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Your Money > Mortgages Articles > Stress-free renting
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By Richard Evans
As the housing market stays stuck in the doldrums and competitive mortgages become hard to find, especially for first-time buyers, many of us are thinking of becoming tenants for a while, perhaps with a view to snapping up a cut-price property later if prices fall further. But the rental market is full of financial traps for the unwary; here's how to avoid them. It's worth while thinking through what you want before you start looking at the lettings ads. For example, where would you like to rent a home? If you are just looking for a stopgap before you buy your own property, it makes sense to live in the area where you want to purchase. "Testing an area by living there as a tenant before you buy has always been part of the property market," says Ian Potter of the Association of Residential Letting Agents. "But it isn't always easy - certain neighbourhoods have very little in the way of rental properties. And some would-be buyers then find that the area isn't suitable after all." He also cautions that sitting on the sidelines while you wait for property prices to fall can be a risky philosophy. "You don't know how long prices may fall for. And in some areas prices are not falling at all. So you need to research your target area carefully." If you have found a property you want to rent while you look for somewhere to buy, try not to tie yourself into a long fixed-term contract, says Mr Potter. "Some landlords are trying to get 12-month rather than six-month tenancies at the moment as demand is high," he adds. "But if you are thinking of buying, you will be better off with a six-month agreement that then becomes 'periodic', where only a month's notice is needed. "Either way," says Mr Potter, "don't be bullied into signing on the day." Instead, ensure that you have a written tenancy agreement and that you know how much you will be charged for the drawing up of the contract and any credit check before you hand over any money. The cost of these extras varies greatly from one area to another, he adds, quoting a typical range of £75-£200. Find out how much of this, if any, is refundable if you don't go ahead. If you use an agent, ensure that it is regulated by a professional body, Mr Potter advises. "This will ensure that correct client money protection is in place and protects against misappropriation of funds." Another important document to agree on before you move in is an inventory of furniture and fittings. "If you and your landlord agree, in writing, what condition the property is in when you start renting it, this should help prevent disagreements at the end of the tenancy," says Citizens Advice, the charity. And don't forget about insurance. While the landlord will take care of cover for the building, you need to insure your own possessions and be covered for third-party damage to the landlord's furniture and the belongings of other tenants. This way you won't be out of pocket if, say, you leave the bath running and cause a flood in the flat below. Deposits are probably the most troublesome area of renting a home. Landlords typically ask for a month's rent to be held as a guarantee against any damage during the tenancy, in addition to another month's money in advance. But the law has changed recently to give tenants more protection and access to independent mediation if disputes arise over deposits. The scheme, which applies in England and Wales but has yet to be launched in Scotland, works as follows. You hand over your deposit to the landlord or agent as normal. He or she must immediately arrange for it to be protected by one of the three schemes in existence. One is "custodial" - the landlord actually passes the money over to the scheme operator. The other two are insurance-based, meaning that the landlord keeps the money but a third party ensures that you get the deposit back if it is withheld without a good reason. The insurance schemes are popular with agents and small landlords, according to Mr Potter. By law, the landlord must give you a certificate confirming that your deposit is protected within 14 days of the start of the tenancy. If not, you are entitled to a penalty of three times that amount, although you'll have to go to court to get it. To give yourself the best chance of getting all your deposit back, obtain permission for any changes, such as repainting, that you want to make to the property. When you want to move out, make sure that any fixed period of your contract has expired and that you give the appropriate notice. Try to leave the property clean and as you found it, checking that everything listed in the inventory is in place. Landlords are not entitled to withhold any of your deposit against fair wear and tear, however. Your deposit should be returned within 10 days if you and your landlord agree about how much you will get back, although the details depend on the type of deposit protection scheme used. If there is a dispute, you should still have any undisputed amount returned immediately while you try to resolve your differences. Both types of scheme offer independent, binding arbitration if you and your landlord cannot reach an agreement; you can instigate this by applying directly to the scheme operator. "If there is a disagreement, make sure the landlord and the deposit scheme have your contact details such as a forwarding or email address or a telephone number," says Citizens Advice. If your landlord used the custodial scheme, you will receive interest on your deposit; unfortunately, this doesn't apply to the insurance-based schemes. Further information: www.direct.gov.uk/en/TenancyDeposit Useful links: |
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