Do-it-yourself Kit Residential Letting Guidance Manual The contents of this Manual have been approved by Anthony Gold Solicitors, under English and Scottish laws.
This is an excerpt from Lawpack s Residential Lettings Kit. To obtain all the legal forms, tenancy agreements, legal notices and background information that you need to rent your property, without the expense of a solicitor or letting agent, click here. Important Facts about this Lawpack Kit This Lawpack Kit contains the information, instruction and forms necessary to handle your own residential letting agreement. It is not suitable for commercial or agricultural tenancies. The forms included in this Lawpack Kit cover the most common letting situations, but we cannot cater for all circumstances. This Lawpack Kit is only for people creating either an Assured Shorthold Tenancy in England or Wales or a Short Assured Tenancy in Scotland. It is not suitable for Northern Ireland. The information contained in this Lawpack Kit has been carefully compiled from professional sources, but its accuracy is not guaranteed, as laws and regulations may change or be subject to differing interpretations. The law is stated at 1 May 2012. Neither this nor any other publication can take the place of a solicitor on important legal matters. This Lawpack Kit is sold with the understanding that the publisher, author and retailer are not engaged in rendering legal services. If legal advice or other expert assistance is required, the services of a competent professional should be sought. As with any legal matter, common sense should determine whether you need the assistance of a solicitor rather than relying solely on the information and forms in this Lawpack Kit. We strongly urge you to consult a solicitor if: substantial amounts of money are involved; you do not understand the instructions or are uncertain how to complete and use a form correctly, or what you want to do is not precisely covered by the forms provided. Note: throughout this Lawpack Kit, for he, his and him read he or she, his or her and him or her. EXCLUSION OF LIABILITY AND DISCLAIMER Whilst every effort has been made to ensure that this Lawpack Kit provides accurate and expert guidance, it is impossible to predict all the circumstances in which it may be used. Accordingly, neither the publisher, author, retailer, approving solicitors nor any other supplier shall be liable to any person or entity with respect to any loss or damage caused or alleged to be caused by the information contained in or omitted from this Lawpack Kit. Lawpack gives you a limited guarantee. If for any reason you are not happy with your purchase, you may return it to us with your receipt within 30 days of the date of purchase for a full refund. In no event shall our liability exceed the purchase price of this Kit. Use of this Lawpack Kit constitutes acceptance of these terms.
3 Contents How to use this Kit 4 Introduction 5 Letting the whole or part of a property 6 Houses in multiple occupation ( HMOs ) 8 Consents before letting 9 EPCs 9 The Tenancy Deposit Protection Scheme 9 The Inventory 13 Guarantors 14 Terms in the tenancy agreement 14 Witnesses 16 The tenant s obligations 16 The landlord s obligations 17 AT5 Notice in Scotland 19 Rent control 19 Landlord s notices to end tenancies 19 Eviction 23 General information 24 Standard Letter for Tenants Information provided by the Landlord in accordance with Section 20 (1) of The Housing (Scotland) Act 2006 26 Tenancy Deposit Schemes Scotland Regulation 42 Information 28 Glossary 30 Loose-leaf forms For England & Wales: Assured Shorthold Tenancy Agreement Section 21 Notice Requiring Possession Section 8 Notice Seeking Possession (rent arrears) For Scotland: Short Assured Tenancy Agreement AT5 Notice of a Short Assured Tenancy Agreement Section 33 Notice to Terminate and Notice to Quit AT6 Notice of Intention to Raise Proceedings for Possession (rent arrears) 2 copies 1 copy 1 copy 2 copies 1 copy 1 copy 1 copy
5 Introduction Rented accommodation and the rights of tenants are regulated by numerous Acts of Parliament and statutory instruments. The Acts which regulate the creation of tenancies today are the Housing Act 1988 in England and Wales which was amended slightly by the Housing Act 1996, and the Housing (Scotland) Act 1988 in Scotland. Under these Acts, most tenancies granted to individuals where they have exclusive occupation of all or part of a house or flat are called Assured Tenancies. Most of these tenancies will be Assured Shorthold Tenancies in England and Wales, and Short Assured Tenancies in Scotland; they are types of Assured Tenancy, but they differ on one important point. This is that the landlord will be entitled to recover possession of the property as of right, at the end of the fixed term (or after the first six months if there is no, or only a very short, fixed term), provided he has served the correct notices on the tenant first. It is against the law to evict a residential tenant unless you have a court order; however, for Assured Shorthold Tenancies in England and Wales, and Short Assured Tenancies in Scotland, where the tenant fails to vacate at the end of the term and where he has been served with the correct form of notice (which has expired), a possession order can normally be obtained within three to four months. (In practice this may take slightly longer