Chard London Lettings Agents - Tenancy agreement information
Legal and contractual aspects of letting your property
Once Chard Lettings has identified suitable tenants for your property we will take up references and prepare the appropriate Tenancy Agreement.
Explanations for the most commonly asked questions and issues relating to clauses within the Tenancy Agreement are also listed below.
Should you have any specific queries relating to the legal aspects of letting your property please contact our Lettings Compliance Officer here who will normally be able to reply to you directly.
Assured Shorthold Tenancies ('AST')
These are the most common residential tenancies for individual (i.e. non-corporate) tenant(s) where the annual rent is less than £25,000. Whilst these are normally for a minimum of a six month period they can, in fact, be for shorter periods subject to mutual agreement, but the Landlord must give a minimum of two months written notice. The main advantages for Landlords are that repossession is now much easier than previously and they are free to charge whatever rent they can agree. In practice, most tenancies are for one year (less one day) and, at the outset, both parties agree when and under what circumstances the tenancy may be ended earlier. Of course, if the tenant commits a substantial breach of the Agreement, the Landlord may always apply straight away to the court for a possession order, but he should always take independent professional legal advice before doing so.
Break Clauses
There is no statutory regulation relating to the inclusion or omission of a tenant's break clause with the tenancy agreement. Whether the tenant has a break /release clause is a matter for negotiation before the tenancy agreement is signed. It's inclusion or otherwise is usually dictated by supply and demand of alternative property as well as the tenant's individual circumstances.
Building service charge and buildings insuranceBreak Clauses
As the landlord you are responsible for payment of ground rent (in the case of leasehold property), service charges and buildings insurance when you let your property. N.B. where a property is leasehold it may be necessary to inform the Freeholder or the Managing Agent of a proposed letting - see "Consents" (below)
Burglar alarms
Intrusion and fire alarm monitoring charges will normally be the responsibility of the tenant, however landlords will normally pay the cost of maintenance contracts relating to these systems.
Common law tenancies
These are tenancies which do not qualify as ASTs or any other form of statutory tenancy because, in most cases, the rent is more than £25,000 per annum or the tenant is a company. They are subject to the general law on landlord and tenant, which is less restrictive of the Landlord and gives less protection to the tenant.
Communal garden
Many London properties have access to communal gardens, often in the form of well maintained garden squares, although some, particularly in W11, bear a closer resemblance to parks, both in shape and grandeur. The responsibility for maintaining the garden is usually met by a "garden committee" elected from local residents. Levies are made either through the building service charge (payable by the landlord) or through a separate garden levy made by the local authority and paid (by the tenant) as well as the Council Tax charge to the local authority.
Company lets
In these the tenant is an incorporated company (usually the actual occupier's employer) and the actual occupier is a licensee of the company, not the Landlord. They are very common in London where the rent is often paid by the occupier's employer under a relocation package. Unlike when the tenant is an individual, they are not subject to special tenant protection law, such as AST's, because that protects only individuals, not corporations.
Consent to Let / Consent to Sub-let
Where your property to be let is leasehold you may need to obtain permission, and possibly a licence to sub-let from the superior landlord or the managing agent. In some cases the superior landlord or managing agent may ask to see copies of references and may even levy a charge for the privilege of their doing so.
It's almost certain that if the property to be let is subject to a mortgage then you will need to obtain your lender's permission to let. Consent to let will often depend on personal financial circumstances. Some lenders will charge an additional rate of interest where the property is being let.
Contents insurance
Each party is responsible for insuring their own possessions. It is normally a condition of the tenancy agreement that the landlord maintains adequate contents insurance for his / her possessions in the property. You should always check that your current policy covers let property.
Council Tax
For lets of over three months the tenant is responsible for payment of Council Tax. Council Tax is a tax levied by the local authority. It is payable by the person permanently resident at the property. The amount of tax due is calculated on a sliding scale that reflects the property's value. The Council Tax Bands run alphabetically from A to H, with H being the highest. For practical purposes, where the term is at least three months the tenant will be liable for Council Tax.
