Renting a property in the UK

If you are planning on renting property in the UK, here is our brief guide to give you an idea of how the process works and what to look out for. We will look at the following areas:

  1. Finance

  2. Choosing the right property

  3. Viewings

  4. Making an offer

  5. The legal aspects

  6. Tenancy types

  7. Security deposits

  8. Inventories, check-ins and check-outs

1. Finance

Budget

Renting a property can be a costly business – in the UK it costs more to rent a property than it does to own one, so you need to make sure you crunch your numbers correctly to find out exactly how much you can afford. List all of your outgoings in detail so you can build up a realistic picture of what rental payments you can afford each month. Remember to include council tax, utility bills, contents insurance and also any fees the letting agent charges – usually paid up front.

You’ll need to include expenses like:

  • Council tax

  • Utility bills – gas, electricity, water

  • Contents insurance

  • TV / broadband / phone

  • TV licence

  • Mobile phone

  • Shopping

  • Entertainment / holidays

  • Transport – public transport, fuel, car insurance, car tax

  • Gym and club memberships

  • Credit agreements

Letting agency fees

There will be a number of fees and expenses you need to pay when you rent a property. Some of the costs do vary from agent to agent and it does depend on the location – in high demand areas such as London or Aberdeen, for example, expect to pay relatively high administration charges.

What you will need to pay:

  • Reservation fee / holding deposit – Once you have decided which property you would like to rent, you will be required to pay a holding fee to take the property off the market. You should pay this fee as soon as possible. Expect to pay in the region of an amount equivalent to one week’s rent – although some agents may charge up to two weeks’ rent.

  • Referencing fee – Before any tenancy agreement is drafted, you must pass a reference check. Expect to pay anything between £25 and £150 for this. Yes, it does vary that much.

  • Tenancy agreement fee – Some agents may charge a fee for drawing up the tenancy agreement. Expect to pay in the region of £200 to £250 for this.

  • Check-in / check-out fee – It is usual for the landlord to pay for one of these and the tenant to pay for the other. Expect to pay in the region of £100 to £200.

  • Security deposit – This amount is held as security against your performance as a tenant. It is usually equivalent to four or six weeks’ rent. If you have a pet, you will be charged a higher security deposit.

  • First month’s rent – This must be paid to the agent in cleared funds before you take possession of the property.

Stamp duty

If you rent a property with a rental property above a certain amount, you will be required to pay stamp duty.

You must pay Stamp Duty Land Tax (SDLT) at a rate of 1% on the portion of the annual rental amount above £125,000 if you rent a property in England, Wales and Northern Ireland.

The amount used to calculate the liability is called the “Net Present Value” (NPV) which works out to be slightly less than the actual annual rent. You can find out if you need to pay stamp duty using the SDLT lease transactions calculator.

If stamp duty is not payable in the first year but upon renewal of the tenancy for a further term the NPV exceeds £125,000, stamp duty becomes payable.

You can fill in the SDLT return online and calculate and pay any tax due.

If Celsium is managing your tenancy we will manage this on your behalf.

In Scotland, you must pay Land and Buildings Transaction Tax (LBTT) at a rate of 1% on the portion of the annual rental amount above £150,000.

The amount used to calculate the liability is called the “Net Present Value” (NPV) which works out to be slightly less than the actual annual rent. You can find out if you need to pay stamp duty using the LBTT lease transactions calculator.

If stamp duty is not payable in the first year but upon renewal of the tenancy for a further term the NPV exceeds £150,000, stamp duty becomes payable.

You can fill in the LBTT return online and calculate and pay any tax due.

If Celsium is managing your tenancy we will manage this on your behalf.

2. Choosing the right property

Where to look

There are various ways in which you can find a property to rent:

  • Local newspaper advertising – Thursday is usually property day

  • Directly with the letting agent – Either by visiting or using their website

  • Using property portals – Rightmove, Zoopla and OnTheMarket

By far the most efficient way is by using the three property portals as you will be able to see all properties available through letting agents. You have the option to register for alerts when new property matching your criteria comes on the market.

As long as you go through a reputable letting agent that has signed up to one of the redress schemes (as they are legally obliged to do), you should have a good experience; if not, you are able to complain through the appropriate redress scheme – more on that later.

The area

Before you even start looking for property you need to decide where you wish to rent. Ask yourself the following questions:

  • Do you prefer a town, urban or rural setting?

  • How important are transport links?

  • How far do you want to be from work?

  • Do you prefer to walk to local amenities?

  • Which local amenities do you need?

  • Are school places available in the area?

