A guide to renting for tenants and landlords

What is a reasonable amount to charge as a deposit? How much work is a landlord expected to do around their property? And when is it OK for tenants to withhold rent? Where rental properties are concerned these are just some of the questions that crop up again and again, so whether you’re a landlord or a tenant, knowing the answers to these questions is essential.

The first potential sticking point between tenants and landlords is the issue of deposits. Tenants, in many cases, will not be able to stump up huge sums, but equally a landlord who has just let their home out to a stranger will want the peace of mind that there’s a cash buffer in place in case tenants go AWOL or the property gets damaged.

There are no set rules as to how much landlords can charge, but Julian Steed, an associate at national law firm Mills & Reeve, says the norm is between one and two month’s rent.

"It’s what the market determines so landlords can charge more if they want, but tenants would probably just go elsewhere or could even bring it to the Office of Fair Trading’s attention," he says.

However, one potential problem landlords might want to avoid is tenants that don’t pay their final month’s rent in lieu of their deposit. If the property is left in tip-top condition, this shouldn’t be a problem, however it can leave landlords short if damage has been done to the property and they need to make a claim on the deposit.

The good news, for tenants at least, is that from 6 April 2007, the law has required that all deposits for assured shorthold tenancies (the most common type of rental contract), are paid into one of the government’s three deposit schemes. Landlords risk having to pay three times the amount of the deposit and could find it difficult to evict tenants if they haven’t paid into one of the three government-backed schemes.

The Deposit Protection Service holds the deposit directly, returning it to tenants when they leave. Should the landlord need to keep some of the deposit money, they’ll need to make an application to the scheme.

Tenancy Deposit Solutions and the Tenancy Deposit Scheme are both insurance-based schemes, run by different companies, which allow the landlord to keep hold of the money, but they must pay a premium to the insurance company in order to protect it.

The tenant and the landlord will agree how much deposit is to be returned at the end of the tenancy and if there is a dispute this will be looked into by the company in question.

Quicker resolution

It’s hoped that under these schemes the age-old deposit disputes will be resolved more easily and amicably too. However, despite it now being the law to use one of the deposit protection schemes, six months after their introduction, the National Landlords Association estimated three-quarters of landlords had yet to register with a scheme, suggesting the Government needs to do more work to publicise the new legislation.

An alternative is the Financial Services Authority-approved Tenant Performance bond, set up by private company Tenant Indemnity Services. As a landlord you must first get the tenants vetted by an approved agency; you then fill out an online form and receive an email copy of the bond. You are insured to the value of three months’ rent, for rent shortfall or malicious damage by a tenant plus legal costs up to the value of £5,000. You must then decide if you are going to pay the one-off fee yourself, or charge the cost to the tenants.

The main benefit of the bond - and why, as a tenant, you might not be bothered about paying the fee - is that you don’t have to stump up a whole deposit. A six-month bond costs £75 for the first tenant and £30 thereafter.

Rent increases are another grey area for tenants and it could be an increasingly significant issue as the cost of buy-to-let mortgages rises. If your landlord adds a few extra pounds to your rent, you might feel awkward about challenging it, but you should if this happens more than once in a year and nothing is written in your tenancy agreement to allow this.

There is no reason a tenancy agreement couldn’t include a clause to propose rent changes every six months, but if your agreement isn’t specific then the Housing Act 1988 only allows for annual revision of rent. "The legislation goes out of its way though to say that change to rent can always be done if both parties agree to it," Steed adds.

Landlords not using a rent review clause in their tenancy agreement must therefore issue a formal ‘notice of increase’ should they wish to increase rents. And if you don’t follow the correct procedure, your tenants are within their rights to carry on paying rent at the existing level.

Equally, from a tenant’s point of view, if your landlord has whacked on an extra £50 a month to your rent or left you with a house full of damp and a dodgy boiler, it would be easy to withhold rent and think what you’re doing is perfectly justified. But this is a risky step to take.

Steed warns: "I’d be extremely cautious about doing that: a well-written tenancy agreement will make it quite clear that the tenant has no right to withhold rent and the landlord can chuck them out if they want."