Deposits
When a tenant signs the Tenancy Agreement he also pays the first rent installment in advance. In addition, he pays a deposit (bond). As a general rule that is equivalent to a minimum six weeks' rent. That is the Landlord's security against damage and other expenditure or losses caused by the tenant during the tenancy. It can only be used provided various conditions have been fully satisfied. Since 6th April 2007 all deposits must be held in accordance with one of three government approved schemes. Very simply, the deposit can either be paid directly to the government scheme to be held by it for the duration of the tenancy, or the Landlord, or Chard on his behalf can hold it, subject to the authority of a government scheme. If the Landlord wishes to hold it he must become a member of one of the schemes first. Where Chard hold it they do so in a separate client account as stakeholders on behalf of both Landlord and tenant, neither of whom can use it unless authorised by the government scheme. It is repayable to the tenant at the end of the tenancy, less any mutually agreed deductions due under the tenancy agreement (see also 'What is an inventory?'). In the case of disputes, the matter is referred, together with the deposit itself, to the government scheme administrator to settle. His decision is final and binding on both parties.
Useful link: http://www.direct.gov.uk/en/TenancyDeposit/index.htm
Disclaimer
The above comments are intended only as a very general explanation of some of the factors a Landlord should take into account. They are certainly not exhaustive and cannot be relied upon as a definitive statement of the law. As may be expected, the legal position will vary according to the particular circumstances of each situation, and the law and legal procedures themselves are often complex. Chard are not lawyers so clients are strongly advised to ensure they obtain full independent professional legal advice on any matters about which they are uncertain, consider important, or require greater specialist information.
Fair wear and tear
Fair wear and tear is the amount of damage or dilapidation that a reasonable person would expect to see in a property being used in a "tenant like manner" by the tenant(s) named on the tenancy agreement at the end of the tenancy. If the landlord has let to a single non smoker "fair wear and tear" will inevitably be less than where the property had been let to, for example, three people, all of whom were smokers. Because fair wear and tear is sometimes contentious we always recommend the services of AN INDEPENDENT INVENTORY COMPANY.
Fees
Most lettings agents in London want all their fees in advance. Perhaps they're worried that if the tenant doesn't pay, they won't get paid. We're happy to collect our fees quarterly in advance where we are collecting rent. We collect rent for the majority of our landlords clients. This gives you the benefit of better cash flow as you receive rent as soon as a tenant moves in. It also means that unlike many lettings agents we only have an incentive to introduce tenants who will pay their rent in full - and on time!
Furniture removal & storage
Tenants are paying for flexibility. Be prepared to accede to reasonable requests to add or remove small items of furniture from the property. Local self store companies are ideal for normal everyday furniture and are extremely cost effective. More valuable furniture may require specialist handling - this can be expensive. Be sure to get a quote from the contractor before signing an agreement with the tenant! Properly stored furniture doesn't depreciate as quickly as "in use" furniture. Bear this in mind when doing your sums.
We always recommend that Landlords remove any item of real or indeed sentimental value before letting a Property. Also if there are items (for instance TV's, Audio equipment etc) which are in the Property when it is being viewed, but you intend to remove when Letting, please ensure that we are fully aware of this to avoid unpleasant confusion once the Tenant moves in.
Gardens
Where a garden exists that is demised to the property, normally the tenant will be responsible for maintaining the garden, lawn and plants. This also applies to pot plants and hanging baskets. Where a "high maintenance" garden exists we strongly recommend that landlords leave advice on maintaining the garden, or, in the case of high value property, insist that the Tenant retain a part time gardener. Some landlords will have a part time gardener already who would normally be kept on. Where the property is an "owners home" a separate, pragmatic, arrangement is often made between landlord and tenant with regard to who takes care of garden maintenance and access for this purpose. IT IS ESSENTIAL THAT YOU MAKE US AWARE OF ANY ARRANGEMENTS SO THAT THE TENANCY AGREEMENT CAN BE AMENDED ACCORDINGLY.
Inventories and check out reports
Once a tenant moves in to a property the landlord and tenant should both sign a copy of the inventory and a schedule of condition. An inventory is simply a list of items in the property, a schedule of condition is an objective report of the condition of those items and the general standard of cleaning and decoration. We always recommend the services of an independent inventory clerk for this purpose. This document forms part of the contract between the landlord and tenant. At the end of the tenancy a check out report is prepared by, ideally, the same inventory clerk. This process is indispensable when damages or losses (if any) are being determined at the end of the tenancy. Thus, if there are any deductions due from a tenant's deposit they can be agreed to allow the swift return of the tenant's deposit and any amounts due to the landlord.
Letter of guarantee/guarantors
In some rare cases, most commonly where students are proposing to rent a property, we will recommend that the proposed tenants provide a guarantor for the rent. This is generally the case where the tenant has no visible income of his/her own and is unable or unwilling to pay a substantial sum of rent, ideally for the entire term, in advance. The guarantor needs to be a UK resident and be able to prove the means to make rental payments should the tenants fail to do so.
