Considering Buy to Let? Here's an essential primer...
Marcus Simpson
Specialised 360° Maths Tutor for all levels and tailored courses for Engineering and other professionals. Ex-Digital Marketing Manager, Journalist and Editor at SAM Conveyancing. "SAM Conveyancing's human calculator."
Buy to Let veteran or considering your first property? Whichever, you'll need to know about legal aspects regarding the following 8 matters:
? Independent Inventory Clerk
? General Repairs
? Know Your Tenant
? Section 21 Eviction Notice changes
? Carbon Monoxide (CO) and Smoke Alarms
? Deposit Protection Scheme
? Wear and Tear
? Buy to Let Stamp Duty Surcharge
1. Independent Inventory Clerk
You must get an an independent inventory clerk to catalogue the current condition of the property and fittings, including photographs, when you get a new tenant.
If you don't, you might struggle to succeed with any claim for damages in a court regarding any dispute with a tenant about the condition of any of the fixture or fittings when they leave,
2. General repairs
You have to carry out basic repairs to any property you let in compliance with Section 11 of the Landlord and Tenant Act 1985. This is regardless of whether your tenancy agreement is in writing or has been agreed orally.
You are responsible for keeping in repair:
- the structure and exterior of a home, such as the walls, roof, foundations, drains, guttering and external pipes, windows and external doors
- basins, sinks, baths, toilets and their pipe work
- water and gas pipes, electrical wiring, water tanks, boilers, radiators, gas fires, fitted electric fires or fitted heaters
- communal parts of a building - entrance halls, stairs and lifts (tenancies that began on or after 15 January 1989)
You can't cancel out any of these obligations by tailoring a tenancy agreement to do so and you can't pass on repair work costs to a tenant.
3. Know Your Tenant
You now have a legal obligation to carry out background checks on people you offer tenancies to, particularly regarding their right to reside in the UK. This has been termed 'Right to Rent'.
Selecting a good tenant in the first place means you're more likely to avoid a costly, long and stressful eviction process further down the line. And if someone you let to doesn't have leave to remain and reside in the UK, you face a ￡5,000 fine.
You therefore need to carry out your due diligence thoroughly. Ideally you should check all past landlord references (particularly to see if rent has been paid on time), obtain bank statements which at least cover the previous 3 months, credit checks (particularly being vigilant about any references concerning fraud) and references from employers.
You'll need to conduct basic identity checks (normally by viewing and taking copies of driving licences or passports) and get proofs of current addresses. You should also form your own impression using your 'gut instinct' by taking the time to talk to a prospective tenant before offering a tenancy.
4. You can't evict a tenant using a Section 21 notice for the first 4 months of a tenancy
It is now nearly impossible to evict new tenants who have an initial 6 month tenancy before that initial period has expired. This law was brought into force ostensibly to act against 'revenge evictions'.
Section 21 Notices are also time-limited. If you issue a notice, you have to start repossession proceedings immediately, if possible, and within 6 months of the issue of the notice. If you have not started proceedings within 6 months, you'll have to serve a new Section 21 Notice.
"Failing to register a tenant's deposit in a registered protection scheme has automatic penalties of up to 3 times the sum of the deposit."
5. Carbon Monoxide (CO) and Smoke Alarms - legal requirements
By law, as a private landlord in the UK, you must:
1 - Fit a smoke alarm on every storey.
2 - Fit a Carbon Monoxide (CO) alarm in every room with a 'solid fuel burning appliance'.
3 - Test all alarms at the start of a tenancy: these must all be functioning properly.
If you don't comply with these requirements, you are liable to a ￡5,000 fine. The Government expects landlords to 'make an informed decision and then choose the best alarms for their properties and tenant'.
NB Despite the legislation only referring to solid fuel burning appliances in relation to CO alarms, the Government guidance given is 'we would expect and encourage reputable landlords to ensure that working carbon monoxide alarms are installed in rooms with these [gas appliances]'.
6. Deposit Protection Scheme
As a buy to let landlord, you normally take a deposit from a tenant to hold as security.
You put the deposit money in a government-backed tenancy deposit scheme (TDP). In England and Wales a tenant's depo deposit can be registered with:
- Deposit Protection Service (Custodial and Insured)
- MyDeposits - including deposits that were held by Capita
- Tenancy Deposit Scheme
You can accept valuable items (eg a car or watch) as a deposit instead of money; items such as these are not protected by the above scheme.
You must make sure a tenant gets their deposit back if they:
- meet the terms of your tenancy agreement
- don’t damage the property
- pay your rent and bills
You or your letting agent must put deposits in the scheme within 30 days of getting them. Failing to register a tenant's deposit in a registered protection scheme and/or not providing the prescribed information about the scheme has automatic penalties of up to 3 times the sum of the deposit.
7. Wear and tear
When a tenant moves out you can reasonably expect to receive your property and items in it back in a reasonable state. Note that you can't expect to receive these back 'as new' but as allowing for 'reasonable wear and tear' given the length of a tenancy.
If you find cracked tiles, marks on walls, scuffs and minor knocks, these will invariably regarded as 'reasonable wear and tear' and you should not expect compensation for repair or replacement from a tenant.
On the other hand, broken doors, smashed windows and any seriously damaged items on the inventory might form a claim for reasonable repairs (but not to a 'like new' standard) from a tenant.
8. From April 2016 - 3% in stamp duty for buy to let property buyers
From 1 April 2016, properties bought for buy to let purposes are subject to an additional 3% surcharge on top of the normal stamp duty (SDLT) payable. This is a complex area, however: you should seek appropriate advice about this surcharge as, like with so many tax matters, the devil is in the detail.
If you own a UK property and have tenants or are looking to let your property then get in contact with us. We can help provide:
- Inventory Clerks
- Assured Short-term tenancy Agreements
- Defect reports
- Expert witnesses
- Dispute & Mediation services