How Do I Protect Myself as a Landlord?Written By PropertyLoop April 20, 2021
Whilst becoming a landlord can be a lucrative affair, it’s certainly the result of hard work and a significant investment of the both the Landlord’s time and money. With a host of legal responsibilities and obligations to adhere to and an investment to safeguard, it goes without saying that it pays to know how to protect yourself as a landlord.
Whether it is the result of a problem tenant, extended void periods or overlooking the latest government initiative, landlords can sometimes be in a very precarious position making appropriate cover and lifelines essential.
Why Tenant Referencing Is Important For Landlords
Referencing potential tenants is a critical part of ensuring that your tenancy can run as smoothly as possible. Of course, we understand the pressures that can come with having a vacant rental property for extended periods of time, but not rushing the process can get you the ideal tenant. The referencing process is dedicated to providing landlords with the fullest available picture of whom they may decide to let their rental property out to, and is often regarded as the best way a landlord can protect themselves from a problem tenant.
Essentially, each potential tenant that goes through the referencing process will have their identity verified and their right to rent assessed. Alongside this a series of affordability checks will be carried out. Intended to reveal if the tenant will be able to meet the obligation to pay rent over the tenancy period, these checks evaluate the potential tenant’s credit history, currently income and employment status. Traditionally, the letting agents or third parties that conduct these reference checks will require the income of the potential tenant to surpass the annual rental charge by around three times.
Many referencing agencies will also require a reference from a previous landlord, with the exception of some students as this may be their first time renting and landlords will often request a guarantor. This can be of undeniable value to a new landlord as it will detail how much rent the tenant paid, if they were ever late in making those payments, if there was ever any problems with anti-social behaviour and if the property was returned in a good condition.
What Insurance Is Necessary For a Landlord?
Unfortunately, in some cases despite the thorough background checks that come with the tenant referencing process, some occupants will not respect the condition of the rental property or its contents. Whilst many rental property owners believe that taking the maximum tenancy deposit will be enough to deter these instances, it fails to actually fully protect the landlord against tenant damage. Landlord Insurance is often the solution to this, whilst these schemes often cover damage to the properties structure, missing rent and in some cases even legal cover, contents insurance for landlords typically comes at an extra cost. A landlord is not required by law to take out an insurance police on their rented property; many mortgage lenders will consider it a violation of the terms of the residential mortgage if the home owner began to let it out. With this in mind it is often a requirement for a property owner to have landlord insurance when seeking to obtain a buy to let mortgage.
Whilst some landlords will simply take out an “umbrella” insurance policy that tries to encompass all the cover a landlord may need, this could result in paying over the odds for policies you may never need. Of course, the type of cover offered varies wildly between policies and providers, however the rental opportunity a landlord offers largely informs the types of polices they should be interested in.
If a landlord chooses to let out their rental property either partly or fully furnished they may want to consider taking out landlord contents insurance. In the event that any of the landlord’s possessions within the rental are damaged or stolen, the policy will cover the costs of replacing the items, or any necessary repair work. These polices offer an essential financial cushion against the costs of repairing the wake of a problem tenant, with the exorbitant costs of re furnishing a property being taken care of. However, contents insurance policies for landlords will often only cover the landlord’s possessions and not the items brought into the rental by the occupants.
Buildings insurance typically comes as standard with regular landlord insurance and protects the landlord if the rental property is subject to damage due to flooding, fires, vandalism and subsidence.
If a landlord takes out liability insurance, sometimes called “public liability insurance”, they will be covered in the unfortunate event that a tenant or guest is accidentally injured whilst in the rental property.
As mentioned, some insurance policies offer landlords a financial lifeline if their tenants are unable to meet their rental commitments. It goes without saying that if an occupant of a rental property begins to accumulate excessive rental arrears a considerable amount of the landlord’s income will be absent, potentially leaving them more exposed to the buy to let mortgage payments. Depending on the provider of the insurance policy, the landlord may find that they are also covered if the tenant refuses to pay rent, malicious damage is caused to the damage, and if the occupants refuse to vacate the property after an eviction order has been served. These types of missing rent insurance policies will typically cover the landlord for around 12 months, or up to a certain value of outstanding rent.
