What You Need to Know Before Renting to Students

The student market is different from renting to the rest of the population. There are many benefits of renting to students, discover more here. This article contains some things landlords should know before renting their property to students!

1. House in Multiple Occupancy (HMO)
2. Where Should I List My Property?
   1. Traditional Lettting Agents
   2. Online Letting Agents
   3. University Lists
3. Tenancy Agreement
4. Right To Rent Check
5. Deposits
6. How to Rent Guide, EPC, Gas Safety and Other Documents
7. Council Tax
8. Insurance
9. Furnished vs Unfurnished
10. Bills Included
11. To Sum Up

House in Multiple Occupancy (HMO)

An HMO is a property rented by three or more people who are not from one ‘household’ (e.g. from one family) but share facilities like a bathroom and kitchen. As such every student property rented out to three or more people is classified as an HMO.

When renting out your property as an HMO, you need to check with the local council that the property falls under whether a licence is required. Each council has different rules so check for each location. You can use the Government’s postcode checker to see your local rules.

If you are renting to five or more people from more than one household, and some (or all) of the tenants share a toilet, bathroom or kitchen, your property is a large HMO. All large HMOs require a licence (England and Wales).

A licence is valid for a maximum of five years; landlords are required to renew it before it expires. Landlords need to ensure that the property is suitable for the number occupants and that the manager (the landlord or the agent) is ‘fit and proper’ (they have no criminal record or breach of landlord laws).

Under current legislation, a landlord must annually submit a copy of the gas safety certificate to the local council, install and maintain smoke alarms and provide safety certificates for all electrical appliances on request. Local councils may add more conditions, so it is imperative to refer to the local council before applying for an HMO license. It is possible to appeal if you disagree with the conditions set by your local council via the First-Tier Tribunal.

HMO licences are crucial, and landlords should regularly (annually at the very least) check back with their local councils for changes to the rules. There is an unlimited fine for renting out an unlicensed HMO.

Where Should I List My Property?

Landlords have many options for listing your property, for example, traditional letting agents, online letting agents, university lists. Each has advantages and costs. You are probably wondering which one is best?

Traditional Lettting Agents

Pros

• Many operate on a no rent no fee basis. It is in their interest to rent your property out so you would assume they will work hard to do so
• They have a physical location; therefore, they will be easier to contact if you need help or are dissatisfied with the service
• Often, the good ones have been around for some time so they may have inside knowledge of the local area

Cons

• Traditional letting agencies charge very high fees. You should expect to pay anywhere between 10% and 15% of your rental income for their tenant finding services. Fees for full property management fees are much higher and often in excess of 16%
• They are transaction-focused and most score poorly on satisfaction scores, with solely student-focused letting agencies faring even lower than other agencies
• They are known to treat students with disdain and give landlords a bad name. They are more likely to disregard process and procedure such as not complying with the minimum notice period when performing home visits or entering without the tenant’s permission. Tenants often blame the landlord rather than the estate agent even though many landlords are not aware of the actions of the agent

Online Letting Agents

Pros

• Online agencies offer more exposure as students tend to initially conduct their search for a property online
• Larger sites have good brand recognition and draw a higher level of traffic. This allows your listing to get more publicity
• The fees are cheaper than traditional letting agencies with many often only charging an upfront fee

Cons

• Online agencies require a hands-on approach. Landlords need to schedule and conduct viewings themselves and often manage their own property
• Similar to traditional agents, online agents are even more transaction-focused and customer or after-sales services tend to be poor. Landlords pay upfront, producing a skewed business model where online agencies have little incentive to support to address any of your issues

University Lists

Pros

• Students trust these properties and landlords more and are likely to pay a small premium for a ‘pre-approved’ property
• The universities that take their accommodation needs and external provider lists seriously will ensure that your property receives targeted exposure

Cons

• Universities prefer halls-based accommodation and there has been a big trend towards Purpose Built Student Accommodation (PBSA) fuelled by the readiness of developers to push such developments driven by profits. COVID-19 and Grenfell have highlighted the issues with PBSAs, and we may see a reversal of this trend going forward – read our full PBSA blog here
• Many universities have poorly maintained websites and add property lists as an afterthought which leads to students either not finding them or not being aware. Lists are poorly maintained, and no thought has gone into the user interface or experience (UI/UX) – some are just a series of hyperlinks on an otherwise blank page, bringing their legitimacy into question

Tenancy Agreement

After finding your tenants, you need a contract ready for them to sign. There are free online templates but treat these with caution as many were never legal to begin with and others are out of date. Many sites do not update their templates regularly. With renting and buy-to-let (BTL) such a ‘hot topic’ at the moment, the rules are constantly changing, and very few templates are compliant with new laws. For information on unfair terms, check out this post.

