First-Time UK Landlords: Top Legal Mistakes on Title, Covenants, Notices, Tenancy Setup

Landlord Compliance Guide: ASTs, Notices, and Finance

A landlord is an owner who lets a home to a tenant under the Housing Act 1988, typically on an assured shorthold tenancy (AST). An AST is the standard private residential tenancy where the tenant occupies as a main home and rent sits within statutory bands. A section 21 notice is a two-month no-fault route to recover possession; it only works if you have delivered every prerequisite document and any required licence. This guide shows how to set up, operate, and exit an AST cleanly so you protect cash flow, refinancing, and value.

Scope and objectives: England and Wales only

This note sits in England and Wales and excludes commercial leases and regulated tenancies. Scotland and Northern Ireland run different frameworks. The goal is simple: buy assets you can lawfully let, set tenancies you can enforce, and protect refinancing and exit.

Acquisition discipline: buy only what you can let and enforce

Most headaches were baked into the title or lease years ago. They show up when you refinance, serve a notice, or answer a lender’s solicitor. Verify the file early and walk from stock that breaks your model.

Class of title and rights: Possessory or qualified title signals gaps in ownership; many lenders want indemnity or title upgraded before drawdown. Check the HM Land Registry title and plan against fences, gates, and paths. No right of way, no parking rights, or missing rights to use communal areas make occupation hard and rents fragile. Impact: financing friction, capex, and letting delays.
Leasehold subletting rules: Some long leases ban underletting, restrict shorthold lettings, or require consent. The alienation clause governs whether you can run an AST, a room-by-room HMO, or a holiday let. Breach invites freeholder enforcement and insurer questions. Impact: let risk, lender consent conditions, legal cost.
Ground rents and estate rentcharges: New long residential leases post-30 June 2022 should carry a peppercorn ground rent. Older leases can include doubling ground rent that spooks lenders. Freehold houses can carry an estate rentcharge; arrears can trigger strong collection remedies. Impact: mortgageability, resale discount, cash sweep risk.
Restrictive covenants: Title covenants can limit alterations, use, fencing, or parking. Neighbors can enforce. Options are insurer, consent, or a section 84 application to modify or discharge – slow and uncertain. Impact: plan risk and delay.
Planning, building control, licensing: Unconsented conversions, lofts, or outbuildings invite enforcement. Councils can extend licensing beyond HMOs through additional or selective schemes. Letting without a required licence blocks section 21 and opens rent repayment order exposure. Impact: cash clawback and notice invalidity.
Rights of light and services: Map statutory undertakers’ easements and shared drains. If you own liability for a shared or old drain, expect recurring opex. See easements and access rights for practical checks. Impact: higher maintenance and tenant claims.
Fire safety in blocks: The Fire Safety Act 2021 brought structure and external walls into scope; compliance usually sits with the freeholder. Many lenders want an EWS1 for certain buildings. Impact: exit timing and price.
Insurance covenants: Leasehold titles require compliance with freeholder insurance and notification of subletting. Holiday letting often sits outside cover. For freeholds, declare occupancy and security accurately. Impact: uninsured loss and covenant breach.

Quick rule of thumb: if a restriction limits ordinary AST use, assume heightened lender scrutiny and longer hold periods until fixed.

Cash flow prerequisites: switches you must turn on

These are binary switches. Miss one and a notice may fail or a penalty lands. Build a pre-let checklist and evidence pack.

MEES and EPC: New and continuing lets need an EPC of E or above unless a valid exemption sits on the register. Government paused the proposed uplift to C, but investors still price energy efficiency. Impact: letting eligibility and optics.
Electrical and gas safety: EICR every five years or on change of tenant; fix remedials promptly. Annual gas safety checks and certificates to tenants are mandatory. A missing certificate can block section 21. Impact: enforceability and safety.
Smoke and CO alarms: Smoke alarms on every storey used as living space; CO alarms where there is a fixed combustion appliance. Fit, test at move-in, and fix quickly when told. Impact: compliance and claims defense.
HMO and local licensing: Five or more occupiers forming more than one household with shared facilities triggers mandatory HMO licensing. Many councils run additional or selective schemes. No licence means no section 21 and rent repayment order exposure. Impact: revenue at risk.
Deposit protection: Protect a deposit within 30 days in an authorized scheme and serve prescribed information in the same window. Penalty is 1-3x the deposit and section 21 is blocked until fixed or deposit returned. Impact: direct cash hit and delay.
Tenant Fees Act 2019: Charge only permitted payments. First breach can trigger a civil penalty up to £5,000; repeated breaches can reach £30,000 as an alternative to prosecution. Impact: margin erosion and reputational cost.
Right to Rent checks: Check each adult’s status before the tenancy starts. Use share codes correctly or approved identity service providers. Civil penalties increased in 2024. Impact: fines and process scrutiny.
Landlord address notices: Section 48 requires you to give a service address in England or Wales; until then, rent is not due. If the landlord changes, serve a section 3 notice. Impact: rent collection and validity.
Section 21 prerequisites: To use section 21, serve the latest How to Rent guide, an EPC, gas and electrical safety certificates, and any required licence. Retaliatory eviction restrictions apply after certain council notices. Impact: possession certainty.
Fitness for human habitation: Tenants can claim if a property is unfit at the start or becomes unfit. Expect damages and works orders, often alongside council action that bars section 21 for a period. Impact: capex and litigation risk.