Rental properties are, after all, an investment made by the landlord and therefore every precaution should be taken to ensure it is protected. For property owners this of course means making every effort to maintain the properties condition, whether this is achieved through remedial work or removing a problematic tenant. Property inspections can be arranged for part way through the tenancy are not only a fantastic opportunity for landlords to inspect their investment for any excessive damages that may have occurred during the tenancy, but also communicate with the tenants and address any issues they have with the rental.
Before the rental property is let out to tenants it must first be fit for human habitation; with the let being free from damp or mould, pests and structural issues, alongside a safe water, electrical and gas supply. Typically, after a tenant has moved into the rental property the landlord will be responsible for arranging the maintenance of the structural integrity of the property’s exterior, including the roof, drains, foundations, ect. The owner of the rental property will also be required to assess the order of the bathroom facilities alongside utility pipes, wiring, water tanks, heaters, radiators and gas fires.
These inspections must be arranged with the tenant at a time that is convenient, alongside providing sufficient notice. The tenant’s right to occupy the property undisturbed is also upheld if repairs are needed to be carried out. In these instances the landlord is legally required to give the occupants of the property at least 24 hours’ notice before entering the premises to conduct such work. With this being said, the landlord is able to enter the property unchallenged in the event of an emergency.
Naturally, the landlord can only be expected to address repair work that has been through to their attention, to this end tenants also bear the responsibility of reporting issues with the rental property to the owner. However, if these requests for repair work to be carried out go ignored and the tenant believes the issues are contributing to a determination in their health or that the home is unsafe to occupy, they are able to present a case to the local environmental health department. This authority will then carry out a thorough inspection of the rental property, issuing a report on their findings. If the Environmental Health Department’s report supports the tenants claim the landlord can be ordered to conduct the necessary repair work. Tenants also have the ability to take legal action against a landlord that neglects to address any disrepair found in the rental property. If the tenant is able to present a compelling case, showing the needed repairs and their attempts to contact the landlord to no avail, the court can order the landlord to not only conduct the appropriate work to the property, but pay the tenant compensation and cover the legal costs they will have incurred.
Take the Maximum Tenancy Deposit
Traditionally when a new tenant moves into a rental property the landlord will first request a tenancy deposit from them. This full is often done as an additional safeguard against any potential damage being caused to the property throughout the rental period. This is often hailed as an incentive for tenants to better treat the property and its contents, as if at the end of the rental period any destruction or harm to the property is found, the associated repair or replacement costs will be taken from the amount that could be returned to the tenant.
Whilst the landlord is not obligated to take a deposit from the occupants of the rental property, if they do it must be entered into a government approved deposit protection scheme within 10 days. The Tenant Fees Act 2019 also prevents landlords from taking excessive amounts from future tenants through this deposit. As a result of this regulation, the maximum amount a landlord is able to request is capped at the equivalent cost of five weeks rent. If however, the annual rental charge for the property is over £60,000, the landlord is able to take up to six weeks rent for the tenancy deposit.
What is a Rental Inventory Checklist?
When a landlord takes a tenancy deposit from a new occupant, this is in an effort to secure the condition of the properties contents, and have cover if any replacements or repairs are needed. As is to be expected disputes will occur regarding what is considered fair wear and tear, and if anything found upon an inspection of the property at the close of the tenancy was actually caused by the tenants. With this in mind, a landlord inventory aims to avoid this outcome, providing a transparent document for both parties to reference upon the final inspection of the property.
Typically these inventories will be curated by an independent third party or letting agent, and will guide both the landlord and new tenants through the property, detailing its condition and its contents. Specifically the report will highlight any blemishes, marks, stains or scuffs to furnishings, walls, cupboards and upholstery. The document also encompasses more subtle aspects of the rental property, with sticking doors and hinges, water pressure and electrical outlets also being included.
If the tenant were to notice any additional marks or damage after the inventory has been signed they are able to report this to the landlord and have this added to the inventory, however this is of course up to the landlord’s discretion. With this being said, the inventory for the rental property is more than a simple list of partly damaged items contained within the property; a comprehensive report should comprise a short description of the item’s condition, accompanied by indisputable photographic evidence.
As mentioned, at the end of the tenancy the property will be subject to a final inspection in which the landlord inventory will be used to see if any new damage has occurred; if so the costs associated with repairing or replacing the damaged items will be deducted from the occupant’s tenancy deposit.
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