Should I refurbish a buy-to-let property?

If you are new to the property game, it's probably best not to. It's time-consuming, stressful and you lose money while the property is not being let out.

If you are experienced, have the time and can afford to do without the incoming rent, then it could be worth your while. Always remember to double the amount you think you'll spend because unforeseen costs almost always emerge.

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What sort of return can I expect from a buy-to-let investment?

According to The Buy-to-Let Bible, a good buy-to-let property will give you around 12 per cent of the purchase price each year in income, so if your new buy-to-let property costs £45,000, you would hope to get around £450 per month in rental.

If similar properties in the area are rented out at £350 per month, you know your buy-to-let property will struggle to bring in the rent you need and maybe you should consider investing in buy-to-let somewhere else.

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If my tenant leaves their fixed-term tenancy agreement early, must they still pay the rent?

Your tenant can give notice to end their tenancy agreement provided they can find an acceptable replacement tenant for you. If they can't find a replacement tenant, they will be responsible for the rent until the end of the tenancy agreement, even if they have physically left the landlord’s property.

In any case, your tenant cannot end the tenancy agreement during the first three months of their tenancy.

Find out more about a landlord's rights and responsibilities in Residential Lettings.

What can my tenant do if they consider my rent to be too high?

Assured shorthold tenants have the right to refer rent matters to the Rent Assessment Committee. In England and Wales, however, any referral must be made within the first six months of the tenancy. In Scotland, it can be made at any time during the period of the tenancy.

The Rent Assessment Committee can only consider the application if there is a sufficient number of similar dwelling houses in the area, and will only reduce your rent if it considers it to be significantly higher than might reasonably be expected, compared to rent paid under similar tenancies in the locality.

Once a rent has been determined by a Rent Assessment Committee, you, as a landlord, cannot serve a notice of increase on your tenants until more than 12 months have expired since the date of determination.

What are a tenant’s obligations to their landlord?

A tenant's obligations to their landlord can be summarised as follows.

Repairs

Your tenants are obligated to use the property in a 'tenant-like manner', which means that they will be responsible for any repairs that are their own fault, even if they would otherwise fall to be paid for by the landlord.
Generally, the tenant is responsible for the condition of the interior of the property, but the landlord can restrict their tenants in the tenancy agreement from doing any redecoration.
The tenant must pay for anything that is broken or damaged in the landlord’s property during the tenancy and the landlord can deduct the cost of this from the damage deposit that is taken at the start of a tenancy agreement.

Outgoings

The landlord will not normally want to be stuck with paying a tenant’s bills, so tenancy agreements provide for the tenants to pay them. However, if there are a number of different tenants coming and going on individual tenancy agreements, the utility accounts may have to be in the landlord's name. If there are any accounts that the landlord will pay, for example some landlords pay the water rates, then the tenancy agreement should be altered to show this.

Use of the property

Your tenant’s must use the rented property solely for residential purposes, as otherwise you, as a landlord, may be placed in breach of planning regulations.
The landlord will also want to prevent the tenant from letting anyone else live at the property, as they will only want tenants whom they have checked and approved.

Access for the landlord

This is important, as the landlord will need to visit and inspect the rented property from time to time, to ensure that the rented property is in good condition, and to do any repairs and gas safety checks.
The landlord will retain keys to the rented property; however, they should never use these to gain access to the rented property without the tenant’s consent, except in an emergency.

If I rent out a room in my own home are there any tax breaks? Can I rent a room tax free?

If you let a room in your house and you are an owner-occupier, or a tenant who is sub-letting, the first £4,250 of any income is tax free, i.e. a rent of £81.73 per week is tax free.

This means you have in your own house access to over £4K income tax free every year!

If the rent is higher than £4,250, you either elect to pay tax on the surplus above £4,250 (without relief for expenses) or you can treat the arrangement as being a furnished letting and prepare accounts.

What are the tax implications if I let out my holiday home?

If you let out holiday accommodation, the definition of furnished holiday lettings is as follows:

  • The accommodation must be available for holiday lets for at least 140 days per year.
  • The accommodation must be let for 70 days in the year.
  • No let must exceed 31 days.

The income is treated as earned income (a trade) attracting Capital Gains Tax rollover relief and business asset taper relief.

Tax-saving ideas worth thinking about...

