The Risk Posed By Inexperienced Landlords
A report calling for the launch of a national register of landlords caught our eye just before Christmas and was something we thought worth looking at in a little more detail.
The Safe and Decent Homes report was commissioned by charity Shelter and British Gas and highlights among other issues the rise of the ‘accidental landlord’. This is the phrase that refers to the growing number of private landlords who have fallen into the role as a result of circumstance – an inheritance or being unable to sell before moving for example, rather than those who purchase property specifically for income or investment. The report stated that currently around one in four landlords have no experience of letting out property, and more worryingly 43 per cent do not regard letting as a proper business. Shelter’s concern of course is the impact that this lack of experience may have on the tenant – as well as leaving these accidental landlords open to a number issues themselves.
At the heart of the report is a call to the government to ensure that all landlords meet basic legal requirements. It’s a call we’re keen to support but we’re also aware that many of the accidental landlords out there are simply unaware of the legalities and responsibilities of renting out a property. If you are in this position here are a few points it’s worth considering:
- Check your mortgage: Most standard resident mortgages prohibit you from renting out your property. Instead most providers will require you to have a specific ‘buy-to-let’ mortgage which is likely to have slightly higher interest rates. It’s also worth noting that most buy to let mortgages are currently unregulated. In fact only family let’s (where your tenant is immediate family) are currently regulated by the FCA. It did seem likely that this would change under the terms of the new European Mortgage Credit Directive, however at the end of last year HM Treasury announced that it will launch a separate consultation into the regulation of buy to let during 2015. This decision to delay the review of buy-to-let lending means that any legislative changes are unlikely before the General Election this year. However as with all mortgages it is best to get advice from a whole of market mortgage broker.
- Duty of care: There are a vast number of legalities involved in renting out a property that cover everything from how and when you can enter the property to managing repairs. You can find out more about these https://www.gov.uk/renting-out-a-property
- Be prepared: Two of the most common areas where accidental landlords run into difficulty are rental voids, this is the period of time that your property is not rented out either as it is not habitable or because you are unable to find a suitable tenant. And secondly being caught out by unexpected repairs. As the property owner you’ll be responsible for anything that breaks or goes wrong in the property as well as ongoing maintenance and insurance so make sure you can afford these additional costs.
- Have the proper certification: There are a number of regulatory requirements for landlords – for example you will need to ensure the property has an Energy Performance Certificate and that all gas and electrical equipment is safe. If the local council state that your property is a HMO (House of Multiple Occupation) then you will need to have a license in place and must meet further health and safety requirements.
The Shelter report highlights some important concerns and if introduced we believe a national register will provide useful guidelines for landlords as well as vital protection for tenants. We’ll be keeping an eye on what discussions this reports prompts in the industry.