How renting works

Tenants need some basic explanations about the contracts on offer and other associated but important issues. Most are touched on in Lesson 1 to get you started, then delved into more deeply in the relevant lessons. Just keep reading. This lesson will give you a pretty good idea of how renting/letting works long before you start signing contracts that you can’t get out of.

For most tenants, their first step is to find out the going rate for properties that match their needs, in other words, how much what they want will actually cost them. Savvy tenants will check the papers, research online and visit agents to get a feel for how much money will be involved in what they’re looking to rent. Landlords and agencies are, since the introduction of the Housing Acts 1988, allowed to effectively charge the local ‘going rate’ for all assured shorthold tenancies. There’s therefore very little that most tenants can do to control costs but to shop carefully.

Assured shorthold tenancies operate on ‘market rents’

For more than a decade, control of rents has been a fairly hands off affair for officialdom. How much you’re being asked to pay will usually be a combination of the local conditions, the state of the property and, of course, the price of local property versus how much you can afford to pay.

This is known as a ‘market rent’ (as opposed to the old strictly controlled ‘fair rents’ that – believe it or not – still apply to very old tenancies). Most of us should welcome this. ‘Fair rents’ contributed to the sharp decline in property to rent, whereas ‘market rents’ have encouraged a growth in supply, generating far more choice and availability. This is good news for tenants, but it has set costs spiralling.

Rent assessment committees

There are still some very limited facilities, which tenants can use, but only in situations where they really believe that the rent they are being charged is basically outrageous – way beyond other similar units ing their area. The Rent Assessment Committee (RAC) exists to exert some limited influence on totally excessive rent levels; but tenants should be very wary about making an application. Rent levels are often raised by this committee as well as reduced.

If you genuinely feel that the rent you are being charged is totally out of line with others in the same area, you can obtain details from your Citizens’ Advice Bureau about where your local RAC is. Check thoroughly before you make an application. All RACs keep a public record of their decisions, which you can examine. If the difference is marginal they are unlikely to intervene, and you are likely to have irritated your landlord for no good reason. Don’t expect a lease to run long with an agitated landlord.

Far better than taking on a property which you think is unreasonably priced, or worse still, one that you are going to have difficulty managing to pay for, is to look carefully at what is on offer in the area you need to live in, and rent something which you can afford.

Understanding your ‘fixed term’

I know it sounds like boring technical stuff, but every modern tenant needs to really understand the principal of fixed terms. This is the original duration of your lease written onto your assured shorthold lease. This fixed term is vitally important and is explained in more detail in Lesson 8.

Of course, that doesn’t mean that all tenancies end on the dot of their fixed term by any stretch. Many run on for years, with or without much alteration in terms. Nor does it mean that a landlord/agent can simply put you onto the street on the day the fixed term expires – there are legal processes that need to be used to evict any assured shorthold tenant. However it does mean that, once these fixed terms come to an end, any landlord has a legal right to insist on having their property vacated (this legal process is explained in Lesson 12). Control of how long you remain reverts absolutely to your landlord once your fixed term ends and that decision will almost always depend on your conduct as a tenant. However, they don’t need any legal reason whatever to ask you to leave after that.

During your initial fixed term, you do enjoy a degree of security – in other words, you’d have to be breaching a significant element(s) of your lease – like not paying rent or causing damage – before any court would agree to terminate your contract during the initial, relatively secure, fixed term. In return for this limited security, you become liable for rent during the entire fixed term. The longer the fixed term, the longer your security and your liability for the rent (with some safeguards, explained later).

Where to start your searching

Online research

www.whatever is an excellent place to search through, but online letting has not yet really taken off. Although it’s an invaluable research tool, most private landlords (who remain the majority providers) still stick with newspaper advertisements. This means that online alone can actually distort your view to the only set of suppliers who always use it – i.e. the letting agents, whose rents are often higher because they incorporate fees. Make sure you never rely on only one perspective in such a diverse marketplace. Even if you’re searching from some distant town (or country) make sure that you explore all the options.

