses
Nicholsons offers a Rent Protection and Legal Expenses service designed to shield landlords from financial losses and legal battles:
- 100% Rent Recovery: Coverage starts immediately upon rent arrears and continues until vacant possession is obtained.
- Legal Representation: We handle court applications, legal advocacy, and bailiff coordination for evictions.
- Damage Disputes: Our service includes legal expenses for tenant-caused damages exceeding £1,000.
6. Financial Planning for Landlords
Costs to Consider
- Maintenance Fund: Set aside a contingency budget for unexpected repairs.
- Agent Fees: Nicholsons’ management services is 15% of monthly rent, ensuring a hands-off experience for landlords.
- Insurance: Comprehensive landlord insurance is essential, covering liability, buildings, and contents.
Tax Compliance
Rental income is taxable. Keep detailed records of all expenses, including agent fees and maintenance costs, to offset tax liabilities. Consulting a tax professional is advisable to ensure compliance.
7. Handling Tenant Evictions
While rare, eviction may be necessary in some cases. Always follow legal procedures to avoid allegations of illegal eviction:
- Serve Proper Notices: Issue Section 21 or Section 8 notices based on the circumstances.
- Court Applications: If tenants don’t vacate, apply for a possession order through the courts.
- Bailiff Enforcement: For uncooperative tenants, hire bailiffs to regain possession.
Conclusion
Renting out an inherited property offers a unique opportunity, but it comes with responsibilities that shouldn’t be underestimated. By ensuring compliance with legal standards, maintaining the property, and leveraging professional services, you can turn your inherited asset into a successful rental investment.
At Nicholsons Estate Agents, we specialise in supporting accidental landlords. From compliance to full management, we provide expert guidance to ensure a smooth and stress-free experience. Contact us today to explore how we can help you unlock your property’s potential!
