The list of records that a landlord must keep is quite long and surprisingly detailed and will cover you in the event of a number of disputes with neighbours, tenants, the taxman and other service providers.
How long shold you keep records for as a buy to let landlord?It is all too easy to forget the paperwork or leave it to another time, but keeping up-to-date with your records is essential.
The records you need to keep are of two sorts.
First, there are some records that you have a legal responsibility to keep and then there are others that are just useful to keep in case of a dispute later.
At the start of a tenancy you will have the tenant’s application form and / or references combined with any background checks that you do on them.
It is essential that you keep these until the tenancy has run its course because this is gold dust if you need to trace them – say, if they abandon the property or leave owing rent or for damages to the property beyond those covered under your deposit.
If they owe any other unpaid bills – say to the electricity or gas – you could also forward new address information onto third parties But if you do this, you should make sure that you have a clause in your tenancy agreement setting out that you will do this if requested to by a utility company or the government.
You should try to get into the habit of keeping a written record of when something happens on each of your properties. This might be as simple as a record of a phone conversation where you agreed to do (or not do something) or it could be a written record of a report of say, a physical inspection or a gas or electrical certificate or an estimate for a repair.
A classic type of change – and one which is easy to overlook – would be where you agree to redecorate a room or to provide a new item like a washing machine for the tenant.
When you redecorate a room or you provide a brand new white good your inventory record should be updated to reflect this change. So, dust down the original inventory and update it. The tenant should sign the change and the new updated inventory should be filed away until such time that it changes again or at the end of the tenancy when it will become the sole record of the original or updated state and condition of the property.
Landlords who don’t have a thorough and up to date inventory which lists the state and condition of the property and everything in it -right down to the colour, make and model number of each item – risk losing out when the tenancy comes to an end.
Another good idea when decorating is to keep a note of the paint colour used in each room in case you need to “touch it up” at a later date.
Right now I’m advising a landlord who let a property without doing an inventory and who has now fallen out with his tenant. In the worst case the tenant could take all the furnishings that were in the property when the tenancy agreement was entered into. If that were to happen the landlord would have a very difficult job to recover any losses to his inventory.
God Gave us Email – so Put it in Writing
It is because people have a habit of “hearing what they want to hear” that I always advise landlords to send a note to their tenant to confirm what was agreed in writing.
In these days of email, this is very easy to do – and it is best to also print out a hard copy too just in case your computer suffers a breakdown and you lose all the data on your hard drive.
When the tenancy comes to an end, all copies of notices and any other legal papers should be kept along with proof of posting certificates. (I don’t use recorded delivery because with this the tenant has the option to just not accept the post!)
You will also need to keep records for the taxman too. This would include records of allowable costs incurred, rents charged, dates that the property was let out, bank statements, invoices and receipts. HMRC could, if they were doing an investigation, ask you about any payments made into your bank account so it is useful to make a note of what these are for as well.
These sorts of records should be kept for six years if you are self employed or running your rental property as a sideline to your main job or seven years if you have a limited company.
Some records should be kept for longer than six years for capital gains tax purposes
Where you sell a property you may be liable to CGT so you will need a record of the dates you bought and sold it and the prices paid.
In addition, you should be able to prove the total associated conveyancing buying and selling costs as well as a record of the costs of any improvements that you made to the property and the date that these improvements occurred -because these are all deductible from your total gain.
You should also keep things like electrical inspection reports to prove that you are looking after the property properly. Landlords gas CP12 certificates should be kept for at least 2 years.
If you have a dispute with a neighbour or any other third party, you should keep it just as long as you need to in case the dispute should ever go to court.
Finally, take care to shred any records that are out of date and make sure they are deleted from your hard drive.