Letter of indemnity
A number of larger corporate tenants, mainly banks, will offer a letter of guarantee or indemnity in lieu of a deposit (bond). This practice has subsided in recent years and a fixed six week deposit is more common. In some instances (naming no names) this can be a "deal breaker", fortunately for landlords there are plenty of tenants happy to pay a cash deposit. One issue is that in the event of a claim for loss or dilapidation the landlord is at a disadvantage as he may be required to invoice the tenant company before recovering money to cover the loss.
Parking/ tenants parking
Garages and off street parking spaces are valuable commodities in the London rental market. If a parking space is included with the property please let us know! It may add considerable value. In some instances it may be more beneficial for the landlord to let the space separately from the property. Your local Chard lettings manager can advise on the options available. Most local authorities offer a residents parking scheme whereby bona fide residents can park in designated sections on the public road. For the majority of residents, this proves a safe, convenient and cost effective option. These parking bays are (supposed to be) clearly marked.
Contact details follow:
-
Royal Borough of Kensington and Chelsea
Parking Shop
19 - 27 Young Street
London W8 5EH
T: 020 7937 7755
http://www.rbkc.gov.uk/EnvironmentalServices/Parking/applypermit.asp -
London Borough of Hammersmith and Fulham
Old Town Hall
Fulham Road
London SW6 1ET
T: 020 7371 5678
http://www.lbhf.gov.uk/AZofServices/P/32245_Parking_permits.asp -
Westminster City Council
City Hall
64 Victoria Street
London SW1E 6QP
T: 020 7823 4567
http://www.westminster.gov.uk/transportandstreets/parking/residentsparking -
London Borough of Hounslow
Street Management & Public Protection
London Borough of Hounslow
Civic Centre
Lampton Road
Hounslow TW3 4DN
E-mail: parking@hounslow.gov.uk
Tel: 020 8583 6666 Permits
Tel: 020 8583 6666 Penalty charge enquiries
Tel: 0845 1300 555 Payments (Credit & debit card line)
Fax: 020 8583 4889
http://www.hounslow.gov.uk/index/transport_and_streets/parking.htm
Pets
Our standard tenancy agreement excludes the Tenant from keeping pets of any description (cats and dogs are obvious, but even hamsters and caged birds, strictly speaking, are pets and should not therefore be kept). We always ask tenants to confirm, in writing, whether or not they propose keeping any pets at the property. We will inform you at the offer stage if a tenant wishes to keep pets. If you consent to a pet being kept at the property it is wise to include a reference to the specific animal in the tenancy agreement, you don't want to agree to a hamster being kept to subsequently discover the tenant has a pet donkey! We also recommend that extra cleaning specific to the pet be referred to in the tenancy agreement, during the term and at its end. We generally insist on a specific clause obliging the tenant to have all soft furnishings professionally cleaned at the end of the tenancy. We can also ask the tenant's previous landlord to supply a reference on their pet. Properties most likely to be pet friendly are houses, mews and those with direct access to outside space, often ground and garden level property.
Professional sharers and HMO considerations
Sometimes a group of, usually two, three, four and occasionally more people rent a flat or house together as an instead of renting individually. Financially, this can make good sense. Instead of each paying perhaps £250 for a small one bedroom flat, two people can rent a smarter, two double bedroom, flat for £400 per week.
In such cases the tenants are jointly and severally liable under the tenancy agreement and, together, constitute "the Tenant". That means each of them is personally responsible for all the obligations of 'the Tenant' under the Agreement. Parliament has imposed various obligations, enforceable by local authorities, on Landlords who let houses "in multiple occupation", such as official registration. There is a considerable "grey area" in how this relates to individual flats and houses let to professional sharers so you should seek further local and legal advice where there are three or more proposed, unrelated tenants wishing to rent.
References
We take up references in order to confirm that a tenant is who they claim to be. Generally speaking this will mean a financial reference, an employer's reference and where possible a character reference.
- Employer's reference (confirming length of contract if relevant and salary details if relevant, otherwise the employers opinion of the applicant's ability to meet the rental commitment)
- Bank reference / status enquiry (some banks may charge customers a fee for providing us with this information)
Company lets: For PLCs - a copy of the audited report and accounts Private Limited Companies - a bank status enquiry and relevant trade references. For all company lets we require confirmation that the person living at the property is a bona fide employee of the tenant company. In case of any doubts we recommend a credit check through a recognised credit check agency.
