A to Z of Property Investing: C is for Contracts

In the third part of our A to Z of property investing, C is for the all important issue of contracts. If you’re serious about property investing and are planning to rent out one more of your properties, then you need get on top of contracts from the start.

Renting out property and becoming a landlord is a business and needs to be treated as such. No landlord should ever consider letting tenants into a property without first having a firm contract in place. A tenancy contract is a legally binding contract made between a landlord and his tenants and sets out the terms and conditions of the contract for both parties.

However tempted you may be to offer a verbal contract, for example to a friend or someone you know, it is always advisable to have a proper written contract, that both parties have signed. In the business world, tenancies don’t always go smoothly and, should a problem occur further down the line, resolving it can be made a lot easier if there’s a proper contract in existence.

The most common form of tenancy agreement is the Assured Shorthold Tenancy, or AST, which may run initially for six months. The contract covers the rights and obligations of both landlords and tenants, including aspects such as when rent has to be paid, how much rent is, any obligations that tenants have and how much notice must be given for rent increases.

If there are any extra terms or conditions that you would like included, for example if they relate to the particular property or the tenant that you’re letting it to, then these can be added in to contract by negotiation.

If you’re using a letting agent or property management company, then you’ll also need to ensure that any necessary contracts are in place with them too so everyone knows where they stand.