Becoming a landlord can be a daunting prospect with the array of rules and regulations to contend with. However becoming a landlord can be both lucrative and rewarding when you have the right support and guidance. To help with the overload of expectations, we have a step by step guide on becoming a landlord and the responsibilities which come with it.

Legal responsibilities and compliance:

Register as a landlord with your local council via the central landlord Registration Scotland website.

  • Apply for a buy to let mortgage if applicable or seek permission from your current lender
  • Take out Landlord Insurance
  • Landlord Gas Safety Certificate (LGSC)
  • Electronic Installation Condition Report (EICR)
  • Portable Appliance Test (PAT) if you are leaving electronic devices in the property
  • Install battery CO Alarm
  • Install mains wired smoke & heat detectors to current required standards
  • Legionella Initial Risk Assessment
  • Lead Test
  • Energy Performance Certificate (EPC)
  • Tenancy Agreement (Private Residential Tenancy in Scotland)
  • You must place your tenants deposit in a tenancy deposit protection (TDP) scheme

Setting the right rental price

Once you are ready to find a tenant, it is important to take the time to ensure you are advertising your property at the right price. To ensure your property remains competitive yet profitable, have a look online for similar properties within the same postal code area as a guide, and take into consideration your property size, condition and any features your property may have and price accordingly. Ideally you want your rental income to cover any mortgage payments, maintenance and insurance while providing a worthwhile yield. Landlords who use Citylets are able to access their Opti Let tool which helps them set optimal rents using the latest market data and analysis.

Finding a tenant and the necessary checks to complete

Finding the right tenant is an important part of the journey as the right tenant will pay rent on time, advise you of any maintenance and keep the property clean and tidy. The best practice in finding the right tenant is to:

  • Meet the tenant at the property viewing, this is a great opportunity to build rapport and get a feel for the applicant.
  • Income and employment verification. Contact the tenants employer and request a reference which includes occupation, salary and length of employment
  • Previous landlord references are a good way of establishing a tenant’s behaviour. A reference request should confirm if the tenants had any late rent payments and if their last property was left in good condition.
  • Credit Checks. This is a good way of establishing a tenants financial stability and is recommended to complete during the application process. There are various third party companies that can carry out credit checks for a modest fee.
  • Proof of Identity. Always verify a tenant’s identity by requesting a copy of their identification documents. Valid ID can be in the form of a passport or photo driving license.

Tenancy agreement and the mandatory clauses

A tenancy agreement must set out the terms and conditions of the rental arrangement which will provide clarity to both the landlord and tenant. The tenancy agreement will also help avoid disputes.

What must be included:

  • Details of the property and its location.
  • Rent amount, due date, and payment method.
  • The deposit amount and how it is protected.
  • Rules about pets, smoking, and subletting.
  • Landlord’s and tenant’s responsibilities for repairs and maintenance.
  • Details on how to end the tenancy.
  • Communication procedures throughout the tenancy.

Lodging of the deposit

When a tenant pays their deposit, this must be lodged with a government approved deposit scheme within 30 days of the tenancy beginning. A landlord must also provide the tenant with written details of the deposit, the deposit scheme and how they are able to claim the return of their deposit. If there is a dispute at the end of the tenancy, the deposit scheme will provide a free resolution dispute service and will act as an independent adjudicator to settle the dispute fairly.

Get landlord insurance

It is important to protect your asset in every way possible. There are many insurers which will offer a variety of protection with a choice of add-ons available. Policies typically exclude the cover of tenant’s belongings along with general wear and tear, but will generally cover most things.

General landlord insurance will cover you for:

  • Building insurance which will cover your property from damage due to fire, flood or vandalism.
  • Landlord’s contents insurance which will cover your carpets, flooring and other household items you provide tenants within your property.
  • Property owner liability insurance which will cover legal costs if your tenant or a visitor is injured in your property.

Popular insurance add-ons

  • Landlord legal expenses cover; will cover legal costs which are associated with disputes, rent recovery or eviction costs.
  • Loss of rent cover; will cover any loss of rent due to the property being uninhabitable from fire or flood etc
  • Breakdown cover; will cover any costs such as a new boiler, heating and plumbing.
  • Rent guarantee cover; will cover costs if the tenant defaults on their rental payments.

Tax:

As a landlord you will have to declare your rental income and pay tax on any profit you make from renting out the property. To notify the HMRC of your rental income you will need to fill in a self-assessment tax return each tax year. The self-assessment tax return can be completed by yourself or an accountant.

You can deduct expenses from your rental income when you work out your taxable rental profit as long as they are wholly and exclusively for the purposes of renting out the property.

We recommend that you speak with an accountant or tax specialist who can provide tailored advice on managing your rental income, expenses and tax liability.

Check-in inventory

Completing an inventory at the start of the tenancy is important because it creates a documented record of the property’s condition at the start of the tenancy. This process is key in protecting both the landlord and tenant from disputes over cleanliness or damages at the end of the tenancy. The inventory not only protects the tenant’s deposit, it will assist the landlord with any arguments over what was pre-existing damage versus tenant-caused issues. A good inventory will be detailed and include pictures of the property. It is recommended that both the landlord and tenant confirm their mutual agreement on the property’s condition by signing the inventory.

Keep on top of maintenance:

It is good practice to act quickly on maintenance issues as this will maintain a good relationship with your tenant. Non urgent maintenance should be addressed within a reasonable time frame, with urgent issues being responded to within 24 to 48 hours.

Some ways to keep on top of general maintenance is;

  • Regular inspections will help prevent potential maintenance from building up.
  • Safety certificates.
  • Review both external and internal property.

Record all details:

Keeping a record of the following will help you keep track of everything and easy to find when required;

  • Rent ledger- Keep record of when the rent is due and when it is paid.
  • Deposit – Keep a record of how much the deposit is, when it is received and which deposit scheme it is held within.
  • Maintenance – Keep a record of what issue is being reported, when it is being reported, how much it cost and how long it took to rectify.
  • Documents – Always keep a copy of the lease and safety certificates. Many certificates will expire on an annual basis on different dates, therefore always keep a record to ensure a valid certificate always exists.

When the lease ends:

When a tenant hands in their notice, you will most likely want to limit the property being vacant for longer than necessary. Here are a few necessary tasks that you should complete and have prepared ahead of the tenant check-out.

  • Prior to the end of the tenancy, arrange a date time with the tenant for the final checkout, where you will inspect the property.
  • Take detailed photographs or videos to document the condition of the property.
  • Inspect the property for any damage beyond fair wear and tear, missing items, missing keys and items the tenant has not removed from the property. Compare these to the original inventory.
  • Have the tenant sign the checkout inventory to confirm they agree with its contents.
  • Inspect and confirm that the property is clean and that all appliances are working and are still in a safe working condition.
  • Test all smoke alarms and carbon monoxide alarms to ensure they are functioning correctly.
  • Release the tenant’s deposit, making any deductions only if there’s agreed-upon evidence of damage or cleaning required
  • Take final meter readings and keep record of readings between tenancies.

Challenges:

Becoming a landlord for the first time can be both rewarding and challenging. There are unforeseen circumstances that can occur, however by following these tips, you’ll be well-equipped to manage your property, stay compliant, protect your investment, and build positive relationships with tenants.

The key to success is preparation, organisation, and continuous learning. Whether you’re managing one property or building a portfolio, taking a proactive approach will help you thrive as a landlord.

A good way to stay up to date with changes in laws and regulations as a landlord is by attending networking groups, training sessions or seeking advice from someone in the rental industry. There are many local networking events where landlords can share their experiences. Over time the lettings process will become more and more familiar and your confidence will increase.

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