  • Rollover of capital gains on the sale of trading assets into the purchase of holiday accommodation.
  • Any gain on the sale of the holiday accommodation may eventually attract Capital Gains Tax at only ten per cent.
  • You can claim capital allowances on furniture and equipment.
  • If you make a trading loss from your holiday lets, you may offset it against your other income or capital gains in the same year or the previous one.

However, don't buy the accommodation with a substantial mortgage because HM Revenue & Customs may regard your motives as not being commercial and don't forget about the VAT consequences if you are VAT-registered.

What are the tax implications if I let out furnished accommodation?

If you receive income from furnished lettings, it is taxed under the property income rules.

If you provide laundry, meals, domestic help, etc. for your tenants, then you may be able to claim that you are running a self-employed business - as you usually can if you are providing holiday lettings (see below). The advantage of running your property enterprise as a business means that there are usually more expenses you can claim against Income Tax and, in addition, you may be able to claim business asset taper relief for Capital Gains Tax and business property relief for Inheritance Tax purposes.

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How can I reduce the time between my old tenant leaving and a new tenant moving in?

Here are five hints:

  1. Decorate the property in a neutral style
  2. Buy property in high demand areas
  3. Be less fussy about the type of tenant you are willing to accept
  4. Buy a type of property for which there is high demand
  5. Advertise the property in plenty of time before the end of the current tenancy

Find more landlord, tenancy agreement and buy-to-let information.

I want a problem tenant to leave my property; what can I do to evict a tenant?

If you're a landlord who wants to evict your tenant, you must take steps to serve the proper form of eviction notice. You will have to evict your tenant using either a Section 8 Notice, which should be used after the tenant is in rent arrears of more than eight weeks/two months (depending if the rent is paid weekly or monthly), or a Section 21 Notice (which can only be used if the fixed term has ended). The Section 8 Notice has a notice period of not less than two weeks, and a Section 21 Notice has a notice period of not less than two months and it must not end before the end of the fixed term. In many cases, you can use both eviction notices.

All of these eviction notices are available, ready to use, in Lawpack's Residential Lettings Kit, with detailed guidance on how you can terminate a tenancy, or you can download immediately Lawpack's Section 21 Notice here.

Should I get the name of a guarantor to pay the rent in case the tenant defaults?

If you're worried about a prospective tenant's ability to pay the rent, it's wise to take a guarantee from a third party. For example, guarantees are often taken from parents of students when they sign tenancy agreements. However, you should take up references and do credit checks on guarantors, as you would on a tenant; it's no good having a guarantor who is as impecunious as a tenant.

It's unwise to allow the tenant to take the tenancy agreement away to get the guarantor to sign it; it has not been unknown for tenants to forge guarantors' signatures in these circumstances. If the guarantor doesn't sign the agreement in front of you, make sure that the signature is witnessed by someone you can trust, who can vouch for their identity.

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What tenancy forms do I need when letting out my property in Scotland?

In order to create a proper Short Assured Tenancy, you must complete an AT5 Notice of a Short Assured Tenancy which must be used with a Short Assured Tenancy Agreement. The completed AT5 Notice must be given to the tenant(s) before the agreement is signed and dated. It can be given at any time before the agreement is entered into. However, you must be able to prove that it was given to the tenant before he or she signed the agreement, so it's wise to give notice at least one day in advance.

The legal form AT5 Notice is provided free of charge with Lawpack's Short Assured Tenancy Agreement download.

Find more landlord, tenancy agreement and buy-to-let information.

Do tenancy agreements need to be witnessed?

In England and Wales, strictly speaking, there is no need to have signatures witnessed if the tenancy agreement is for a term of less than three years. However, it may be a good idea to have any guarantor's signature witnessed, particularly if they do not sign in front of you. The witness can be the same person for all three signatures on the agreement.

In Scotland, it's recommended that the tenancy is witnessed, as it then becomes self-proving.

Do I need to get permission from anyone before letting out my property?

If you have a mortgage or are going to let a leasehold flat, you need to check to see if you need to obtain permission from your mortgage company or your landlord before letting. If consent is not obtained, this could have serious consequences, including the lender or landlord taking possession proceedings against you. Your mortgage company may impose conditions for letting; needless to say, you should be careful to comply with these.

Find out all you need to know about tenancy agreements and letting your property in Residential Lettings.

What can I do to improve the chances of letting a property?