Specialist services

• Students should always explore their own university’s accommodation service where decent property is often available. Check whether or not these units have been checked for safety – some universities simply provide lists, others carry out extensive safety checks and accredit property.
• Other tenants may wish to try contacting the local authority in the area they’re looking to rent in – many grew so tired of substandard accommodation that they drew up lists of accredited properties that comply with all safety requirements and have responsible landlords. Quite a few now have extensive lists of recommended properties that rarely come onto the open market via agents or the newspapers.
• Both the above options are a great place to start for students and the second is an excellent first choice for all tenants looking for keenly priced units.
• Tenants searching for property whose first consideration is not cost but location could do worse than explore a local relocation service – however once found, the terms/conditions would not be ‘guaranteed’ and users still need to read the full guide to avoid pitfalls.

The lettings agencies

Most towns are now awash with lettings agencies. These companies are keenly commercial operations which exist to make profits, not to be your friends, no matter how much of a welcome mat they put out for you. They are employed by landlords, not tenants – renting through an agency does not make you their customer, they already have their client – landlords. A quick walk down any high street, or a brief scan through any local paper will show you just how many there are. Every one of them has property on their books and is actively looking to get tenants into contracts. But beware: all agents have many additional up front fees. Added up, they can come as quite a shock to the unwary.

Finding accommodation through agents can have some unexpectedly high add-on costs and I take a look at some likely ones in Lesson 5. These can add up to significant sums of money simply to get to the contract stage so make sure that you check the agency lesson carefully – especially if you’re on a tight budget.

Independent landlords

Like agents, landlords exist to make profits. They are often also landlords who prefer more direct relationships with their lettings – especially over tenant selection. However, because their costs are reduced by not paying agency fees, many offer slightly lower rents. In addition, few make charges for basic tenancy set-up services. They usually look on the inventory processes at both ends of the contract as part and parcel of setting up a well organised tenancy. Nor do many independents charge lease signing fees, extension fees or any of the other variations dreamed up by agencies. Many don’t charge check in, check out fees or inventory costs either.

Checking your options

You pays your money and you takes your choice in the rental game. So always at least examine your options beyond the easy high street strategy. If ever a market thrived on choice it’s the huge lettings market. Checking out your options can save you a great deal of money over the lifetime of a rental contract.

A word about the paperwork

All sensible private landlords/agents do require their younger tenants (students and the under 25s usually) to provide a Parental Guarantor. Effectively what this means is that all the responsibilities like rent, bills and especially damage are underwritten or ‘guaranteed’ by someone older who is presumed to be more responsible than the young tenant (and to have more cash!).

So, landlords do need these guarantees. Sometimes people moving out of home for the first time simply don’t get to grips with the realities of costs and care for property that all tenants contractually agree to when signing leases, or other rather basic bits of knowledge either.

Tenants’ application procedure

Many landlords/agents will also want to instigate a tenants’ application procedure of some sort – another form where tenants are legally obliged to reveal information like former addresses, their National Insurance Number (or passport number) and a variety of other verifying personal details. They will almost always require authorisation for credit checks. This kind of paperwork is essential for landlords (or their agents). Make sure you fill in details truthfully. These documents are fast becoming adopted by most landlords and agents.

Ground 17

Since 1997 one of the grounds upon which tenants can be asked to leave (even during the relatively safe fixed term) is Ground 17, and the period of notice of your landlord’s intention to seek possession in this case can be as little as two weeks (see Lesson 11 for further details on grounds for possession).

Ground 17 allows landlords to act if they were persuaded or induced to grant the tenancy as a result of a false statement, knowingly made by the tenant, or someone acting at the tenant’s instigation. This was a very significant addition to the rights of possession your landlord had before 1997, and a necessary one. Tenants who now claim to be employed when they are not, for example, could be affected. So too could tenants who pretend to be older than they in fact are, where landlords have age restrictions. Students have often failed to admit that they are students because many landlords do indeed avoid them. Application forms are a protection for landlords and agents against any such false statement.

This Ground enables landlords who have been told untruths to use that as a legal reason for the prompt return of their property. Tenancy application forms are a useful way therefore of making sure that landlords and agencies have written proof of the tenants’ claims. Prospective tenants would be well advised to remember this when filling them in.

Other types of guarantee

Sometimes tenants have circumstances which require specialist guarantees. An excellent example of this is for the tenant who wants to move in, say, with the family dog. Most leases specifically exclude pets, but if you need a home with your dog, and you discuss it in advance, many agents and landlords will agree. They do however normally expect you to provide additional levels of deposit against damage, and often ask you to sign a guarantee that you will replace to their satisfaction any items (including garden lawns) that have been damaged. They also usually demand additional end-of-lease cleaning.

