After incorporating your property business you will be keen to get started and let your properties so that you can get returns on your investments as soon as possible. However, before you embark on your buy to let business, you will need to ensure that you have a suite of legally-compliant contracts that protect you, your properties and your business. A failure to provide certain documentation might result in financial penalty for a landlord and out of date contracts are both unenforceable and dangerous. In this article we discuss what essential contracts and documents you will need for your buy to let business and what you need to consider when selecting them.
1. Assured Shorthold Tenancy Agreement (AST)
Arguably the most important contract you can source for your buy to let company after incorporation is a robust and compliant assured shorthold tenancy agreement (AST). An AST describes the relationship between the landlord and the tenant and makes clear the obligations and rights that derive from the agreement in relation to the property.
It is important that your ASTs include certain clauses and information, such as:
- The landlord and tenant’s personal details;
- The start date and end of the tenancy;
- The rent amount;
- The nature of the let (e.g. sole occupancy, house in multiple occupation, bedsit);
- Details relating to deposit protection (it is a legal requirement that all deposits taken from the tenant are registered with an approved provider);
- Details relating to the property and common parts;
- The term of the tenancy and termination requirements in accordance with notice periods prescribed by legislation; and
- Governing law.
Alongside this core information, it is also important that your AST is up to date. In support of tenant rights, the Government has introduced a series of bans on fees and charges that landlords can request from tenants. Duplicating old templates or downloading free templates online might expose you to inclusion of illegal clauses, such as cleaning fees.
2. Guarantor Agreement
Depending on the rental market you are targeting you might also require a guarantor agreement. This type of agreement is common for student rentals or where a tenant does not have a fixed income or salary. A guarantor, in essence, promises to pay the outstanding rent if the tenant defaults on payment. Unlike an AST, a guarantor agreement must be executed by deed meaning that it must be witnessed and it must state its nature.
3. Tenancy related letters
When letting out your properties you will want to ensure that you have clear and accessible letters to send to tenants in certain circumstances which allow you to make amendments to the tenancy or request outstanding payments.
Most commonly, landlords that have long-term tenants will need to issue a rent increase letter to ensure that their buy to let business is making the profits it should be. Equally, if tenants are in arrears it is important that you have the correct mechanisms in place in order to recover missed payments and clear rent arrears letters are the first step in any process for the recovery of rent.
Alongside being able to communicate with tenants about their existing tenancy you will also want to have the correct documents in place to ensure that you can end the tenancy when you are contractually entitled to. It is important that you understand how notices work and how different notices apply in different circumstances. For example, a section 21 notice is used for ‘no- fault’ evictions when you want to recover the property whilst section 8 notices are typically used when the tenant has been in breach of the AST.
5. How to Rent Guide and Certificates
Alongside having a robust AST, clear letters and the right notices available to you, your buy to let business also needs to make sure that it follows certain procedures and sends its tenants certain documentation when it enters into a tenancy agreement with them.
Firstly, landlords are required to provide their tenants with the Government’s How to Rent guide that gives the tenant information relating to tenancies. Secondly, and alongside the How to Rent guide, landlords are required to give their tenants certain documentation relating to the energy efficiency of the property and safety. These documents include:
- Energy Performance Certificate (EPC)
- Electrical Installation Condition Report
- Gas safety certificate.
As you are legally required to provide these documents, it is prudent to get a tenant to sign each document to ensure you can prove that the documents were received by the tenant if disputes in the future were ever to arise.
Having incorporated your buy to let business you will be able to begin your investment journey and start to rent out your properties. However, it is important that you pay close attention to the content of the necessary agreements to ensure that they are up to date and legally compliant.
Without experience, editing and tailoring online templates is risky and on the flip side a lawyer might be too expensive at this stage of your buy to let company.
Fortunately, Legislate is a contract creation and management platform that allows you to create, sign and manage lawyer-reviewed legal documents in a controlled and safe way. To create any of the legal documents in this article for only £9.95, sign up to Legislate today!
The opinions on this page are for general information purposes only and do not constitute legal advice on which you should rely.