To increase your chances of finding a tenant and letting your property you can try these ideas (in this order):

Reduce the rent
If you can't let your property at the price you want, then try reducing the rent - even as little as £2 per week less can make a difference.

Be less picky
For example, if you've asked for non-smokers, then consider smokers. A local cleaning company may be able get rid of the smell quite easily.

Put furniture in the property
This will be expensive and is no guarantee that the place will attract tenants. Consider this if you are getting calls rejecting the property because it's unfurnished.

Consider selling it
This is a drastic step, because most properties in the UK are lettable - it's just the rent you are asking for that might put off possible tenants. However, if you are experiencing trouble letting it, think about getting out! You could sell it and buy something else.

You can also...

I am thinking about letting my property for the first time. What are the legal obligations I would have towards the tenants as their landlord?

As a landlord you have a number of unavoidable obligations under the law towards your tenants. Here are the main landlord responsibilities.

Repairing covenants
Under the Landlord and Tenant Act 1985, the landlord must look after the structure and exterior of the rented property, and the installations for the supply of services (gas, electricity, water, sanitation and heating). You'll find this in the Assured Shorthold Tenancy agreement for England and Wales and in the Short Assured Tenancy agreement for Scotland. The landlord should also look after the roof of the rented property, the drains, gutters and the garden, if there is one.

Gas safety
Under the Gas Safety Regulations a landlord must have the gas equipment at a property inspected every year by a Council for Registered Gas Installers (CORGI)-registered plumber and give the certificate to the tenant. Landlords should check the current regulations with their local health and safety executive, who enforces them.

Furniture, electrical equipment and general product regulations
These regulations require a rented property's furniture to be fire-resistant, and all electrical equipment and other items in the rented property to be safe. You can get further information from your local trading standards office.

Covenant of quiet enjoyment
This is part of all tenancies and it means the tenant should be able to live without interference. The landlord can't enter the rented property without the tenant's consent (except in an emergency), should keep the rented property in a proper condition, and should not do anything (or allow anyone else to do anything) which would affect the tenant's rights, for example, stopping services to 'persuade' the tenant to leave.

A landlord who lets a number of separate flats in a property has a duty to his other tenants because of the covenant of quiet enjoyment. For example, if one tenant is a nuisance, the other tenants will look to the landlord to solve the problem, and if necessary evict the tenant who is causing disruption.

Insurance
The landlord has an obligation to insure the rented property and its contents (but the tenants are responsible for insuring their own possessions). The landlord should be certain their insurance policy is suitable for rented property - his normal household insurance generally will not be. Check the terms of the policy carefully, as some policies exclude cover for lettings to some types of tenant.

The agreements included in the Residential Lettings Kit allow the landlord to give the tenant a copy of the insurance policy. This is so the landlord can hold the tenant responsible if they do anything that voids the insurance or causes the landlord's premiums to increase.

What is it like at a property auction?

What is it like at a property auction? Here's a quick guide to what to expect.

  1. Property Auction rooms welcome anyone who swells the crowd, who is dressed reasonably whether they're going to bid or not, and who will keep fairly quiet during the property auction.
  2. There is always a constant to-ing and fro-ing of people. You can arrive and leave whenever you like, but try not to distract people while bidding on a lot is taking place.
  3. It's not unusual to arrive late or leave after the lot you're interested in, but you should try not to miss the property auctioneer's opening speech and announcements.
  4. Property Auctioneers often seem to comment on vacant seats available at the front of the property auction room, even though lots are no more expensive whether you are sitting at the front or the back. Use the empty seats if you want to, but it's also good to stand where you can see any other bidders.
  5. You can choose whether to sit or stand but if you want to bid, you need to be in a position where you can see the property auctioneer and they can see you easily.
  6. Property Auction rooms usually open about one hour before the property auction starts. Most of the audience turns up in the 20 minutes before proceedings start. Property Auctions often start about five minutes late, but don't rely on this. If you have questions to ask the property auctioneer's staff or solicitors before the property auction, try to arrive half an hour before the property auction starts.
  7. When you arrive at the Property Auction, always check:
    • if there have been any additions or amendments to the lots and lot details;
    • if the lot in which you are interested has already been sold or withdrawn;
    • if the lots are to be offered in alphabetical or numerical order.
  8. If you want to bid, don't be shy about getting the property auctioneer's attention by waving or calling out.

Find out more about Property Auctions in our complete guide to Buying Bargains at Property Auctions.