But the majority, i.e. honest tenants, shouldn’t fear the paperwork. It’s part and parcel of getting off on the right foot, of giving your landlord the confidence to let you rent what is a very expensive asset for a tiny part of its value each month. It’s healthy having exactly what both parties agreed set out in writing, and it protects both the landlord and the tenant. Landlords/agents who are organised enough to have procedures like this are also the ones most likely to respond to genuine problems like repairs because they’re set up to make their contracts run smoothly, hence protecting their own vital income stream.

Beware the absence of paperwork

Avoid like the plague the landlord willing to offer some ‘back of the envelope’ type of tenancy – the last thing a modern tenant needs is a landlord who skirts round the legalities over such huge financial obligations. Organised landlords know what they need. They’re the ones who aren’t interested in scams, in trying to charge for things that have never been discussed, let alone agreed to by tenants. Okay, in reality an assured shorthold tenancy can be legally set up without a shred of paperwork – but that’s not what you want. Organisation proves a mindset of responsibility and with rents this high, who wants a disorganised landlord when the boiler breaks down? Or all those fights over what the conditions were when deposits need returning? Paperwork protects tenants and landlords. Don’t be tempted to skirt round them in such costly contracts. It’s a recipe for future trouble.

A word about inventory costs

Let’s be clear here, whether you’re renting from a private landlord or via an agent, inventories are absolutely essential to protect both tenants and landlords. You need an inventory – a freshly prepared one that accurately reflects the genuine condition of the property.

Inventories are closely tied into the deposit structure – so they really do matter and are explained more fully in Lesson 4.

Inventories are one of the most contentious areas of ‘the business’ and so closely tied into the deposit structure that no sensible tenant can afford to be blasé about them. Read up on deposit charges and inventories – not knowing what you’re legally liable for can be a very costly bit of ignorance.

Examining the options realistically

All these various charges and services need to be considered when working out what you can and cannot afford. Tenants renting relatively lower priced units very often find themselves renting via independent landlords who simply don’t generate the profit levels needed to engage agents – or choose not to pay them because they know perfectly well how to run a tenancy. Also bear in mind that agency fees for many other services can be very hefty. Not only do they levy high fees from the landlord for their services, but also their end of lease redecorating, cleaning, and repair services can be very expensive – especially if they have a good sized deposit to work through at the end of a tenancy. (Much of this will thankfully change with the new Tenancy Deposit Scheme – explained later – soon to come on-stream.)

Sometimes properties available to let through agencies can be more expensive than similar properties available direct from private landlords. The landlord’s agency fees have to be incorporated within the rent, and you will be paying them. Agencies usually charge landlords around 15 per cent plus VAT of the rent for management – money that comes from higher rents. For some tenants this is worthwhile, but many others prefer to find their own landlord.

Finding the independent landlord

Check the local classified section or ‘property to let’ column. Many of the advertisements will have been placed by agents, but they are often required to indicate that they are trade, or to state their company. Some free advertising papers even require anything other than private advertising to be in bold print so that it is very easy to recognise. Rule of thumb. Wherever it’s glitzy, it’s an agent.

Look through the smaller adverts and there you’ll find thousands of private landlords who advertise here direct – every single day of the week. Check the price range you are looking for. Rental valuations depend on a number of different factors; the area, the condition and the facilities offered. The valuations will vary, so check over a couple of weeks to get a feel for the price range you are looking for before you start making appointments to view. And again, watch out for charlatans.

A cautionary word

Renting property through well run agencies can have some unrecognised benefits. Some agencies (but by no means a majority yet) are members of trade associations that monitor standards and they should check basic safety provision on furniture, gas safety, etc of anything on their books because they have legal liabilities themselves if they don’t. This doesn’t apply to independent landlords, where tenants need to proactively check basic safety for themselves. And, unfortunately, the worst landlords of all, offering the dangerous property, can’t get taken onto the books of any legitimate agent, meaning they always advertise in the press along with the overwhelming majority of responsible landlords. Be very wary of any property that seems clearly cheaper (or tackier) than its competitors. Safety isn’t something you can afford to be casual about. See Lesson 2 on viewings for advice.