in Scotland.) Lawpack publishes an online Eviction ekit that shows you how to legally evict a tenant in England or Wales see www.lawpack.co.uk for details. Landlords will want to ensure that all Assured Tenancies granted are Assured Shorthold Tenancies in England and Wales, and Short Assured Tenancies in Scotland, as otherwise they may be unable to recover possession of their property. In England and Wales, since 1997, this has been easy, as all tenancies are assumed to be shortholds, unless a landlord serves a notice on the tenant to the contrary. In Scotland the tenancy will be assumed to be an Assured Tenancy unless the appropriate notice (called an AT5 notice) is served before the start of the tenancy. The AT5 notice is included in this Kit. There are other types of tenancy and occupancy rights that exist. For example, where a landlord is resident at the property or an adjacent property, the Housing Act 1988 in England and Wales and the Housing (Scotland) Act 1988 in Scotland may not apply, and the tenancy will not be an Assured Tenancy and may not even be a tenancy at all. This is because it was not felt appropriate to grant a tenant the protection of the Act to someone living in the landlord s own home. Different considerations will also apply to lets to employees, lodgers, agricultural workers, limited companies, holidaymakers, accommodation on boats, and some lettings by charities. None of these is covered by this Lawpack Kit and you should seek specialist legal advice if you are concerned that any of these situations may apply to you. This Lawpack Kit provides you with a set of documents that enable you to set up and terminate an Assured Shorthold Tenancy in England and Wales or a Short Assured Tenancy in Scotland. It includes the following: 1. An Assured Shorthold Tenancy and a Short Assured Tenancy agreement both for letting a whole house or flat, or letting individual rooms where tenants in a house or flat will share common parts (such as a kitchen and bathroom). 2. For England and Wales, a Notice Requiring Possession (under section 21 of the Housing Act 1988). 3. For Scotland, Form AT5 (Notice to be served before lease signed), a Notice to Terminate (S33 Notice) and a Notice to Quit. 4. For England and Wales, a notice you can use to end the tenancy during the fixed term if your tenant falls into arrears of rent (a notice under section 8 of the Housing Act 1988).
6 Residential Letting In Scotland the notice is called an AT6 (a notice under section 19 of the Housing (Scotland) Act 1988). If you wish to end the tenancy during the fixed term you also have to serve the Notice to Quit as well as the AT6. 5. This Manual, to help you set up the tenancy and to give you some basic information. The tenancy agreement will not be suitable if: you wish to give a new form of tenancy agreement to an existing tenant who originally went into the property before January 1989 (in Scotland, check the position with a solicitor); or you are or will be resident at the property yourself (in England and Wales this definition includes living in self-contained accommodation in a converted house, but not a purpose-built block; in Scotland it does not); there will be an annual rent of more than 100,000 (this limit does not apply in Scotland); or there will be an annual rent of less than 250 in England and Wales ( 1,000 in Greater London), or of less than 6 per week in Scotland. The information and agreement contained in this Kit will allow you to grant a simple Assured Shorthold Tenancy or a Short Assured Tenancy, but this Kit does not claim to be comprehensive. Should you require further information on lettings in England and Wales, Lawpack s Complete Guide to Residential Lettings book discusses the subject in greater depth, and/or seek legal advice. Note that in Scotland, private landlords must be registered with the local authority. The cost is currently 55 per local authority plus 11 per property. You can make a paper application but you get a 10 per cent discount if you make your application online at www.landlordregistrationscotland.gov.uk. If you are making multiple applications to different local authorities, there is a further discount of 50 per cent. Letting the whole or part of a property The tenancy agreement forms in this Kit can be used in two general circumstances: 1 if you are letting a house or flat as a whole to either one or several tenants; or 2 if you are letting out individual rooms in a shared house or flat, where the tenant has exclusive occupation of part of the property (e.g. his own bedroom) and shares the rest of the property with the other tenants. Normally this type of agreement will have one tenant only, however couples may sometimes wish to share a room in a shared house. What are the advantages and disadvantages of each? Whole house or flat Advantages There is only one agreement for the whole property, which reduces the paperwork. If there is more than one tenant, they all have what is called joint and several liability for the whole of the rent. This means that if one of them fails to pay his share, the landlord is entitled to recover this from the other tenants (and will be entitled to get a County Court Judgment in England and Wales or Sheriff Court Decree in Scotland against them if they fail to pay). General administration is simpler and easier from the landlord s point of view.
