Letting a property can yield a number of benefits – most obviously the rental income. For many this income can supplement a diminishing pension pot or underperforming investments. Nonetheless for those tempted to dabble in the buy to let market, there are a number of pitfalls that require extra attention – get it wrong and your ‘investment’ could land you with very hefty bills. Getting legal advice before you start is essential for any budding (or experienced) landlord.
John Hoey a consultant solicitor with almost a decade of experience in this field answers your queries
Do you need specialist insurance?
Landlord insurance, like regular home insurance can cover for damage to your building or its contents. It will also cover you for rental activities, for example if a tenant were to harm themselves, and allow them to be rehoused if the property becomes unsuitable to live in.
There is however no legal obligation for you to take out landlord’s insurance. If, however, you buy with a ‘buy to let’ mortgage, it is very likely that your lender will want you to do so.
Do you need a tenancy deposit scheme?
Yes, if you rented out a property on or after 6th April 2007 and took a deposit, this deposit should have been protected under a tenancy deposit scheme (or TDS). You may struggle to take possession of the property, if you do not use a TDS.
Are there any other requirements
The landlord is responsible for gas safety and must:
The electrical system and any electrical appliances in your property must be safe to use by your tenants. Legally you are responsible for the safety of:
Any new appliances you provide for your tenants should come with instruction booklets.
Rental Income is subject to income tax. Unless you are experienced in these areas you should seek the advice of a tax specialist (e.g. a Chartered Accountant) who will explain your liability to pay tax and your reporting obligations to HMRC.
If you are about to buy a property to let then you will be subject to the Stamp Duty Land Tax (SDLT) regime. If you already own land (e.g. your home/another rental property) you may be to subject to the enhanced rates of SDLT (3% above the normal rates). Your solicitor will be able to advise you of you liability.
If you want to sell the property you are likely to be subject to the Capital Gains Tax (CGT) regime. The rules for CGT are vast and complex and again you will need to seek advice of a tax specialist (e.g. a Chartered Accountant).
There are of course a number of other taxes such as Inheritance Tax and Council Tax, which you will also need to take into consideration.
As a landlord you must ensure that the property is fit for this purpose. You should:
Will I be responsible for the maintenance of the building?
Generally landlords are responsible for making all major and structural repairs and you should keep the structure and exterior of the property in good order. That is to say walls, floors, windows (including their frames) and the roof. You are also responsible for the wiring, pipes (gas and water). You must also repair the plumbing, basins, sinks, toilets and baths etc. As a landlord you must keep a record of inspection dates, the defects identified and any repair work that has been undertaken. A copy of this record must also be given to the tenant.
What are the tenants expected to do?
The tenants are normally obliged only to take reasonable care of the property. This is taken to mean carrying out minor jobs such as gardening, and general housework.
It is possible that the tenancy agreement could be drafted in such a way so as to impose further obligations on the tenants. Say, for example, the tenancy agreement may require the tenant to decorate and keep the interior of the premises in good repair. That being said in a number of areas, the law will intervene to ensure tenants are not given too much responsibility.
Do you need any legal docs?
You need a written tenancy agreement – informal or oral agreements can cause problems. With a formal agreement, you will be able to insert clauses that will protect your position and regulate the tenant’s use of your property. For example ‘no dogs allowed’. Once your tenant is in occupancy you cannot then force them to sign an agreement.
You require a well drafted assured shorthold tenancy agreement prepared by an experienced solicitor. Remember this is the document that protects you and your investment, should things go wrong.
Do you need a lawyer?
Legal advice is a must. Your solicitor will be able to draft the most appropriate tenancy agreement that fits with your wishes and complies with current laws and best practice. If things don’t go to plan your solicitor will be on hand to help e.g. if you wish to recover rent arrears and/or regain possession of your property.
Letting a property need not be stressful – call John Hoey for your initial consultation.
About the Author
John Hoey is a consultant solicitor who specialises in dispute resolution, employment and landlord and tenant matters. He is also an accredited mediator. John can give a unique perspective to a situation having come to the law later in life with experiences in other fields. He brings this common sense, professional and affable approach to the legal field.
Date: June 2017
Donnelly & Elliott Limited Solicitors|38 Stoke Road Gosport Hampshire PO12 1JG |02392 505 500| www.gosport-solicitors.co.ukImportant Note: The above information is for general guidance and in part forms the opinion of the author. It is based on the law as at the date of this note. It should not be relied upon in part or in whole as a substitute for independent legal advice. If any of the issues raised in this article effect you please contact a member of our team.
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