In a lot of cases, it can be more profitable renting to a group of students than to individual tenants. Which makes the prospect quite inviting! However, as with most areas of residential landlord and tenant law, there are a few things we would recommend considering before you rush down to the local university.
Tenancy Agreements for Student Accomodation
When deciding to rent to students, you have to make a decision. Whether you want to rent the Property to all the tenants under one tenancy agreement, or to grant separate agreements to each tenant with a license to use the common parts. One agreement for all the tenants means they are all jointly and severally liable to pay the rent; in layman’s terms this means that the responsibility to pay the whole of the rent is shared between all the tenants, they are not only responsible for their portion.
Therefore, if the whole rent is not being paid, you could pursue any one tenant or all tenants. Alternatively, you can grant each tenant an individual tenancy, usually, for the room they are occupying in the property; this means that they are only responsible for their room and their proportion of the rent. And if their rent stops being paid, you can only pursue the individual.
Regaining Possession of your Property when Renting to Students
The type of tenancy you opt for will affect your position if you need to regain possession of your property. If you opt for one tenancy where the tenants are jointly and severally liable, and one tenant fails to pay the rent, you are not able to only evict this tenant. You would have to commence possession proceedings against all occupants to regain possession of the Property. Which might be inconvenient if there is just one rotten egg in the bunch. However, if you grant separate tenancies where each tenant is responsible for their own rent and one stops paying, you could issue possession proceedings against that tenant only. Whilst leaving the others in situ.
Student Accomodation HMO
Privately rented student accommodation will usually be considered a house in multiple occupation (HMO). A rented property becomes a HMO if there are more than 5 tenants living in the property. Making up more than one household, and they share a toilet, bathroom or kitchen facilities with other tenants. If your property qualifies as a HMO, meeting the above requirements, it becomes subject to a mandatory HMO license. And it is a criminal offence for a landlord to operate without one and could be heavily fined. You will need to at least apply for your license before renting out your property.
Some areas are also subject to additional licensing requirements. Therefore you should double-check with your local authority before renting out a HMO.
Renters Reform Bill
Current and prospective Landlords will no doubt be familiar with the Renters Reform Bill 2022 that was announced in June of this year. Amongst many other things, the bill sets out to ban fixed term lets, and abolish section 21 notices. This will have a particularly big impact on the student let sector where a fixed term let is the norm; One group of students moves in for the academic year, and at the end of the fixed term they vacate, and another group moves in.
However, if fixed term lets are banned, landlords will not be able to say with certainty that the property will be vacant to re-let for the following year. This will make the re-letting process very hard. Further, if you miss the window to let to students in an academic year, it is not just a case of simply finding a family to let to in the interim period. If you switch from using the property as HMO to let to a single family, it becomes extremely difficult to switch back. As you have to obtain permission from the local authority, which is often denied. As a result of this, missing one window for student lets can mean losing homes for students in the long term.
Council Tax when Renting to Students
This will also cause an issue regarding council tax. It is well known that students are exempt from council tax. However, if one occupant becomes liable to pay council tax, all occupying tenants will then have to begin paying it. This could happen when there’s students from mixed years in a HMO without a fixed term, and one graduates. This would mean all the tenants living in the Property would have to start paying council tax. Even where the majority of them are still students.
Therefore, it is extremely important for landlords, especially those already renting to students to be aware of the renters’ reform bill. Specifically the implications it will have on the private rented sector.
As for any landlord, you should consider taking out an insurance policy when renting to students. Some insurance policies will cover the rent if this is not paid, and/or will cover your legal costs if you ever need to evict a tenant or recoup any losses you have suffered. This should always be a consideration when letting out your property.
How Woodstock Legal Services can assist you when renting out to students:
Renting out to students can be both profitable and rewarding if done correctly. However, as you can see from the handful of considerations detailed above, the decision should not be taken without due care and consideration. Woodstock Legal Services offer many services to assist landlords through this process. From working with agents to ensure their Tenancy Agreements are effective, to providing specific advice to landlords about how to deal with one problematic tenant in a HMO. Woodstock can even advise how to best prepare for the changes created by the Renters Reform Bill.
Have any questions about the legalities of the private rented sector, or the student let sector? Please do not hesitate to get in contact with the friendly team at Woodstock Legal Services.