Debt covenants: read them like equity

Loan conditions and tenancy choices are joined at the hip. Fit your finance to your operating model and vice versa.

Consent to let and use: Residential mortgages usually ban letting without consent and often exclude HMOs or holiday lets. Buy-to-let loans can exclude multiple occupants, short-lets, or certain tenant profiles without consent. Impact: covenant cure cost and refinancing windows.
Freeholder consents and bylaws: If a lease requires consent to sublet, lenders will ask to see it. Provide the managing agent with AST details where bylaws require it to avoid nuisance escalations into service-charge arrears or forfeiture threats. Impact: avoidable disputes and cash leakage.
Priority payments: Keep building insurance, ground rent, and service charges current. Many portfolio facilities hard-wire these as priority spends. Impact: protect the asset and the loan.

Tenancy setup: standard tool, non-standard traps

Treat each tenancy like a closing. Execution order and evidence often decide enforcement outcomes months later.

Tenancy type: Where rent sits within bands and the tenant occupies as a principal home, use an AST. Exclusions include high-rent tenancies above £100,000 a year, low-rent, resident landlords, and student halls. For sharers, choose joint ASTs or room-by-room ASTs; licensing, utilities, rent per square foot, and enforcement vary. Impact: operating model and yield.
Parties and guarantors: Verify legal names and immigration status of all adult occupiers. Execute guarantor agreements as deeds and give the guarantor the tenancy before signing. Company guarantors need authority and correct execution. Impact: enforceability at default.
Rent and deposit mechanics: Fix rent, due dates, and payment method. Stay within TFA caps. If you take a holding deposit, either sign within five calendar days or agree an extension in writing. Impact: clean cash controls.
Breaks, renewals, increases: Draft breaks with clear notice, service methods, and simple conditions. For periodic tenancies, use section 13 with the correct form and notice. Avoid clashes between contractual review clauses and section 13. Impact: predictable rent and exit paths.
Move-in pack and documents: Serve How to Rent, EPC, gas certificate, EICR, deposit prescribed information, and smoke/CO evidence. Get signed acknowledgments with dates. If using email, get explicit consent and keep logs. Impact: section 21 readiness.
Statutory notices and addresses: Serve section 48. On a change of landlord, serve section 3. Define service methods in the AST and keep a service log. Notify the freeholder or managing agent of subletting if your lease requires it. Impact: fewer disputes.
Data protection: Register with the ICO, publish a privacy notice, and define lawful bases for referencing, credit checks, deposit schemes, and insurers. CCTV in common parts adds duties; skip audio. Impact: regulatory hygiene and trust.
Inventory and check-in: Commission an independent inventory with time-stamped photos and tenant sign-off. Deposit deductions stand or fall on this evidence. Impact: recovery on exit.
Repairs, access, and works: Include 24-hour access for inspections, keep a repairs log, and document responses to damp and mold. Impact: tenant health, claims defense, and council relations.

Cash controls: simple beats clever

Build repeatable steps that protect cash and prove compliance.

Pre-tenancy: Take a holding deposit if used, complete referencing and Right to Rent checks, execute the AST and any guarantor deed as a deed, and collect first rent and the deposit.
Deposit protection: Within 30 days, protect the deposit and serve prescribed information. Many insured schemes require minimum referencing standards. Impact: preserve section 21 and avoid penalties.
Ongoing payments: Collect rent into a segregated account. Pay mortgage, insurance, ground rent, and service charges first. Maintain a sinking reserve for statutory works. In many HMOs, plan for council tax if liability sits with you. Impact: liquidity and lender confidence.
Arrears and enforcement: Follow a staged protocol: reminders, then section 8 on grounds 8, 10, 11 when thresholds are hit, and section 21 where available. Prove service with certificates of posting and N215s. Impact: faster recovery.
Move-out: Conduct check-out with photos, propose deposit deductions within scheme timelines, and serve any rent-arrears notices needed to preserve claims. Record meter readings and council tax updates. Impact: reduce leakage.