7 All bills can be put into the names of the tenants. Disadvantages There may be problems if one of the tenants decides to leave before the others. Although the other tenants are liable for the whole of the rent, there may be difficulties in getting them to pay this, even if you get a County Court Judgment (in England and Wales) or Sheriff Court Decree (in Scotland) (and most landlords would prefer not to go to court). There may also be problems getting a replacement tenant who is acceptable to both you and to the other tenants. If the tenants are on Housing Benefit they will be entitled to slightly less each, than if the rooms were let on an individual basis. Individual rooms Advantages If one of the tenants leaves, you have more control over his replacement. If the tenants are claiming Housing Benefit, they will be able to claim more per room than if the property is let as a whole. Although there may be more paperwork overall, this system will be easier to administer if you have a number of individual tenants who will be moving in and out at different times from each other, as it will not be necessary to ask all the tenants to sign a new joint agreement every time a tenant changes. Disadvantages More paperwork and administration for the landlord. If one tenant leaves, you cannot claim his rent from the other tenants while a replacement tenant is being found. There may be problems about the use of the common space if tenants are not compatible. It may be difficult for household bills (such as electricity) to be put in the name of the tenants, which means that you will be liable for them if the tenant does not pay you. Where there are multiple tenants on separate agreements the landlord will have the overall liability for paying the Council Tax.You may therefore wish to have the tenants pay their share of the Council Tax to you and then you arrange to pay it yourself. The decision on which type of tenancy to create will depend to a large extent on the type of property being let, the type of tenant you are catering for and local conditions generally. When completing the Assured Shorthold Tenancy for England & Wales: if your tenancy is for the whole house or flat, cross out the Designated Room section. On page 2, delete the paragraph in square brackets at the top where indicated. Amend clauses 1.2 and 5.2 by deleting the text in the second set of square brackets. if your tenancy is for a room in a shared house, on the front page you will need to specify which part of the property is to be occupied exclusively by the tenant (i.e. the Designated Room) and which parts of the property he is going to share with the other tenants. The Designated Room should either be given a name or number (e.g. Room 1, or The Blue Room ), or its position in the property be specified (e.g. The back bedroom on the first floor ). Regarding the Common Parts, these will be presumed to be the parts of the Property which you are not letting to other people. You should provide the Tenant with a letter stating which parts of the Property they are permitted to use by description or simply state the rest of the property excluding.... You should be careful to
8 Residential Letting be precise in these descriptions. You are permitted by the tenancy agreement to vary the Common Parts that the Tenant has the right to use from time to time by sending them a letter but you cannot use a change in the available rooms to put pressure on the Tenant by denying them basic facilities in order to make them pay rent or move out. Before completing the agreement, you should read the rest of the notes in this Manual. Houses in multiple occupation ( HMOs ) Whatever type of tenancy you create, if you are letting to three or more unrelated people (i.e. not of the same family) who share living accommodation, then it is likely that the property will be an HMO: a house in multiple occupation. This is as a result of the Housing Act 2004, which changed the previous definition of an HMO. The significance of letting a property which is an HMO is that, in addition to the normal legal obligations which landlords have to comply with (discussed later in this Manual), there are additional management regulations which apply just to HMOs. For example, contact details for the landlord or his manager must be made available to all occupiers and be displayed in the property; there are various provisions regarding fire safety, the general safety of occupiers, and the provision of utility services. For instance, you will need to get all electrical installations inspected every five years by a qualified electrician and obtain a certificate to prove this. This, along with the gas safety certificate (see later in this Manual) must be produced for the local authority within seven days of a written request. Other regulations relate to keeping the common parts and the outside of the property in good order and to the disposal of rubbish. Failure to comply with these regulations is a criminal offence, although tenants/occupiers will also be committing a criminal offence if they fail to cooperate with their landlord or obstruct his arrangements for complying with the regulations. Landlords of some HMOs will need to apply for a licence for the property from their local authority. These are mostly the larger HMOs, i.e. buildings consisting of three or more storeys and occupied by five or more tenants in two or more households. However, local authorities also have power to widen the remit of licensing to include smaller properties. If you run an HMO, you should contact your local authority to see what the situation is in your area, and whether you will need to be licensed. You should also ask to go on their mailing list so you can be kept informed of future developments. There are stringent penalties for non-registration of relevant properties and for breaching licensing conditions, which include fines of up to 20,000. Landlords of relevant properties that are not registered will not be able to recover possession under the notice only procedure in section 21 of the Housing Act 1988, and local authority benefit offices and tenants may be able to apply for rent repayment orders to recover up to 12 months worth of rent or housing benefit. Further information regarding the new HMO rules and licensing can be obtained from the Department for Communities and Local Government (www.communities.gov.uk). If you are not certain whether the HMO regulations will apply to your property and/or whether your property needs to be licensed, you should speak to your local authority (either the private housing section or the environmental health section) who will advise you. The Housing Act 2004 does not apply in Scotland. HMO licensing already exists for certain properties in Scotland, but this is currently subject to change under the Housing (Scotland) Act 2006, although this is yet to be properly introduced. Contact your local authority for up-to-date information. More information can be found from a leaflet produced by the Scottish Government, available from: www.scotland.gov.uk/publications/2004/07/19731/40886.
