Landlords Guide to Letting Rules and Regulations in the UK
For accidental or new landlords, navigating through the ever changing legal landscape of the rental industry can be tough at first. Despite the learning curve landlords and property owners must abide by their legal responsibilities to the tenant from the outset. These regulations are in place to not only safeguard the wellbeing of the tenant, but can also ensure that issues surrounding property damage can be resolved quickly and amicably; something all landlords appreciate the value of.
Of course there are certain things a landlord must provide by law to their tenants, but with new landlord rules being established each year the wave of information can be overwhelming. Here we offer our guide to the responsibilities of private landlords.
Do Landlords Need to Complete a Tax Return for Rental Income?
Having to be completed by the 31st January every year, the landlord tax return can be daunting to newcomers as property owners are required to submit a Self-Assessment tax return, something typically done by the self-employed. Unlike Stamp Duty and Capital Gains tax, which are exclusively paid when a property is being purchased or sold, a landlord’s National Insurance contributions and tax on rental income are paid annually, unless the yearly income from your properties is less than £1000. We can say with confidence that most landlords will earn far more than this threshold and will therefore be required to register for Self-Assessment tax returns by the 5th of October in their second tax year; fail to do so and HRMC could try and issue a fine.
The information required to complete the Self-Assessment tax return comprises the income a landlord has received from their rental properties over the course of the last year. However, the tax return is also where property owners declare any of the expenses that they wish to be deducted from the total amount, meaning it’s essential for landlords to detail any costs they incur that could be claimed back during a tax period, potentially saving them significant sums!
Once the amount of taxable income has been calculated these business expenses are used to reduce the total amount of tax that must be paid to HMRC. Typical business expenses for a landlord include, costs incurred through property maintenance and repairs, replacing domestic items, the running costs of each property, accounting and property management fees and any payments made towards mortgage interest.
Whilst landlords and property owners are under no obligation to provide records of these expenses alongside the submission of their tax returns, the information that details this deductible expenditure must be safely kept on hand for at least five years following the filing of the appropriate return. This safeguarded information mainly comprises receipts, bank statements, invoices, rental contracts and rent books, and for journeys that were required for work purposes a mileage log can also be kept.
As soon as the total amount owed has been calculated then the landlord will be required to clear this debt by the end of January. However, if the amount of tax owed is more than £1000, then further payments must be made on account, with the first being on the31st of January and the second on July 31st. In either case, if the landlord feels the sum is too much to be paid all at once, the HMRC time to pay service allows a manageable payment plan to be established to clear the amount within 12 months.
Landlord Safety Responsibilities
It is a legal obligation for all landlords and property owners to ensure that any rental that is currently occupied abides by all safety regulations. To this end if the rental property in question is situated in England a minimum of one smoke alarm on each floor of the property where living accommodation is situated. A Carbon Monoxide Alarm is also required to be fitted in all rooms that contain a solid fuel burning appliance, such as a wood stove or coal burner.
All gas appliances and flues within the property must also be inspected by a registered Gas Safe engineer, in an annual safety check. With this being said if the appliances in question are owned by the tenant then this is not the responsibility of the landlord to ensure these are also inspected.
Once the engineer has completed the inspection a copy of the annual safety check record must be provided to the tenants within 28 days of the check taking place, regardless of if this is a new or existing tenancy. Similarly to the information regarding expenses and tax deductions, landlords are obliged to safeguard the results of their gas safety inspections for at least two years.
If however, during the inspection the Gas Safe engineer finds fault with an appliance and issues a warning notice a sticker will be placed on the item warning that it should not be used. This warning must not be tampered with or removed by the tenants or landlord, but most importantly, the appliance must not be used. If the engineer takes issue with the heating for the property then the landlord is obliged to source an emergency alternative until work is completed by the engineer.
Fire Safe Furnishings
The Fire and Furnishings Regulations 1988 determines the levels of fire resistance in household furnishings and furniture, with the legislation looking to ensure that all furniture inside a rental property is fire resistant.
Furniture that passes the regulatory standards shows a label indicating the appropriate level of resistance for the given piece of furnishing. It is recommended that landlords exclusively purchase furnishings that show these labels as they can be held aside to prove to an enforcement officer than the properties furniture is compliant with the regulations. Failure to meet the minimum safety standards could result in a fine of up to £5,000 and a six month prison sentence for the landlord.