Renewals and Tenants' Options to Renew
Some tenants, especially corporate tenants or expatriate executives being relocated to London will require a "Tenants' Option to Renew". Essentially this gives the tenant the right to renew the tenancy agreement for a further term or terms at a rent (generally subject to a defined increase on each renewal) that will be stated within the original tenancy agreement. It is important that landlords realize that this may mean that their property is potentially "tied up" and let, at the tenant's discretion for several years.
Rent payments
As a minimum rent is payable monthly in advance. Many corporate tenants prefer to make quarterly payments, although a number of both corporate and private tenants will pay quarterly, six monthly, annually or even bi annually in advance. Rent is most commonly paid either monthly or quarterly.
Where we collect the rent the net amount due to you as the landlord will be transferred to your nominated bank account after allowing time for funds to clear through the UK clearing system.
Short Lets / Lets of less than 3 months
On short lets of less than three months the tenant will invariably pay all telephone charges although these should be at normal service provider rates. Generally telephone accounts would be in the tenant's name. All other utilities normally remain in the landlord's name, however many landlords levy a fixed utility charge on tenants to cover gas, electricity etc. which is in addition to the rent quote
Smoking
Some tenants, especially corporate tenants or expatriate executives being relocated to London will require a "Tenants' Option to Renew". Essentially this gives the tenant the right to renew the tenancy agreement for a further term or terms at a rent (generally subject to a defined increase on each renewal) that will be stated within the original tenancy agreement. It is important that landlords realize that this may mean that their property is potentially "tied up" and let, at the tenant's discretion for several years.
Rent payments
We ask all tenants whether they are smokers or not. Landlords retain the right to decline to let to a smoker. It is possible to make non smoking in the property a condition of the agreement. If a smoker has made a false declaration or allows smoking in the property a landlord may, in some circumstances, have the right to make a claim from the tenants deposit at the end of the tenancy, taking into account extra cleaning and decoration costs.
Tax for landlords
It is strongly recommended that you consult an accountant for professional specialist advice when preparing tax returns. Broadly speaking all income generated from the letting of your property will be subject to UK income tax at the prevailing rate. Under present legislation, many costs can be off set against the rental income for tax calculation purposes. These costs include: interest on eligible loans secured against the property (BUT NOT CAPITAL REPAYMENTS), letting agents fees, service charges, wear and tear allowance (when furnished) and other costs directly associated with the property. You should clarify what is relevant to your individual circumstances with a tax advisor.
Tax and non resident landlords
There are specific rules regarding tax for landlords receiving rent who are non-resident in the United Kingdom.
In order to prevent tax evasion by landlords who own property in the UK, but live overseas, current legislation holds any person or organisation passing rental income to a non resident landlord to be responsible for accounting for all monies and payment of tax to Her Majesty's Customs and Revenue (HMCR).
Non resident landlords must register with HMCR in order to receive rental income without deduction of tax, by completing a "FICO" form. Chard lettings is FICO registered and will be able to pay rental income to you without deduction of tax following a simple registration procedure. Alternatively please use the links below to print off PDFs of the relevant forms. There are three categories; Property owned by an non-resident individual, property owned by an overseas company, and property owned by an overseas trust.
Useful links:
Utilities (gas, electricity, water etc)
Your tenant will normally be expected to pay the following outgoings together with any standing charges made by the relevant utility supplier, which will normally be transferred into the tenants name at the start of the term. Gas, electricity, water rates, council tax, television, cable TV charges, telephone and internet connection charges.
Where you are letting your property short term on a month to month basis (i.e. a term not certain of at least three months) it is usual for all utilities, excluding telephone, to be included in the rent.
Valuations
We offer all landlords a free pre-letting valuation service without any obligation on their part. We will advise on the market for the property, likely tenant profile and achievable rent. Our valuers have extensive experience of the local market, dealing with thousands of transactions. They are on hand to answer specific questions relating to the proposed letting.
Visitors and guests
All individuals named on the tenancy agreement have the right to live and "peacefully enjoy" the property. Common sense dictates that tenants may have occasional friends and family stay over. Nevertheless only those mentioned on the agreement have the right to reside there. In the unlikely event that a tenant has more people staying at the property than provided for in the tenancy agreement the landlord would have good grounds for claiming an amount for wear beyond "fair wear and tear" at the end of the term. Under no circumstances can a tenant take in paid guests or lodgers.
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