9 HMO Planning Consent In England & Wales, from 6 April 2010 amendments were made to the Town & Country Planning Act (Use Classes) Order 1987 that altered the planning categories for residential property. The normal C3 planning category is for single households of any size. An HMO will fall into the new C4 planning class, and the change from C3 to C4 use will require planning consent. Failure to obtain planning consent could lead to prosecution. Consult your local authority planning department for more information. Consents before letting If you have a mortgage or are going to let a leasehold flat, you need to check to see if you need to obtain permission from your mortgage company and/or your landlord before letting. If consent is not obtained, this could have serious consequences, including the lender or landlord terminating your mortgage or taking possession proceedings against you. Your mortgage company or landlord may impose conditions on any letting such as the type of tenants you may let to, the term of the tenancy, or the minimum rental amount; needless to say, you should be careful to comply with these restrictions. Normally, you should include any specific requirements in the tenancy agreement as special clauses. The easiest way of doing this would be to require the tenant to keep to the restrictions imposed by the mortgage company or landlord, and make reference to the letter which informs you of the restrictions. You should then append these letters to the tenancy agreement. EPCs Since October 2008, under the Energy Performance of Buildings Regulations, landlords have been required to provide prospective tenants with an Energy Performance Certificate (EPC). This must be obtained from an accredited Domestic Energy Assessor (there will be a fee involved). To find an Energy Assessor in your area, visit www.whatstheidea.org.uk. EPCs will enable prospective tenants to see at a glance how energy-efficient and environmentally friendly rented properties are and get a rough idea of how much they cost to heat and light. You do not have to carry out any improvements to your property as a result of any recommendations made by the Energy Assessor, however your property is likely to be more attractive to tenants if it is energy-efficient. The EPC must be provided, free of charge when property particulars are given to prospective tenants or when they are first shown round the property. At the very latest it must be provided before the tenancy agreement is signed. Failure to comply with the regulations may result in a penalty charge notice being served, which currently carries a fine of 200. The Tenancy Deposit Protection Scheme Most landlords will want to take a damage deposit to have a fund to draw on at the end of the tenancy if the property needs repairs or the contents need repairing or replacing. It is normal for a landlord to take between one and two months rent for this purpose. However, the Housing Act 2004 set up a new Tenancy Deposit Protection Scheme in England and Wales (this does not currently apply to Scotland). Since 6 April 2007, all landlords in England and Wales who take a damage deposit for an Assured Shorthold Tenancy after 6 April 2007, or who grant a new tenancy to a tenant where a damage deposit was taken before 6 April 2007, need to arrange for the deposit to be protected under one of the three government-authorised Tenancy Deposit Schemes.
