Thinking of buy to let?
With many first time buyers still struggling to get on the property ladder and others being forced to continue renting, it’s been reported that demand for rental properties is high. Add to this the fact that interest rates are still attractive, and renting out a property could be an appealing investment opportunity. This doesn’t mean you’ll be in for an easy ride though. Before you take the plunge you’ll need to plan carefully and be fully aware of the legal obligations you will be taking on.
James Adams, Trainee Solicitor at QualitySolicitors Talbots, explains that renting out a property isn’t all about simply finding a tenant and collecting the rent – there are legal requirements you’ll need to negotiate first.
First things first
Before you can consider renting out a property you will need to ensure there are no restrictions on the property’s deeds or planning permission which would prevent this – for both leasehold and freehold properties. Though it’s unusual to see these types of limitations for freehold properties, it’s not unheard of.
As landlord there are a number of responsibilities you’ll need to comply with:
- Provide an Energy Performance Certificate (which will be valid for 10 years).
- Undertake a risk assessment of the property and its contents to highlight and remove any potential hazards.
- Employ a Capita registered technician to check your boiler and other gas supplied equipment, and an electrician to test all appliances. Ensure all furniture adheres to the required safety regulations.
- Notify your insurance and mortgage provider that you are renting out the property – don’t be tempted not to tell them as you’ll be in breach of your terms and conditions.
- Have a recognised assured short-hold tenancy (AST) agreement in place and, depending on the circumstances, you may want to consider adding extra and specific clauses to suit your needs.
- Seek references for tenants with evidence of income and credit searches.
- Take a deposit from the tenant – usually 1 to 1.5 month’s rent and place it with one of the following Government backed schemes within 30 days.
- Deposit Protection Service.
- Tenancy Deposit Scheme.
These schemes are designed to protect the tenant’s money and ensure they get the deposit back if they comply with the terms of their rental agreement. You should be aware, if you don’t place a tenant’s deposit with one of the above schemes, you could be forced to pay the tenant compensation of between 1 to 3 times the deposit amount.
- Within 30 days give the tenant information regarding where there deposit had been placed, how they can get it back and what to do if there’s a dispute.
- Protect yourself legally against damage to the property by taking a damage deposit appropriate to the size and condition of the property. You might also want to consider taking photographs and giving a copy to the tenant as a record of the pre-let state of the property for future reference. There are specialist insurance policies you may want to consider to protect landlords against any losses.
The conveyancing costs involved for the required legal work should be the same as if you were buying a property to live in yourself. Roughly in the region of £500 - £600 for a property with a value of up to £250,000. In addition there will be various other expenses to the Government for Stamp Duty, Land Registry fees and to third parties for search fees.
Firstly, speak with them to find out why rent is not being paid in the hope it can be sorted out. If that doesn’t work, you’ll need to follow the proper legal processes – and it’s best to get professional advice at this point.
With any rental agreement, at the end of the fixed term you can take back possession of your property by serving legal notice. Once the notice has expired, court action can be taken to recover possession of the property.
Whatever you do, you must always follow the correct procedures and never take matters into your own hands. Landlord harassment and unlawful eviction is both a civil and criminal offence and can give grounds to substantial claims from your tenants.
Advice when you need it
Investing in the buy to let market can be a risky business but also one with great potential. If you need help with any of the legal steps involved or in dealing with any rental disputes, please get in touch. At QualitySolicitors we provide a Free Initial Assessment service, so you can call us for a chat to find how we can help.