Using the deposit

Landlords can simply use your deposit to cover any rent shortfall and then call in the heavies by serving a rather ominous sounding ‘notice of intention of seeking possession’ from the first day you miss a payment. There are 17 different grounds to bring a tenancy agreement to an end and three of these are for tenants not paying rent: arrears, late payments and substantial arrears.

Similarly, if you’ve got a new job and need to move away or want to move in with a partner, make sure that as a tenant you still give the correct amount of notice - if not you’ll have to find another tenant to take over the contract or carry on paying rent until your contract comes to an end.

"Unless you, the tenant, can establish a breach by the landlord, you will always be liable for the rent for the full fixed term," confirms Dominic Murray, a lawyer from Vincent Laverys in Preston.

On the other hand, if you’re a landlord sick of walking the buy-to-let tightrope or simply want to move into the property yourself, you can’t just announce your imminent arrival and boot out your tenants.

It doesn’t matter how urgently you need the property, you need to wait until the assured shorthold tenancy has ended before you can move back in. And, even if the tenancy has ended and the tenants are continuing to live there in what is referred to as a ‘periodic statutory tenancy’, you’ll still have to give two months’ notice.

To try and avoid problems, the key for landlords is to put as much detail as possible in the contract and discuss any areas of potential confusion. The more that’s out in the open, the less likely there will be awkward squirming later. For tenants, the Association of Residential Letting Agents stresses the importance of reading all documents carefully and never signing anything you don’t understand.

Many problems can be avoided with an inventory or Schedule of Condition. This details all the items, fixtures and fittings in the property and describes their condition as well as that of the property in general. Either the letting agent or landlord can prepare it but you should still go around the property with them to make sure you agree with the described state of each item. You could also take photos of items as extra backup.

Once a tenant has a tenancy agreement they are granted possession of that property until the end of the agreement. Break clauses allow landlords and tenants to leave their contract early but as Julian Steed points out "it doesn’t do exactly what it says on the tin".

Having exercised the break, the tenancy agreement changes to a periodic statutory agreement, which means either party must give two month’s notice. Both tenants and landlords should be aware that there are a number of things that landlords are not permitted to do once a tenancy agreement has been signed; if your ‘friendly’ landlord pops round without notice you’re within your rights to ask them to stop. Landlords also shouldn’t neglect the property; threaten or offer money to tenants to leave; shut down utility supplies or prevent friends from visiting.

Damage and upkeep

Probably the most common area of complaint, from tenants and landlords alike, surrounds damage and upkeep of the property. ARLA guidelines specify that as a landlord you would be expected to repair the structure and exterior of the property, keep utility supplies in working order and ensure the property reaches a certain standard for habitation. As a tenant you are expected to do the standard day-to-day things, such as changing light bulbs, keeping the garden tidy and the property clean.

When Anna Leahay, a 25-year-old investment banker from London, and her housemates discovered mice in their rented home, they had to call in (and pay) the exterminators themselves. "The landlord’s first reaction was to get a cat as the previous tenants had one but one of my housemates is allergic so that wasn’t an option.

"After a great deal of pestering the landlord came round with some poison but when that didn’t work either he said we obviously weren’t keeping the house clean enough," she says.

Both Steed and Murray agree that it is the landlord’s responsibility to keep the property in a fit state. "Clearly vermin are a risk and if Anna and her friends are adamant that they are not significantly contributing to the problem then the landlord’s unwillingness to rectify the situation immediately is a clear breach to an assured shorthold tenancy agreement," Murray explains.

While going to the courts might be unavoidable in some disputes it shouldn’t be your first port of call. For landlords, Landlord Action has a free advice line and an eviction service if you tenants have grown roots. The National Landlords Association also has an advice phoneline for its members.

As a tenant, if your landlord has come through a letting agency they must meet certain criteria to advertise through the agency. If you feel your landlord is falling short you can pull them up by contacting the letting agents. You can also contact your local council’s housing advice centre via direct.gov.uk and the Citizens Advice Bureau is always on hand too.

But remember a little friendliness can go a long way. Tenants and landlords don’t need to be firm friends but keeping a friendly rapport could help solve a dispute the old-fashioned way - by simply talking to each other.