Regulatory temperature: enforcement is up

Councils target weaker stock and poor management. In 2022, 21% of private rented homes in England fell below the Decent Homes Standard. Expect civil penalties up to £30,000 for certain breaches and rent repayment orders for licensing failures, illegal eviction, harassment, or breach of banning orders. Courts run slow; price in multi-month possession timelines and holding costs.

Tax and structure: the after-tax yield is what matters

Individuals: Finance costs are not deductible from rental income; relief is a 20% basic rate reducer. The cash basis now applies by default up to £150,000 of receipts; elect for accruals if that suits. Non-resident landlords may face withholding unless HMRC approves gross payment. Impact: cash tax planning and reporting cadence.
Companies: SPVs can deduct finance costs subject to corporate interest restriction. Companies pay corporation tax; dividends then face shareholder tax. ATED applies to company-held homes over £500,000 unless you claim and file relief annually. For setup, see UK buy-to-let SPVs. Impact: leverage efficiency versus admin.
SDLT, VAT, local taxes: Expect the 3% higher rates for additional dwellings and a further 2% for non-resident buyers. Residential rents are exempt from VAT; budget gross for repairs and management. Some HMOs are banded per room for council tax. Impact: acquisition model and run-rate costs.

Common drafting errors and how to avoid them

Break clauses: Keep conditions simple: rent paid to break date, keys returned, and vacant occupation given up. Avoid material compliance wording. Impact: fewer arguments.
Rent review conflicts: If you rely on section 13, align or drop contractual reviews. Impact: clean increases.
Repairs vs statute: Do not try to shift section 11 duties to the tenant. Impact: enforceability.
Prohibited fees: Remove clauses that charge for check-out, inventories, or compel a professional cleaner. Require cleaning to a standard instead. Impact: TFA compliance.
Notice provisions: Email needs explicit consent and an actively monitored mailbox. Include deemed service clauses aligned with statute and list physical addresses. Impact: valid service.

Service and enforcement: formality wins

Section 21: Use Form 6A, give at least two months, and evidence every prerequisite. Do not serve inside the fixed term unless the break has been exercised properly. If you acquired the deposit from a prior landlord, check whether you must re-serve prescribed information. Impact: certainty at hearing.
Section 8: Ground 8 is mandatory at two months’ arrears; grounds 10 and 11 are discretionary. Give at least two weeks’ notice for rent grounds and track arrears by due date to avoid tactical payments taking you below thresholds on the day. Impact: leverage in negotiation.
Service methods: First-class post with a certificate of posting, hand delivery with a witness, or a process server for higher-risk cases. Keep copies, dates, and photos, and file N215s. Impact: proof that sticks.
Retaliatory eviction bar: After certain council notices, section 21 is unavailable for six months. Fix issues fast and record any tenant refusals of access. Impact: timeline control.

Local licensing and management expectations

Fit and proper test: Expect questions on history and management capability. Present a management plan covering repairs, waste, anti-social behavior, and tenant engagement. Impact: licence approval.
Amenity standards: HMOs carry minimum room sizes and amenity ratios. Undersized rooms will not be licensed. Impact: layout and rent model. See buying an HMO in student cities for sizing traps.
Fees and oversight: Budget application fees and possible landlord training. Some councils align licensing with targeted inspections and rent repayment order pursuit. Impact: compliance cost and audit readiness.

Comparisons and alternatives: choose for yield and enforcement

Joint AST vs rooms: Joint ASTs simplify utilities and enforcement via joint and several liability. Rooms can lift rent per square foot but usually trigger HMO licensing and raise management intensity. Impact: yield versus time.
Company lets vs AST: Company lets sit outside the Housing Act 1988; you rely on contract, not sections 8 or 21. Many lenders restrict them. Impact: enforcement route and loan fit.
Holiday lets vs AST: Higher gross yield potential, but planning limits, mortgage exclusions, and wear-and-tear shift the math. Impact: volatility and permissions.