And learn the secrets of buy-to-let success with our Buy-to-Let Bible.

What should I look for when viewing a buy-to-let property?

Here's your essential buy-to-let checklist when looking to buy a buy-to-let property.

Kitchen
Is the kitchen big enough to accommodate a small dining table? This is attractive if there is only one reception room and it turns the kitchen into a kitchen-diner.

Smallest bedroom
If the smallest bedroom is smaller than 6' 6" in any direction, then it's not a bedroom! You need to be able to get a bed in a bedroom, so this room can only be considered as a study or a baby's room. You need to think about this when deciding what type of tenant you are looking for. If you're looking for two professional people to share a two-bedroom flat, then the second bedroom must be bigger than 6' 6".

Bathroom
Is there a fitted shower? A bathroom is a lot more desirable if there is a power shower. If there are two bathrooms then the property is very desirable as a buy-to-let investment, even if one is only a shower room.

Heating
An old heating system can be expensive to replace. If possible, get it checked before you buy the house as a buy-to-let project. It's your legal duty as a landlord to provide heating and to issue a gas safety record.

Electrics
Are the electric sockets old? This will tell you that at some point the whole electric system will need rewiring.

This checklist covers the basics but you also should be considering the buy-to-let properties' potential yield.

How much money do I need to put down for a buy-to-let property? Can I borrow all the money I need, or do I need my own capital?

It's possible to borrow everything you need for investing in a buy-to-let property by taking out an unsecured personal loan and using it as a deposit on your new property. However, this is a risky way of investing, and you should probably only do it if your income is much higher than your spending.

Another option is to arrange a 100 per cent mortgage. Some mortgages still offer several times your salary, plus your partner's salary, and you can find a list of providers in Lawpack's book The Buy-to-Let Bible.

If you do have enough money for a deposit on your new buy-to-let property, it's often easier to get a buy-to-let mortgage than a normal one, because the property rental income - not your income - will fund the repayments.

Find more landlord, tenancy agreement and buy-to-let information.

How do I go about disputing the service charge on my leasehold property?

You need to complete an Application Form S27A Landlord and Tenant Act 1985, which is available from the Residential Property Tribunal Service's website at www.rpts.gov.uk. The Residential Property Tribunal Service, which settles disputes between landlords and tenants about service charges and other issues, has five regional Leasehold Valuation Tribunals (LVTs) in England.

You must send the completed form, along with a copy of the lease and a cheque in payment of the application fee to the nearest Leasehold Valuation Tribunal or Rent Assessment Panel. The Rent Assessment Panel is another part of the Residential Property Tribunal Service. The amount of the application fee depends on the amount of service charge being challenged.

There are three possible tracks by which a service charge dispute can be handled by the Leashold Valuation Tribunal (LVT). When you are completing the form, you will have to state the track which you consider to be most suitable. The three tracks, from the simplest and fastest to the slowest and most complex, are:

  • on paper, without a hearing;
  • fast track, with a hearing;
  • standard track, with a hearing and possibly a pre-trial review.

If a case is handled 'on paper', the Leashold Valuation Tribunal (LVT) panel will receive written evidence from each party and will then reach its decision without holding an Leashold Valuation Tribunal (LVT) hearing. The 'fast track' and 'standard track' procedures require an Leashold Valuation Tribunal (LVT) hearing and the applicant must pay a £150 hearing fee for this. A case can be considered on the fast track if it is simple and is not expected to generate much paperwork or argument. The Leashold Valuation Tribunal (LVT) says that it tries to hold fast track hearings within ten weeks of receiving the initial application. The standard track is for more complicated cases, including those in which several issues need to be decided and/or a lot of documentation will be required. With standard track cases, both parties may be invited to a pre-trial review, a kind of mini-hearing, so that the Leashold Valuation Tribunal (LVT) can decide on the next steps that need to be taken before the final hearing. Standard track cases often take several months from start to finish.

Learn more about Leaseholds and Leasehold Property.

Find more landlord, tenancy agreement and buy-to-let information.

I am going through the process of separation and divorce: can my partner kick me out of our rented accommodation now that we've split up?

If your name is not on the tenancy agreement, then normally, yes.

Find out about tenancy rights and about divorce.

 

I'm not happy with my accountant; who can I complain to?

All chartered accountants are members of the Institute of Chartered Accountants, who will assess your complaint to decide whether conciliation is appropriate or alternatively, carry out an investigation.