10 Residential Letting There are two types of scheme: Custodial scheme This is where the landlord must pass the deposit money over to the scheme administrators who will hold it during the period of the tenancy. This type of scheme is free of charge (the running costs will be paid by the interest paid on the deposit money). There is only one custodial scheme operating at present. This is called The Deposit Protection Service Ltd, with a website at www.depositprotection.com. You can contact them by telephone on 0844 4727 000. Insurance-based schemes This is where the landlord is entitled to hold the deposit money. However, the landlord will have to pay a fee to the scheme administrators and comply strictly with the scheme rules. The scheme administrators have to have insurance cover in place to protect them if the landlord fails to pay over the money, in which case they have to pay the tenant themselves. There are two insurance-based schemes: MyDeposits and the The Dispute Service Ltd. MyDeposits is sponsored by the National Landlords Association and is aimed mainly at landlords. It has a website at www.mydeposits.co.uk and the telephone number is 0844 980 0290. The other scheme is run by The Dispute Service Ltd and is supported by ARLA, the NAEA and the RICS. It is aimed mainly at lettings agents and has a website at www.thedisputeservice.co.uk. Their telephone helpline number is 0845 226 7837. However, both schemes are set up to protect deposits held either by landlords or by agents. They are slightly different in the way that they operate and the fee structure is different. Note that the The Dispute Service Ltd have special terms and conditions that they will require their members to use in their tenancy agreement which are not included in this Lawpack agreement. All of the schemes will have their own rules, and you will be required to act in accordance with these at all times. All the scheme administrators will prefer information to be provided electronically via their websites, and although paper applications will be accepted, they are not encouraged, and with the insurance-based schemes they may incur an extra charge. For further information please contact the scheme administrators direct. The procedure under the schemes You should complete the deposit section of the tenancy agreement on page 1, to show the amount of the deposit. You are required under the regulations to provide the tenant with certain prescribed information within 30 days of the deposit having been paid to you. With the MyDeposits scheme you will be sent a form which you must sign and then send on to the tenants. You must also download and supply the MyDeposits leaflet for tenants. This must be done within 30 days of receiving the deposit. If you use the DPS scheme you must download and complete the prescribed information form found on the DPS website. You must then sign this form and give it to your tenants. You must do this within 30 days of registering the deposit. Failure to register the deposit and supply the correct information to the tenants within 30 days of receipt of the deposit can have severe financial consequences. The forms that you sign have a space for the tenant to sign as well. The tenant does not have to sign the form and it will not be invalid if they decline to do so. At the end of the tenancy, you should try to agree with the tenant whether any deductions should be made from the deposit and if so how much. Most of the deposit protection schemes require you to notify
11 the tenant within ten days of the end of the tenancy if you wish to make deductions from the deposit. Hopefully, the property will have been left in a good condition and you will be able to repay all the deposit to the tenants. If agreement can be reached: For deposits protected under the custodial scheme, you will need to inform the scheme administrators and follow the procedure prescribed under their rules. For deposits protected under one of the insurance-based schemes, you should pay the money to the tenants and inform the scheme administrators in accordance with the scheme rules that the tenancy has now ended. If you are unable to reach agreement with the tenant you should inform the scheme administrators following the procedure laid down under their rules. If you are holding the money under one of the insurance-based schemes, you will also have to pay to the scheme administrators the part of the deposit which is in dispute. The other part should be paid to the tenant or kept by you as agreed between you. The dispute will then be referred to the scheme s adjudicators. You can, if you wish, have the dispute decided by a County court, however this is not advisable as it will take far longer to resolve and will involve court fees. The adjudication service provided under the Tenancy Deposit Scheme is free of charge. You will need to provide full details of your claim under the damage deposit to the adjudicator together with a copy of the tenancy agreement, a copy of the inventory and any other evidence of the condition of the property such as photographs. Note that although an inventory is not mandatory under the Tenancy Deposit Scheme, your chances of success in an adjudication will be very slight if you do not have one. You can purchase a Property Inventory Kit from Lawpack at www.lawpack.co.uk. You will also be expected to provide invoices for all repair and other work done, and receipts for replacement items purchased, and any other expenses you may have incurred which you are claiming from the tenant. The adjudicator will not come and seek further evidence from you if you do not provide these initially. Therefore, you must ensure that you provide full evidence including receipts, quotes, and estimates for all amounts you are claiming. The ajudicator will then normally decide the case on the paperwork. The deposit money will be paid by the scheme administrators in accordance with the ajudicator s decision within 10 days of being informed of it. The possibility of appeal from the adjudicator s decision is very limited. You may complain to the scheme if you believe that the adjudicator has not followed the procedure properly. If the tenant disappears at the end of the tenancy leaving no forwarding address, you should contact the scheme administrators and follow the rules for the particular scheme you are using. However, if the tenant left leaving damage and/or rent arrears, you will be able to claim these from the damage deposit, although the case may have to be referred to adjudication first. Penalties for non-compliance The government has put in several measures to prevent landlords avoiding the Tenancy Deposit Scheme. Note the following points: Although the scheme only applies to deposits taken after 6 April 2007, it may also apply to deposits taken before 6 April 2007. It is advisable for a landlord to register any deposit they are holding for an Assured Shorthold Tenancy. The Housing Act 2004 prohibits deposits which are not money.