Once you have shortlisted some areas, it can be a good idea to speak to colleagues to get an idea of reputation and spend some time driving or walking around the areas at different times of day, including evenings. You can find a lot of information about different areas on the web these days, but Zoopla provides a reasonable level of information via its “Local Info” tabs, such as star ratings for Community & safety, Entertainment & nightlife, Parks & recreation, Restaurants & shopping, Schools & public services, Transport & travel, giving you a good overview of the area.


Remember, you can’t change the area without moving home again and that means waiting until the end of the tenancy or exercising your break clause which is explained later.

The house

For the property portal or letting agent to provide you with details of suitable properties, you will need to let them know in which areas you are looking and what type of property you prefer.

Consider the following:

  • House or apartment

  • New-uild, modern or traditional

  • Furnished v. unfurnished v. part-furnished

  • Parking arrangements

  • No. of public rooms / separate diner

  • No. of bedrooms / bathrooms / en-suite

  • Garden size and maintainability

  • Conservatory

3. Viewings

Appointments

If you happen to stumble upon a property you like, never approach the property unannounced. The property may be empty, currently tenanted or the landlord may still be living there. Most occupiers will be unhappy about viewers appearing unexpectedly on their doorstep, and you should always consider the security aspect, so always contact the letting agent to make a viewing appointment. The occupier will be more welcoming and likely to answer questions if they have advance warning and aren’t caught off guard.

When you are on viewings, it is worth taking photos with your smartphone, as it can be difficult to recall specific details once you have left the property.

If time allows, have a second viewing of any properties you like and try to visit at different times of day before you make a final decision. You will definitely spot any issues more readily during a second visit and you will get a better impression of the surrounding area.

Questions to ask

It is always a good idea to attend a viewing forearmed with a list of questions you should ask. You may have your own list already prepared but here are some pointers to get you started:

  • How long has the property been on the market?

If it has been on the market for a long time, does this indicate a problem with the property or neighbourhood?

  • When is it available from?

Within a reasonable timescale or a little further down the line?

  • Are any bills included?

Some apartments have a communal supply.

  • How much are the monthly bills?

If the current tenant can answer this it is good for budgeting.

  • Will the landlord consider x, y or z?

If there is something missing there is no harm is asking for the landlord to provide it.

  • What is the landlord like?

It is always good to get any current tenant’s opinion, especially in terms of maintenance.

4. Making an offer

Submitting the offer

Once you have decided you want to make an offer for a property, you need to move quickly before anybody else takes the property. You can offer the asking price but there is no harm in offering a little below – landlords expect tenants to negotiate on the rent these days. Just be mindful of what the market is doing – if tenant demand is outstripping supply, you will not have much room (if any) for negotiation.

Offer accepted

Once your offer has been accepted you will need to pay a reservation fee to take the property off the market. You need to pay this as soon as possible as it is a question of first come first served – if somebody else pays the fee before you do, they get the property.

One point to note is that the reservation fee is non-refundable if you do not proceed with the tenancy and the only way you can get it back is if the landlord changes his mind or the referencing is not successful. Be mindful to check the letting agent’s terms and conditions as they will include details of what costs will be withheld in the event of a refunded reservation fee – e.g. the cost of third party referencing.

Once you have paid the reservation fee, the agent will conduct a reference on you before drafting the tenancy agreement and arranging a check-in at the property.

Referencing

UK resident

If you are a UK resident, the referencing procedure is generally straight forward, although do be prepared to share some personal and financial information.

The agent will usually send an internet link for you to complete the information required and you will also be required to provide proof of identification, e.g. passport or driving licence with photo card. The process varies from agent to agent, depending upon which referencing company they are using, but here is a list of what you will probably need to provide either to the letting agent or to the referencing company:

  • Personal details

  • Credit history details

  • Photo ID

  • Bank statements (last 3 months)

  • Previous property details (last 3 years)

  • Reference from your employer

  • Reference from previous landlord

  • Next of kin details

Overseas applicant

If you are a non-UK resident, the referencing procedure is generally the same as for a UK resident, although you may be asked to supply a little more information.

The agent will usually send an internet link for you to complete the information required and you will also be required to provide proof of identification, e.g. passport. You will be asked to provide personal, financial information as part of the referencing process. Whilst this may not be the norm in your home country, it is standard practice in the UK. The process varies from agent to agent, depending upon which referencing company they are using, but here is a list of what you will probably need to provide either to the letting agent or to the referencing company:

  • Personal details

  • Credit history details

  • Passport / visa

  • Confirmation of employment letter from your employer

  • Bank statements (last 3 months)

  • Previous property details (i.e. rented or owned)

  • Proof of property ownership (e.g. addressed utility bill, bank statement, legal document)

  • Reference letter from previous landlord

  • Reference letter from your bank

  • Personal reference

  • Next of kin details

Once the referencing has been completed successfully, the agent will draw up a tenancy agreement, confirm a tenancy start date with you and arrange a check-in. Make sure you ask to see a draft tenancy agreement before you sign – do not be pressured into signing quickly.

