Traps for the unwary: what to be aware of when renting out your residential property

Whether you have a portfolio of residential properties, you want to let out a newly converted flat above your garage or stables, or you are letting your house out while you travel the world, there are several hoops to jump through before you can legally grant an assured shorthold tenancy, this being the most common and the best form of tenancy for a short (minimum 6 months) residential let.

Some prerequisites may seem slightly more demanding, and it is important that the time, cost and effort in complying with all the requirements is factored in before making any commitment to a letting.

Renting listed buildings

If considering a short-term rental, it is important to bear in mind whether the property falls within certain categories. For instance, special circumstances apply to listed buildings.

As a commitment to the environment, the Minimum Energy Efficiency Standards regulations were applied from April 2020, making it illegal for landlords to rent a property that has an Energy Performance Certificate (EPC) rating of F or G. However, many listed buildings will have such an EPC rating with features such as timber frames, solid stone walls and single glazing. Admittedly, an EPC is generally not required where the landlord can demonstrate that the building is protected as part of a designated environment, or because of its special architectural or historical merit. But it is difficult for a landlord to unilaterally determine this.

To avoid issues such as this, the best course is to get a draft EPC, find out the nature of any works required, and then consult with the local planning officer to see if such works entitle you to register for an exemption. If such works do not entitle you to an exemption, then you must weigh up the cost of the works and any ancillary planning consent or listed building planning consent (remember that one may be necessary even if the other isn’t) and you must of course be assured that you will then get an appropriate EPC. It can be a costly process.

Selective licence areas

Another consideration is whether the property falls within a selective licence area. The Housing Act 2004 allows the local authority to require any private rented homes within a specified area to have a licence (unless it falls under mandatory or additional HMO licensing). The standard selective licence will be five years from the date of issue. This is not necessarily just low-value, high-occupancy properties. For instance, the vast majority of the centre of Oxford is subject to selective licensing. The local authority must maintain a register of current selective licences, temporary exemptions from selective licensing and interim management orders, and there must be a licence holder who can apply for such a licence and pay the fee.

Other considerations

If renting out a property for short-term rental, landlords should consider:

• Tax: how will the income be treated? Would it be better to let the property via a company?
• Does the tenant have the right to actually rent the property? Immigration rules apply here, and the residential status of all tenants must be checked.
• Have you registered with a tenancy deposit scheme to protect the tenant’s deposit?
• Is your property used as security? In which case, do you actually have the right to let the property under the terms of the mortgage?