Implementation timeline and roles: 6-10 weeks

Week 0-1: Title and lease review; lender engagement; insurance quotes; council licensing check; MEES plan. Compare freehold vs leasehold issues if buying flats.
Week 2-4: Works and safety checks, EPC improvements; licence application; draft AST and guarantor deed; choose deposit scheme; ICO registration.
Week 4-6: Marketing and referencing; Right to Rent checks; agree terms; execute AST; collect first rent and deposit; serve documents; protect deposit.
Week 6-10: Monitor compliance; meet licence conditions; build arrears protocol and notice templates; back-test the file for completeness.

Owners and doers: landlord sponsors the legal setup; conveyancer handles title and indemnities; agent can run setup but you audit statutory steps; electrician and Gas Safe engineer certify; accountant sets tax; insurer binds appropriate endorsements; council processes licensing. For sale agreement nuance, see this overview of a sale and purchase agreement in real estate.

Economics and the price of mistakes

One-off costs: conveyancing and any indemnities, licensing fees, EICR remedials, and inventory. Recurring: mortgage interest, insurance, service charges, ground rent, management fees, compliance renewals, and licence renewals. Illustrative impacts:

Deposit protection miss: On a £1,500 deposit: £1,500-£4,500 penalty plus blocked section 21. Impact: timeline and cash risk.
No HMO licence: Up to 12 months’ rent via a rent repayment order. Impact: cash clawback.
Missing gas certificate: Re-serve, re-notice, and carry several months’ holding costs. Impact: carry cost.

Financing choices also shape returns. If you plan a refinance, align the loan with your intended letting style. A useful primer on structures is this short guide to real estate private credit financing.

Quick kill tests before exchange

Underletting ban: Lease bans Housing Act tenancies – walk unless consent or variation is secured in writing.
EPC fails: EPC F or G with no viable path to E within budget – pass or price the works and optics.
Estate rentcharge: Aggressive collection with no variation – avoid unless lender accepts mitigations.
HMO sizing: Licensing required but room sizes fail – redesign or pass.
Mortgage mismatch: Loan conditions conflict with rooms or short-lets – secure the right product first.
Possessory title risk: Active adverse claim – get indemnity or pass.
Agent template issues: AST template breaches the TFA – replace it.

Controls that stand up in court and with lenders

Complete file: Keep a dated compliance file with all prescribed documents and acknowledgments tied to the tenancy start date.
Right to Rent log: Retain evidence with re-check dates for time-limited permissions.
Service records: Log service of notices with method, time, and witness where used; file N215s consistently.
License tracker: Track licensing deadlines and conditions with calendar alerts; store licence numbers in the AST.
Repairs ledger: Record complaint date, action, attendance, and outcome, with photos.
Rent control: Reconcile rents monthly and escalate arrears on a day-count protocol; document contact.

Fresh angle worth adopting: run a one-hour quarterly audit against this file. If a document is missing, assume a notice will fail and fix it before a dispute forces your hand.

Edge cases worth a line

Tenant swaps: On a joint AST, use a deed of assignment or surrender and re-grant; re-serve deposit information if rules require.
Deposit top-ups: On renewal, top-ups can trigger re-service under some scheme rules.
Section 21 timing: Serving inside a fixed term without activating a break is premature.
Leasehold consent: Letting before consent can void insurance and invite freeholder action.
Mixed-use quirks: Flats over shops attract planning, licensing, and insurance nuances; lenders adjust LTVs. See title defects that derail small deals.
Non-resident landlords: Without HMRC approval, agents or tenants may withhold tax.
Data minimization: Do not pass around passports without a lawful basis.

Practical next steps

Before exchange: Read the lease, test lettability, price MEES capex, confirm lender and insurer positions, check licensing, and draft the AST and guarantor deed. If new to leasehold, review service charges and ground rents.
Between exchange and completion: Complete works, obtain consents, bind insurance with the right use, and register with the ICO.
Pre-marketing: Assemble the compliance pack and checklist, select the deposit scheme, book inventory and check-in.
At letting: Follow the execution order, evidence service, and diarize renewals.
In hold: Run a quarterly compliance audit, review tax annually, rate-check insurance, pre-empt licence renewals, and communicate with tenants early on issues. For primary legislation context, skim the key statutes and regulations.

Closeout and retention

Archive your tenancy pack with an index, version history, Q&A, user access list, and full audit logs. Hash the archive, set a retention schedule, and instruct vendors on deletion and destruction certificates when the period ends. Legal holds override deletion; record holds clearly and lift them formally.

Conclusion

You do not need heroics to run a compliant and bankable first let. Read the lease, match the tenancy to statute and lender conditions, serve the right papers in the right order, and keep evidence as if a judge or credit committee will read it – because they might. That quiet discipline protects rent, refinance options, and exit value.