One thing to bear in mind is that the terms of a tenancy must be fair and balanced. For example, if there is a clause stipulating that the property must be professionally cleaned at the end of the tenancy and at the tenant’s expense, there should be a corresponding and equivalent clause relating to professional cleaning at the start of the tenancy and at the landlord’s expense.

5. The legal aspects

Your obligations

Your obligations as a tenant will be clearly outlined in the tenancy agreement. However, the main points you need to do are:

  • Pay the rent in time

  • Pay your bills

  • Respect your neighbours

  • Look after the property (but not maintain it)

There is a term that states you must use the premises “in a tenant-like manner” – it basically means treating the property as though it were your own home. So, if you block the sink, it is your responsibility to unblock it. If the radiators need bleeding, it is your responsibility to bleed them. If the boiler pressure dips (as happens from time-to-time) it is your responsibility to top it up. If you call out the letting agent or landlord to attend to such matters, expect to be charged for it.

The landlord is responsible for repair and maintenance to the property as a result of wear and tear or any damage or failure on the premises which is not a result of the tenant’s or any guest’s actions or inactions.

One point to note is that in the past I have seen tenants refuse to attend an appointment for a boiler repair as they claim it is not their problem. Using the property in a tenant-like manner means that you as a tenant are responsible for allowing access to any work persons. If in any doubt ask yourself the question, “What would need to happen if I were the homeowner?”

The landlord’s obligations

This section of the tenancy agreement may seem alarmingly brief in comparison to that relating to the tenant’s obligations. Do not be alarmed – the majority of the landlord’s obligations are cover by statutory law and rather than quote reams of text, it is usual to just quote the the main sections of the legislation.

In a nutshell, this is what your landlord is required to do:

  • Allow you “quiet enjoyment” - The landlord must not hassle you or keep coming round to the property unnecessarily. If the landlord wishes to visit the property for an inspection or repair, they must give you at least 24 hours’ notice.

  • Insure the property – Bear in mind that you will need to take out cover for your own possessions and it is prudent to take tenant’s insurance that covers any items of the landlord against accidental damage.

  • Maintain the property – Pay for the cost of repairs to the structure and exterior, as well as electrical, heating, hot water and sanitary installations.

  • Return the deposit – Unless agreed deductions are made from the security deposit, the landlord must return this to the tenant in full.

  • Only evict with a court order – The landlord cannot throw you out of the property or change the locks or intimidate you – this is illegal. To gain possession of the property, the landlord must observe a strict process.

  • Furniture and Furnishings (Fire) Safety Regulations 1988 – The landlord must ensure that all soft furnishings, e.g. upholstered seating, sofa beds, bean bags, mattresses, pillows, cushions, etc. comply with the regulations. Items should have a fire safety label attached.

  • The Gas Safety (Installation and Use) Regulations 1998 – The landlord must carry out a gas test annually. This must be carried out by a Gas Safe engineer. This is to ensure that gas appliances, fittings and flues are safe for use. You should receive a copy of the gas safety certificate.

  • The Smoke and Carbon Monoxide Alarm (England) Regulations 2015 – The landlord must fit a smoke alarm on every storey of the property and a CO detector in every room that contains a solid fuel burning appliance, e.g. open fire, log burner. They must be tested and working at the start of the tenancy.

  • Electrical Equipment (Safety) Regulations 1994 / The Consumer Protection Act 1987 – Although there is no legal requirement for the landlord to have tests carried out and provide a certificate, they must ensure that the electrical system and supplied electrical appliances are safe for use.

6. Tenancy types

Assured Shorthold Tenancies and Short Assured Tenancies

Your new tenancy is likely to be called an Assured Shorthold Tenancy (AST) if you are renting in England and Wales, or a Short Assured Tenancy in Scotland. They are both very similar to each other.

An AST is usually for a minimum of 6 months, though you may in some areas be required to take a property for a minimum of 12 months.

Where you can, try to incorporate a “break clause” – this allows you to end the tenancy before the expiry of the fixed term. Sometimes, the landlord will only accept a “business break” whereby you can only end the tenancy early if you are required to move away from the area due to work reasons.

Under an AST, as long as you as a tenant (or your guests) have not breached the terms of the tenancy, the landlord cannot regain possession of the property until after the end of the fixed term, so you have some security of tenure.

If you breach any of the terms of the tenancy, the landlord has the right to apply to the courts to end the tenancy. The landlord can only take this course of action if he has protected your security deposit in accordance with the government-backed tenancy deposit scheme.

