Guide to letting a residential property

Letting a property for the first time can be a daunting experience. After all it is an undertaking that involves a valuable investment for you. This is why we have compiled a guide to help you navigate through the lettings process.

Buy to let: an investment worth serious consideration

Property has always been regarded as one of the safest investments available to those with the means and funds available. Property is an asset that is essential, durable, easy to value and has historically delivered exceptional returns compared to other investment opportunities. In fact, the value of property has, on average, doubled every 10 years over the last half a century.

As with buying a property for use as your own residence, purchasing the correct property for rental purposes is vital if you are to extract the maximum investment and capital gain. As property experts Fine & Country agents are perfectly suited to advise on what makes the right type of property along with location, demand in your area and historical rents achieved, all essential if you are to make a sound and profitable investment.

Process of letting in the UK

• Check if you need a licence

• Choose a letting agent to value the property

• Market the property or have an agency do it for you

• Enter a contract with the tenant

Licensing

Some councils require landlords to obtain a licence in order to let a property. Contact your local council to find out if you need one.

Choose an estate agent to value the property

Have opening discussions with two or three estate agents initially. Check that they are regulated by RICS (Royal Institution of Chartered Surveyors), have several years of service and great online reviews. By law, the agent must also belong to a regulatory scheme, such as The Property Ombudsman.

Your chosen estate agent will be able to let you know how much rental income you can expect to receive each calendar month.

Market your property

Your estate agent will take photos of the property and advertise it on various platforms. Once a tenant has been found, the estate agent will be able to arrange Right to Rent checks, set up the tenancy agreement, and create the inventory.

Enter into a contract with a tenant

You will need to have a tenancy agreement in place and signed. This outlines the legal agreement, terms of the contract, rent, deposit, contact details of both parties, length of tenancy, notice period, and any clauses.

There are several types of tenancy types in the UK.

• Assured shorthold tenancy (AST)

• Excluded tenancy (lodging)

• Non-assured tenancy

• Assured tenancy

• Company let

The most common is the AST. Often these agreements are for a fixed term of six or twelve months. Once this term is over the contract becomes a monthly rolling contract. The tenant's deposit must be protected in a government-backed scheme with an AST.

If the landlord lives on the property and shares facilities it would be an excluded tenancy. The landlord doesn’t have to protect the deposit and they can evict the tenant without a court order or by giving a 4 weeks' notice.

Your agent will be able to advise on which tenancy agreement you will need.

Manage the property

Managing the property means organising repairs, collecting rent, carrying out inspections, dealing with disputes, and checking in and checking out the tenant. As a landlord, you can do this directly. However, managing a property takes time. You can use the management services of your estate agent to do this for you, often for a fee.

EPC Rating Rules

By law, landlords must provide an EPC rating. From 2026, the minimum standard of a property will increase to C for new tenancies. In 2028, the new rating will be required for the existing tenancies too. If the rental property has an EPC rating below C, you will need to improve your energy efficiency rating. You may be able to get government grants to help with this.

Carbon Monoxide Detectors

Landlords must have carbon monoxide detectors fitted in all properties with fixed appliances. It is the landlord's responsibility to check these are in working order prior to the tenant moving in.

Pet-Friendly Rules

The Government launched a new Model Tenancy Agreement in January 2022. This new agreement means landlords can no longer ban tenants from having pets in England. If you don’t want pets on the property, then you can object in writing, but you must have a good reason for doing so.

Property Requirements

Since many people began working from home in recent years, renters are looking for more space and outside areas. However, commuter spots with good transport links are still desirable, particularly as people return to work in cities.

The top 10 buy-to-let areas in the UK are Bristol, Oxford, Cambridge, Manchester, Luton, London, Northampton, Brighton, Reading, and Norwich.

UK Market Conditions

Looking at current market conditions can also give you an indication of the value of your property. We issue monthly national lettings reports which you can see here.

Responsibilities as a Landlord in the UK

As a landlord, you will have responsibilities to your tenants.

• Provide an EPC certificate

• Install and maintain gas and electrical equipment

• Protect your tenant's deposit in a government backed scheme

• Fit and test smoke alarms

• Provide a gas certificate

• Follow fire safety regulations

• Carry out Right to Rent checks on tenants

Costs of letting a property

Estate Agency Fees

If you use an estate agent to market and manage the property then you will pay a fee. The amount will depend on the monthly rent and the level of service you require. Simply finding a tenant for a property will be a one-off cost, whereas managing the property will be an ongoing fee.

Of course, you can market and manage the property yourself, but this will take up valuable time, and you won’t have the expertise of a property professional.

Taxes

You will have to pay income tax on your rental income. You may also be liable for class 2 national insurance if renting the property is a business.

Insurance

Landlord's insurance is another cost to consider. What this includes and the price depends on the cover you choose.

It can include the following

• Buildings and contents insurance

• Property owners liability

• Loss of rent protection

• Tenant default insurance

Gas Safety Certificate

As a landlord in the UK it is your responsibility to provide a gas safety certificate. The cost will range from £30 to £150.

EPC Certificate

By law, you must provide an EPC certificate. The price will depend on the size and type of the property.

Letting a property in the UK from overseas

When you let out a property in the UK, and live overseas, you will need to file a tax return. You must do this yearly and within the deadlines.

If you use a letting agent to collect the rent, and you are a non-UK resident, then they will take off 20% tax from the rent before giving you the remainder. If the tenant pays you directly, and the rent is above £100 per week, they should deduct 20% before paying you the rest. The tenant will then pay the money deducted to HMRC every quarter.

Your tenant should provide you with a certificate of NRL6 by the 5th of July each year.