Renting out your house in England and Wales can be a great way to generate rental income. If you are a first time landlord thinking of renting out your rental home to prospective tenants you will have lots of questions and important steps you need to take including familiarising yourself with landlord responsibilities and potential tax obligations. Landlords are responsible for ensuring that the rental property is habitable. In order to make sure you fulfil your responsibilities, it's important to be well prepared before listing your property. Read this article to find out what you need to do before you can let your property.
Health and safety
Landlords owe a duty of care to renters and their health and safety legal obligations will vary depending on whether the landlord is a live-in landlord taking a lodger or renting out a HMO, bedsit or sole occupancy property. Before you put your house up for rent, take some steps to reduce the risk of accidents, injuries and other health hazards to new tenants by doing a risk assessment and fire safety checks. Install smoke alarms on each floor and carbon monoxide alarms and detectors in rooms where solid fuel is combusted.
Landlord insurance policy
Let properties are a valuable asset which is why it is important you protect your rental property with insurance. As a landlord you can take structural insurance and contents insurance if the property you are providing is furnished or has white goods. You can also seek rent guarantee insurance which will provide some protection against rent arrears. Landlord insurance can sometimes be tax deductible.
Energy performance certificate
An EPC is a legal requirement when renting out your home or property. The certificate is an official document from a registered energy assessor, which gives details about the energy efficiency of your home. It includes information such as an energy efficiency rating which shows how well insulated your property is, how effectively it uses electricity and how easily heat is lost. EPC ratings are valid for 5 years and must be provided to the tenant at the start of the tenancy along with other statutory documents such as a gas safety certificate (if applicable) and how to rent letter.
Electrical Safety Certificate
The Electrical Safety Standards in the Private Rented Sector (England) Regulations 2020 came into force on 1 April 2020, applying to all new tenancies from 1 July 2020 and all existing tenancies in England as of 1 April 2021. As a result, an Electrical Installation Condition Report (EICR) must carried out every 5 years and the landlord must provide the electrical safety certificate to the tenant before letting out the property. Prior to the regulations, only houses in multiple occupation (HMO) needed an electrical safety certificate. Working with a letting agent can help ensure that your gas and electrical safety checks are compliant and up-to-date.
Rental property furniture
You need to decide if you provide a furnished or unfurnished property to your tenants. Regardless of what you decide, the first thing to do is to get a professional inventory of the property and possessions (if applicable). This will ensure that the state of the property is documented at the start of the tenancy and damage can be determined objectively during the check out process. If you are providing white goods, ensure that the date, model and details of the appliances are also provided.
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Property management can be a full-time job which is why it might be worth using a letting agent to help you manage your rental property. Letting agent fees are deducted from your rental income. You can enquire from the estate agent who you bought your property from or alternatively do some market research to find a letting agent. Their job is to find potential tenants for your rental properties and verify that they pass credit checks, right to rent and background checks. They will also deal with all the legal paperwork once a tenant has been found. This can be a good option if you don't have time to deal with all the extra work involved or if you have more than one property. Letting agents can also support you with an eviction process should you need to. If you choose to manage the property yourself, read our tips to help you find a tenant or a lodger.
A tenancy agreement, more precisely an assured shorthold tenancy agreement in England and Wales, is a legal contract between the landlord and tenant which defines the terms of the tenancy. Regardless of whether you are creating the assured shorthold tenancy agreement yourself or using a letting agent, you should familiarise yourself with the terms and understand your obligations as a landlord renting out your house. In particular you must ensure you have all the permissions to let out your property (for example from a mortgage lender) and it is a legal requirement to register the tenant's deposit (capped to one month's rent) with a gov.uk approved tenancy deposit scheme. You should also be familiar with the Tenant Fees Act 2019 to know what fees can be charged to a tenant in connection to your rental property.
Pay income tax on your rental income
Regardless of whether you are renting out your house via a limited company or in your own name, you will need to declare your rental income to HMRC. You may need to pay tax depending on your income tax band and how much rental income you generate from renting out your house. If you are unsure about your tax position, seek advice from an accountant or an online tax calculator. If you choose to rent out your house in your own name, you will need to file a self assessment tax return. You may be able to deduct expenses from your rental income in your self assessment tax return.
After going through these important steps and answering these questions you should now be in a good position to rent out your house. The next step is to ensure your legals are in order which can be a challenge to the frequent legal updates. Legislate is a great solution for landlords and letting agents to automate their tenancy documentation in a legally compliant and user-friendly way. To create your tenancy documents with Legislate today, read a tutorial or sign up today.
Legislate is a contracting platform where landlords can create contracts relevant to the property they rent, ranging from tenancy agreements to letter agreements for serving notices. Read our tutorial to learn how to create your tenancy agreements in minutes with Legislate. Book a demo and sign up today to put the confidence back into contracting.
The opinions on this page are for general information purposes only and do not constitute legal advice on which you should rely.