12 Residential Letting If you take a deposit for an Assured Shorthold Tenancy which is not protected under one of the three schemes, your tenants can go to court asking for: the deposit to be returned to them; or the deposit to be protected under the custodial scheme; and an order that you pay them a sum equal to three times the amount of the deposit money, within 14 days. Note also that you will not be entitled to evict the tenant using the notice-only procedure under Section 21 whilst the deposit is not protected under one of the statutory schemes. Tenancy Deposit Scheme in Scotland Tenancy deposit protection will come into force in Scotland from 2 July 2012 under the Tenancy Deposit Schemes (Scotland) Regulations 2011. This requires that deposits for all tenancies (not just Short Assured Tenancies) in Scotland will need to be placed into one of the approved protection schemes. This legislation will eventually apply to all tenancies currently in force, even if they are not renewed; so deposits for tenancies already in force will need to be protected on renewal, if that renewal occurs after 2 October 2012 and even if there is no renewal the deposit will still need protecting by May 2013 in all cases. Currently, only the deposit scheme operated by the Letting Protection Service Scotland (www.lettingprotectionscotland.com) has been approved by the Scottish Executive, but it is expected that two other schemes, operated by SafeDeposits Scotland (www.safedepositsscotland.com) and MyDeposits Scotland (www.mydepositsscotland.co.uk), will be approved by 2 July 2012. Up to date information on the implementation and approval process can currently be found on the webpage of the Scottish Executive currently at: www.scotland.gov.uk/topics/built-environment/housing/privaterent/government/sgtd1. The Scottish regulations require that the deposit be paid into one of the approved schemes within 30 days of receipt. It is also necessary to give the tenant certain information prescribed by regulation 42 of the deposit regulations. To assist you in doing this a template form is shown at the end of the Manual, a version of which is also available as a download see page 4 for details. If the deposit is not protected and the required information not given to the tenant inside the required timescale, or at all, then the tenant is entitled to apply to the Sheriff Court for this to be done, and for financial penalties to be levied against the landlord. Avoiding the Tenancy Deposit Protection Scheme Some landlords are unhappy about using the Tenancy Deposit Protection Scheme and seek alternatives to taking a deposit which will be subject to it. Generally, these alternatives are unsatisfactory. Below are some of the ways that landlords have tried to avoid the Tenancy Deposit Scheme: Taking a deposit which is not money. This is specifically prohibited under the Housing Act 2004 in England and Wales, and in Scotland under the appropriate regulations. Letting under an Assured rather than an Assured Shorthold tenancy. If this is done the landlord need not comply with the Tenancy Deposit Protection Scheme. However, it is most inadvisable, as the notice only shorthold ground for possession will no longer be available. Landlords doing this may find it impossible to evict their tenant in the future. In Scotland, this will not be effective as the deposit protection provisions apply to all tenancies.
