SECURING THE TENANCY

When you have seen all your applicants you must make a decision on which, if any, of them seem to be best suited as tenants for your property. Do not be afraid to turn them all down and select another batch of three or four from your back-up list if necessary. Even if these too are unsuitable, and there are no alternative interested parties, consider starting afresh by re-advertising rather than accept tenants who do not fulfil your requirements.

Often the steps towards securing the tenancy will be processed by a solicitor or agent, although you can undertake them yourself if you are willing to proceed carefully. These steps are:

• 1.Checking references.
• 2.Finalising and signing the lease.
• 3.Receiving the deposit.

Obtaining references

References should be requested at this stage. At least two references, one character and one financial, should be pursued. A former landlord is, of course, the ideal referee. If a guarantor is involved, you are checking his or her ability to pay so the financial reference should be directed at him or her. You may decide to let your solicitor or agent request the references. There may be a charge for a bank reference.

If you are organising a company let references should still be sought. The company's financial standing should also be checked.

Signing the lease

The finalised lease will require the witnessed signatures of all parties involved:

• the tenant(s)
• the guarantor (if applicable)
• the landlord.

Paying Stamp Duty on leases

Stamp Duty Land Tax (SDLT) replaced the old Stamp Duty on 1 December 2003 and the new SDLT includes paying tax on leases. Normally it is deemed to be the tenant's duty to return the notification (if one is due) to HM Revenue & Customs and to pay the tax but the landlord has a responsibility to inform his tenants that they should do so. It is an offence not to notify HM Revenue & Customs if SDLT is due on a lease and there are penalties if the notification is not made within 30 days. All leases of seven years or more must be notified, whether or not tax is due. SDLT rules make no distinction between furnished and unfurnished property.

Calculating whether tax is due

Many residential leases will not attract SDLT. If a quick calculation of

(average annual rent in £) × (length of lease in years)

is less than £125,000, then you need go no further - no SDLT is due.

If this quick calculation yields a figure of £125,000 or more, SDLT may still not be due but a more complex calculation to determine your ‘Net Present Value’ will be required. The formula for determining your Net Present Value is given in Figure 11 or will be calculated for you by telephoning the Stamp Duty Helpline on 0845 603 0135. If the Net Present Value is £125,000 or less, then there is nothing to pay. If it is more than £125,000 then the amount due is 1 % of the excess Net Present Value over £125,000.

Properties within a designated Disadvantaged Area have a nil tax threshold of £150,000 instead of £125,000. To find out if your property is within a Disadvantaged Area, telephone the Stamp Duty Helpline or log onto the Inland Revenue web site.

Receiving the deposit

As part of securing the tenancy, and as a provision against future damage or rent arrears, tenants should pay a deposit. It is up to you to:

• 1.Acknowledge receipt.
• 2.Lodge the payment in a dedicated account opened by you expressly for this purpose.

An account at a bank or building society of your convenience is a good place to lodge the deposit and the sum will accrue some interest over time. This interest will normally be returned to the tenant, along with the capital sum of the deposit at the end of the tenancy less, of course, any deductions which may be necessary.

Informing others

As soon as the tenancy has been secured, inform any other interested parties of your position so that they may look elsewhere. Remember to remove or cancel any remaining advertisements for your property.