Other accountants may be members of the Association of Chartered Certified Accountants, the Chartered Institute of Management Accountants, or the Chartered Institute of Public Finance Accountants. Book-keepers may belong to the Institute of Chartered Secretaries. All of these bodies will investigate and may take disciplinary action against the accountant if your complaint is upheld.

What does solicitor jargon 'no win, no fee' mean?

Solicitor jargon 'no win, no fee' means that solicitors are paid nothing for their work if they lose, but it also covers agreements whereby solicitors can charge more if they're successful. Put simply, there are two types of 'no win, no fee':

  1. Conditional fee agreements: this is the only type of 'No win, no fee' that is allowed for the vast majority of cases (with the exception of family and crime). The solicitor is allowed to charge a sum to reward his risk-taking in the event of a successful result which can be as much as double his fees. If you win, the losing side will (generally speaking) pick up this cost.
  2. Contingency arrangements: the solicitor takes as his fee a straight percentage of the award (by contrast with a Conditional fee agreement where the lawyer charges a percentage increase on his or her fees). It's limited to cases which don't involve court proceedings, and is especially popular in employment tribunals and Motor Insurers' Bureau claims.

Find out how you can access Affordable Law.

 

How do solicitors charge?

There are various methods of funding a legal case used by solicitors:

  • Charging by the hour: This is the most common method of charging. Hourly rates vary from high street firms where you can expect to pay somewhere between £80 to £120 an hour for advice on private and commercial work, all the way through to £350 an hour for a senior partner in a City firm for extremely expert advice on complex points of commercial law.
  • Fixed fees: This form of payment has the obvious appeal of limiting your liability for legal costs and, after the hourly rate, it's the next most common way of charging. The obvious downside is that if your case concludes quickly, then you will end up paying more than you may have on the hourly rate basis.
  • No win, no fee: 'No win, no fee' is a deceptively simple expression. On one level - and as the name implies - solicitors are paid nothing for their work if they lose, but it also covers agreements whereby solicitors can charge more if they are successful.
  • Legal Aid/the Community Legal Service: To be eligible for Legal Aid, you have to show that you cannot pay for your case (i.e. that you are financially eligible) and that you have a sufficiently strong case that you are likely to win. Even if you're working, own your home and have savings, you may still qualify. However, you may well have to pay a contribution towards the cost of taking your case to court.

 

The property that I rent out has "caused" an injuy to the tenant. Can a tenant make a claim against a landlord for this?

In some circumstances, a landlord may be liable for defects on the property rented out which cause personal injury to his tenants (and in some cases to others, lawfully at the property). Most arrangements relating to residential property create a lease (whether oral or written) and a relationship of landlord and tenant is created. The landlord's duty in relation to hazards on the property or to the condition of the property depends on whether the defects arose due to his own positive actions, and whether the defects occurred before the lease was created or while you were in situ.

Find more landlord, tenancy agreement and buy-to-let information.

How do I go about increasing the rent on my rented property?

For most tenancies there is a statutory procedure that has to be followed with prescribed forms (which are all available from Lawpack), and if this procedure isn't followed, the tenant may not be liable to pay the proposed increase. The tenant may even be able to recover extra rent paid in response to incorrect procedures.

For more information on the what procedures and forms landlords need to use to raise the rent in England and Wales, read our article 'Raising the Rent'.

If the tenant feels that the rent is too high, they can refer the matter to the Rent Assessment Committee for review.

Find more landlord, tenancy agreement and buy-to-let information.

Can I still get a good buy-to-let mortgage rate in the current climate?

Over the past year, landlords have been hugely affected by the credit crunch with lenders drastically tightening criteria.

Many landlords have come to the end of a buy-to-let mortgage deal, like a fixed rate, and have found that they don't have the same choice of deals available. Plus lenders have restricted the maximum loan-to-value (LTV) ratios they will lend to.

But if you think that the buy-to-let market is all bad news, then think again. House prices are reducing in some areas, the demand for good quality housing to rent is increasing, and average rents are increasing.  

Plus decreases in the Base Rate have meant that any landlords on a tracker mortgage have seen their repayments fall, as well as borrowers who had been forced to go onto their lender’s Standard Variable Rate. Fixed rates are also slowly coming down.

There are still plenty of great Buy to Let mortgage deals out there, so let us find the right Buy to Let mortgage for your property investment today.