13 Taking a guarantee. As no money changes hands, guarantees are not subject to the Tenancy Deposit Protection Scheme rules. If the guarantee is from a Local Authority under one of their bond schemes, this is an excellent alternative. However, a guarantee taken from a friend or relative of the tenant may be less satisfactory. The guarantor may prove difficult to find when the money is needed, or may refuse to pay, making time-consuming County court proceedings necessary. If it turns out that the guarantor has no assets it may be difficult to enforce this. Taking two months rent in advance instead of a month s rent and a deposit. This seems superficially satisfactory, as the tenant will normally pay the same amount of money at the start. However, as the money is for rent rather than damage, it cannot be used for anything other than rent, and the landlord will be left without a fund for damages at the end of the tenancy. Be warned also that in each case the Court will consider the situation and may well consider rent paid in advance to be a deposit which requires protection. Insurance-based alternatives. These have been developed by some insurance companies. Generally they will only be available where tenants have passed the insurance companies referencing procedure, so cannot normally be used for the tenants most likely to cause problems. Putting up the rent instead of taking a deposit. This is a valid option, however it may make the property less attractive to tenants. Also, if the tenant successfully challenges the rent to the Rent Assessment Panel (on the basis that it is not a market rent), they have the power to reduce the rent to a market figure for the remainder of the fixed term. In this case the landlord will be left with a lower rent and no deposit. Finally, you may decide not to take any deposit at all. Note that the alternatives discussed above do not give the tenant the incentive to look after the property that the prospect of losing their deposit will provide. In practice, most of the methods of avoiding the system are probably more trouble than simply registering the deposit as required. The Inventory As mentioned above, having a proper detailed inventory of the property s condition and contents is very important, and landlords will find it difficult to make any recovery from the damage deposit if this is not done. You can purchase a Property Inventory Kit from Lawpack at www.lawpack.co.uk. You should go through the house room by room, noting on the Property Inventory all the items in each room. Even if you are letting a property unfurnished it is a good idea to have an inventory to record the condition of the walls and carpets, etc., in case of future dispute. You should also make a note of the condition of the items on the Property Inventory, for example, if there is a stain on the carpet or rug, so that the tenant cannot assert that the damage they have caused existed at the start of the tenancy. The Property Inventory should be checked with the tenant before he moves into the property. You then retain the signed copy of the Property Inventory which you should copy for your tenants to assist them at the end of the tenancy. One copy per house is sufficient. When the tenant is about to leave, the landlord (or his agent) should meet him at the property and go through the Inventory with him again, room by room. If there are any missing or damaged items, it is often possible to sort out how much should be deducted from the damage deposit there and then. If you do not want to prepare an Inventory, you can delete the Inventory section on the first page of the Tenancy Agreement. However, we strongly recommend that an Inventory be prepared for all agreements. Even if the property is let unfurnished, an Inventory can contain useful information about the condition of doors and windows, the paintwork, light fittings and carpets.
14 Residential Letting Whether or not you are preparing an Inventory it is a good idea to take photos of all areas of the property. With a modern digital camera this is particularly easy and it is simple to place all the photographs on a CD and to give them to the tenant at the start of the tenancy. Carrying out a similar process at the end will help supplement the tenancy with strong visual evidence of the condition of the property. This process works especially well for gardens which are particularly hard to describe effectively in an Inventory. If you do not have time to prepare an Inventory yourself, there are many professional Inventory clerks who can do this for you, for a fee. You can locate some from The Association of Independent Inventory Clerks (AIIC) who have a website at www.theaiic.co.uk. Guarantors If you are worried about a prospective tenant s ability to pay the rent, it might be wise to take a guarantee from a third party guarantor. For example, guarantees are often taken from parents of students when they sign tenancy agreements. However, you should take up references and do credit checks on guarantors, as you would on a tenant; it is no good having a guarantor who is as impecunious as a tenant. A rent guarantee agreement is available online from Lawpack at www.lawpack.co.uk. Terms in the tenancy agreement One of the main reasons for having a form of tenancy agreement is to set out the landlord s and tenant s obligations to each other (known by lawyers as covenants ). Having a clear and comprehensive tenancy agreement can help prevent future disputes. The Lawpack tenancy agreements included in this Kit have the main terms on the front page and standard terms in the middle two pages. You should read these carefully. Some of the clauses included are discussed briefly below. For a more detailed consideration of the clauses that go into a tenancy agreement in England and Wales, see Lawpack s The Complete Guide to Residential Lettings available from Lawpack at www.lawpack.co.uk. Date of agreement: The agreement can be dated at any time after everyone has signed it. This date should be the same as the date on which the term is to begin. The property address: It is also useful to add here details of any garages or additional parking. The designated room: Applies only if your tenancy is for individual rooms. Delete if not applicable. The landlord s address: For Assured Shorthold Tenancy agreements it is important that the agreement gives an address for the landlord in England or Wales. This is because section 48 of the Landlord and Tenant Act 1987 provides that the rent does not have to be paid until an address in England and Wales for the service of notices and documents has been provided to the tenant. If the landlord is resident abroad or living in Scotland, there should always be a contact address given in England or Wales. If this is not possible, the landlord should consider using a letting agency. Although not a legal requirement for letting properties in Scotland, it is normal practice and prudent to provide a contact address in Scotland. The tenant: Make sure that all the tenants are listed on the agreement and that they all sign the agreement.