Despite global recession, economic crisis and the property crash, bricks and mortar is still the preferred method of long term investment for most, especially as a contingent pension plan. And with so many priced out of buying their own home (let alone an investment property), there is no shortage of renters to fill up those buy to lets.
But being a landlord is not without its risks and responsibilities, with serious legal and financial repercussions if you get it wrong.
There is a wealth of literature out there about the Do’s and Don’ts so this is just a short summary of some of the more important ones (legally and practically):
Make sure you check out any potential tenant with a financial and personal reference to avoid any problematic tenants from day one.
2. Tenancy Agreement
It is always advisable to have a properly drawn up tenancy agreement to reflect in black and white the terms governing the contractual relationship between the parties and will always be the reference point in any discrepancy or dispute.
3. Get a License
Many local authorities impose a selective licensing scheme which requires a private landlord to obtain a license in order to let in that area. If you fall foul of this you can be subject to fines, and you will not be able to rely on any s21 notice to seek possession.
Since 1st October, the law prevents you from serving a s21 notice to seek possession if complaints about repairs have been made and not properly addressed. The local authority can also get involved.
Since 2007 it has been a legal requirement that if a deposit is taken from a tenant, this has to be protected in a specified way. You also have to provide prescribed information to the tenant within a specified period. Failure to do so will mean compensation of up to 3 times the deposit and again an inability to rely on s21 notices to seek possession.
6. Smoke Alarm
From 1st October 2015 a landlord must fit a smoke alarm on every storey of a rented property. In addition a Carbon Monoxide alarm must be fitted in every room with a solid fuel burning appliance. This is enforced by the local authority and carries a maximum penalty of £5,000.
7. S21 Notice
Most landlords will use a s21 notice as the first step to obtain possession, because it is non-fault based it should be quicker and more straightforward. But a landlord should ensure that the notice is properly formulated and served, because technicalities can render this void and you will then have to start the whole process again. Getting it right can be complicated as the form of the notice will depend on whether you are in fixed or periodic term, and start and finish dates.
This should be done from the start (with a proper inventory taken) and at regular intervals, especially if a tenancy is then renewed. This will highlight any problems that can be dealt with rather than you becoming surprised at the end when arguments will surely follow about whether you should have had notice and done something sooner, which will delay your ability to obtain possession of the property.
9. Landlord insurance
Tenants should get their own contents insurance. Specialist landlord insurance is available on the market, which in addition to the normal building risks, insure you for specific landlord items such as rental income if the property is vacant.
10. Mortgage Conditions
You should ensure that your mortgage allows for you to rent out the property under a buy to let policy. Breach of your mortgage conditions can lead to imposing of penalties or even a black mark against your credit history as they can consider this mortgage fraud.