Electrical Safety Obligations of the Landlord
As previously mentioned with the gas appliances, it is also the duty of the rental property owner that all electrical equipment is of a safe operating capacity prior to each tenancy period commencing. As of June 1st 2020 revised Electrical Safety Standard Regulations were introduced for landlords in England, with all tenancies, existing or new having to comply by April 1st 2021.
The newly introduced measures dictate that landlords are required to ensure electrical installations are inspected every five years by a qualified electrician, with a report being provided that details the condition of the installations. Once the inspection has been conducted, the tenants of the property must be provided with a copy of the report within 28 days, with a copy being provided to the electrician that carried out the inspection. Whilst tenants that are either moving into the property or looking at moving into the rental have 28 days in which to be given a copy of the electrical safety report, if this information is requested by the landlord’s local authority it must be supplied within 7 days. If a property is found to fall short of the electrical safety inspection criteria, the local authority is able to implement a fine of up to £30,000, alongside the costs of repairing the property.
Energy Performance Certificate
Valid for 10 years, a landlord must be able to produce a valid Energy Performance Certificate for each rental property that they let out. The certificate evaluates and ranks the energy efficiency of a property, with the A rank being the most energy efficient and G rank being the worst. Before letting out to tenants a property must have a minimum EPC rating of an E rank. A property with a higher energy efficiency rating is likely to be more appealing to the new generation of environmentally conscious renters, not to mention their monthly utility bills will be far lower.
Tenants Can Report Poor Housing Conditions
Under the Homes (Fitness for Human Habitation) Act 2018, landlords and property owners situated in England are legally required to uphold a minimum standard of living within their rental properties, ensuring they are “fit for human habitation”.
The act requires that landlords ensure that their property is well maintained structurally, free from damp, has adequate amounts of ventilation and natural light, a food preparation area, a hot and cold water supply alongside space for safe disposal of waste and drainage.
If it is found that a rental property does not comply with the Homes Fitness Act, legal proceedings could dictate that the landlord immediately commits improvements to the condition of the property, and in some cases, pay compensation to the effected tenant.
If the landlord is made to pay the tenants of the property compensation it could be an extremely costly lesson as there is currently no limit on the amount of monetary compensation that can be awarded, and they may also be made to pay the legal fees of the tenant. The amount that is paid to the tenant is usually dictated by the severity of the properties poor state, how long the tenant had to reside in an unsafe environment and any harm that came to the tenant.
If the property is found to be lacking in any of these areas then a tenant would be within their right to pursue legal action against the landlord. Of course if the tenant is experiencing these issues on a regular basis and the landlord or property owner is reluctant to address these issues in a timely manner, as per Section 11 of the Landlord and Tenant Act 1985, the tenant may have the right to withhold monthly rental payments until the repairs are made to the property.
Tenant Responsibilities for Repairs
With the introduction of the Landlord and Tenant Act 1985 brings a clear outline of both landlords and tenants responsibilities when it comes to repairs. Section 11 of the act details that any damage to the rental property caused by a tenant, friend or family member of the properties occupants, the tenants will be responsible for the repair of the damage and is legally obligated to pay the associated costs.
Now of course when it comes to the end of the tenancy period and the deposit is discussed, disputes over what constitutes fair wear and tear can be a nightmare for both landlords and tenants. Signs of wear and tear are to be expected throughout a property, but anything that exceeds the usual marks and scuffs across surfaces and furniture will be hard to excuse. To avoid these kinds of disagreements, the landlord should ensure to clearly detail what they consider to be “fair wear and tear” within the tenancy agreement before the tenants move in.
If tenants have caused any damage to the rental property, it is imperative that they notify the landlord as soon as possible. This isn’t a matter of the property owner bringing repercussions down upon the tenant, but rather so their investment and the tenant’s home can be brought back to a decent standard. However, if the damage remains unreported by the tenant, it is not only highly likely that the damage will only worsen, but it will also be far less likely that they will retain their tenancy deposit as the amount will be used by the landlord to cover the amount of the repair costs.
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