After the fixed term has ended (or six months if there was no fixed term), the landlord is able to regain possession of the property by serving at least two months’ notice in writing. This must be in a prescribed format known as the Section 21 notice.

Again, if the landlord has not protected your security deposit in accordance with the government-backed tenancy deposit scheme, the Section 21 notice is not valid and you do not have to leave the property.

One point to note is that if the annual rent is more than £100,000, the tenancy is in a company's name or the landlord lives in the property, it cannot be an AST and a different tenancy agreement must be used – a common law agreement.

Common Law Tenancies

If the tenant is a company (e.g. your employer is paying the rent for you), or if the landlord lives in the rental property, or if the annual rent is above £100,000, the tenancy can no longer be an AST. The tenancy becomes a Common Law Tenancy which is basically a contractual agreement rather than a statutory agreement and all references to the Housing Act 1988 (amended 1996) (amended 2004) and tenancy deposit protection are removed as they do not apply.

The provisions of the Landlord and Tenant Act 1985 still apply as does the Protection from Eviction Act 1977, so the landlord is still obliged to maintain the property in the same manner as though it were an AST, and the landlord must apply for a court order to evict the tenant in any case where the tenant refuses to leave the property.

7. Security deposits

A security deposit is taken as security against your behaviour in accordance with the provisions of the tenancy agreement. At the end of the tenancy, certain deductions may be proposed against any breaches of the tenancy agreement. Items that are usually covered include:

  • Any damage to the property and fixtures and fittings caused by the tenant or arising from any breach of the terms of this agreement by the tenant

  • Any damage caused or cleaning required due to pets, animals, reptiles, birds, or fish occupying the property

  • Any instalment of the rent which is due but remains unpaid at the end of the tenancy

  • Any sum repayable by the landlord or the agent to the local authority where housing benefit has been paid direct to the landlord, or the agent, by the local authority

  • Any other breach by the tenant of the terms of the agreement

What you might also see are clauses similar to these:

  • Any unpaid account or charge for water including sewerage and environmental charges, electricity or gas or other fuels used by the tenant in the property

  • Any unpaid council tax

  • Any unpaid telephone charges

These are not valid reasons for deduction as they relate to contracts between the tenant and a third-party.

Costs can only be claimed against the security deposit if the landlord can demonstrate incurring a loss as a result of the tenant’s non-payment of the bills. These clauses crop up time and time again but quite simply, they are not valid.

For an AST, the landlord has a legal obligation to protect the tenant’s security deposit through the government-backed tenancy deposit scheme. There are three operators to the scheme in England and Wales:

 For a SAT, the landlord has a legal obligation to protect the tenant’s security deposit through the government-backed tenancy deposit scheme. There are three operators to the scheme in Scotland:

Your landlord or letting agent must put your deposit in the scheme within 30 days of getting it.

Your landlord must return your deposit within 10 days of you both agreeing how much you’ll get back.

If you’re in a dispute with your landlord, then your deposit will be protected in the scheme until the issue is sorted out.

8. Inventories, check-ins and check-outs

Inventory

Before you move into your rental property, the landlord should have had carried out a detailed inventory and schedule of condition. This should list all rooms in the property, all items in them, and their condition. The inventory should also include any garden or outbuildings. The inventory, check-in and check-out reports are used at the end of the tenancy to establish whether any damage has occurred and to what degree the tenant is liable for it, so they should be accurate and include clear photographs.

Check-in

At check-in you will be required to sign to testify that you agree to the findings and descriptions listed in the inventory, so it is important that either you or a representative are there.

Sometimes, you will be left a copy of the inventory to check and return to the agent or landlord. Make sure you do check, as you will be held liable for any damage at the start of the tenancy that was not listed in the inventory.

Check-out

The check-out is the inventory process repeated at the end of the tenancy. Again, this should be as accurate as possible and you should attend or have a representative attend to ensure that what is documented is a true reflection of the condition.

Deposit disputes

If you have left the property immaculately, and there is no further damage noted in the check-out report against the check-in report, you should receive your security deposit back in full.

If there is some damage noted, the landlord is permitted to deduct a reasonable amount for repair – providing you agree with the claim. If you do not agree with the claim, you must initially try to resolve this with the agent or the landlord but if this fails, you can refer the dispute to the tenancy deposit scheme noted in your tenancy agreement. They will assess the evidence provided and make a judgment on the claim. Their decision is final and binding.

One point to note is that if the landlord or agent has no inventory, check-in or check-out, it is going to be extremely difficult for them to prove any damage has occurred during your tenancy, so they will be unlikely to make a successful claim.

 

If you are relocating employees and would like any support with your rental searches or tenancy management, please contact us for more information.

 

Image by Tim Green

Stuart Beaty

Celsium, Birmingham, UK