If you are using a letting agency, they likely have a template you can use. However, again approach with caution as I have reviewed many templates provided by such agencies and found that they contain unfair clauses.

Right To Rent Check

Landlords must check their tenants have the right to rent in the UK; this is often easy as national students tend to opt for private houses with international students preferring PBSAs. Nevertheless, you must complete checks to secure compliance with the law.

Currently, there are three groups of people that have unlimited right to rent in the UK. These are:

1. British Citizens
2. EEA and Swiss Nationals
3. People who have the right of abode in the UK, or who have been granted indefinite leave to remain or have no time limit on their stay in the UK

The rules are likely to change in the near future as Britain progresses with Brexit; it is essential to refer back to the Government site here. Find the Government's guide on how to conduct a right to rent check here.

Deposits

Landlords must legally protect their tenant's deposit within thirty days of receiving it or could be liable. Compensation is anywhere between one and three times the amount of the deposit. Tenants are encouraged to take their landlord to court and do so regularly, so it is not worth the risk. Find more information on legitimate deposit deductions here.

How to Rent Guide, EPC, Gas Safety and Other Documents

When letting your property to you are required by law to give your tenants the following documents:

1. A copy of the Government’s How to Rent Guide (England Only)
2. A Gas Safety Certificate
3. Details of the deposit protection scheme
4. An Energy Performance Certificate (EPC)
5. Your contact details

Failure to provide these documents makes it hard to evict tenants. Evicting students is rare, as they are in general good tenants and typically only there for a year. However, compliance is necessary as they provide tenants with important information and protect landlords. For instance, failure to provide a valid copy of the Gas Safety Certificate or EPC prevents serving a Section 21 notice.

As of 1st April 2018, rental properties must have an EPC rating of E or above. The Government has introduced a new scheme, The Green Homes Grant, which will allow anyone to get up to £5,000 to cover the costs of energy efficiency improvements; utilisation is subject to restrictions. Find more information here.

Students and other young people are leading the drive for sustainability and environmental conservation, landlords should take advantage of such schemes and make themselves stand out from the competition. One possibility is insulation improvement, something that is often neglected in student houses.

Improving energy performance also serves as a selling point to students as landlords can highlight cheaper monthly bills in comparison to other properties.

Council Tax

Students are exempt from council tax and many good landlords take this burden away and arrange for the exemption on behalf of their student tenants. To obtain the exemption you need to obtain proof that your tenants are students. Tenants can easily provide this through their university and most universities have quick online applications for these documents.

By taking control of the process, landlords ensure they have copies of a student’s status and can deal with any challenges or future council tax bill queries.

Insurance

Insurers require you to inform them if you are renting to students and some offer special student rental policies. Insurance is not mandatory but taking out a policy is wise. Given the nature of the student market, taking out unoccupancy cover is probably unnecessary; it may be included in some of the more expensive policies. If you are a good landlord and have a well-maintained house, you will always find students for your property as the number of students far outstrip the supply of HMOs.

Furnished vs Unfurnished

Undergraduates almost always opt for fully furnished properties. An unfurnished house is unlikely to appeal to many, if any, students. Postgraduates may consider unfurnished houses, but it is still only a minority. Those that do would likely consider non-student-specific houses as these are much cheaper. Some tips for furnishing your HMO:

• Choose darker colours. Although light and bright colours are often more attractive, students do think about the possibility of staining or ruining a nice white sofa
• Dishwashers and washing machines add value. Many students rate these at the top of their wish list when searching for houses. They can be the deciding factor in whether your house rented or not
• Be reasonable with TV sizes. There is a new trend in student houses where landlords buy 60-inch screens for a tiny room. What may seem like a bonus may turn out to be an unnecessary expenditure. According to Samsung, the ideal TV size is: Viewing Distance (inches) / 2

Bills Included

Bills included can be an excellent feature to ‘sell’ your house to students. However, the add-on must be priced reasonably as premium charges serve to deter students. Information is freely available, and most students are savvy to breakdown the cost components and figure out the value.

High-speed WIFI from a reliable provider always comes at the top of a student search criteria and commands a premium. Even if you decide to leave the bills to your students, including reliable high-speed WIFI will draw more traffic and get your property rented fast.

Unlimited WIFI packages are generally very cheap and becoming the norm which frees you up from worrying about your tenants overconsuming and leaving you with a massive bill. The same can be said for water (where there is not a water meter at the property). It is important to include a fair-use policy when offering bills included.

To Sum Up

These are some of the key areas to consider when renting to students and this article will give you a good starting point. Students are often excellent tenants and offer greater rewards for your time. The top way to ensure happy renting experiences is strong communication and treating your tenants with respect. Conducting your business in this manner will guarantee you will never regret renting to students.

What else should landlords consider when renting to students? We always love to hear from you, please add your comments below!