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Advice for landlords The Benefits Of Letting A Property
You may be considering letting for a number of reasons. Perhaps you will be working overseas and want to retain a stake in the UK housing market. Perhaps you have recently inherited a property or you may be one of a growing number of people who view property as a key element of their investment portfolio. Whatever your reason for letting, the private rental sector has never been more attractive. Recent legislative changes have removed many of the uncertainties associated with letting, so that the landlord should always be able to regain possession of their property at the end of any letting period. Financial returns from letting have significantly improved due to the return to real growth in house prices, the availability of 'buy to let' mortgage schemes, and the ability to offset most costs associated with letting against rental income for tax purposes. Letting can provide both Income and Capital Growth. Tips On Presentation
Neutral décor works best
Remove all "clutter" Painted surfaces are easier to maintain than wallpaper Gardens should be neat & tidy Professional cleaning is recommended Furnished or Un-Furnished All properties should usually include carpets and curtains. Furnished properties will also include the furniture found in most homes (beds, tables, chairs, suites), cooker and fridge, kitchen crockery, cooking utensils and cutlery. However, unfurnished properties are advised to include white goods in the kitchen to appeal to a wider audience. Better presentation and quality of the property and furnishings will be reflected in the monthly rental achievable. Linen and towels are not normally included even in a fully furnished property, and we would strongly advise against leaving a television, video, hi-fi equipment etc., other than in executive lets. A major consideration for Landlords who have a choice whether to let a property furnished or unfurnished is that there are Regulations, which must be adhered to specifically on furnished properties. Tax Implications
You will be liable to pay income tax on your net income from the property, which is the gross income less allowable expenses, which are incurred in letting the property. Below are a few expenses that you are able to offset against the profit:
* Gatehouse Estates Property Management Commissions plus any set up fees
* Maintenance and Repair * Mortgage Interest * Building and Insurance Premiums * Property Wear and Tear Allowance Overseas Landlords If you live abroad permanently or are working abroad for an extended period you will still normally be required to pay income tax on the net income from any property letting. There are some additional obligations on the part of the letting agent with respect to overseas landlords which you should be aware of. We are required to withhold a proportion of rental income (equivalent to the basic rate of tax) and pay this directly to the Inland Revenue unless we receive specific written exemption from the Inland Revenue not to do so. We are able to provide you with the appropriate documentation to apply to the Inland Revenue for this exemption, thus allowing us to pay you rent without deduction of tax. The granting of exemption to withholding tax is at the discretion of the Inland Revenue and is likely to be withdrawn if you are subsequently delinquent in making the appropriate tax returns. Mortgage Consent
If your property is mortgaged you must advise your mortgage lender that you propose letting your property and obtain their written consent. Sometimes an administration fee is charged for issuing a consent letter and it is possible that there may be a variation in the interest rate level. Leasehold Consent
If your property is leasehold, your head lease will state whether or not you require permission from the Freeholder to sub-let. You should find that your lease would contain a clause indicating that you must obtain consent from your head leaseholder (or freeholder) but that such consent should not be unreasonably withheld from you. Important Information On Legal Requirements
There are various legislations that are mandatory when letting out your property
Gas Safety (Installation and Use) Regulation 1994
* All gas appliances such as cookers & boilers in rented accommodation must be certified every year by a Corgi Registered Installer. These regulations are enforced by the Health and Safety Executive.
* For further information on these regulations please ring the free HSE Gas Safety Advice Line on 0800 300363. Failure to comply may constitute a criminal offence under the Consumer Protection Act 1987, which carries a maximum fine of £5000.00 and/or a 6 month imprisonment sentence
Furniture And Furnishings (Fire) (Safety) Regulations 1988 * All upholstered furniture must comply with the furniture and furnishings regulation 1988. Upholstered or even part upholstered furniture is covered by regulations including beds, mattresses, headboards, pillows, cushions, seat pads and garden furniture that may be used inside of the property. Bedclothes, carpets, curtains and furniture pre 1950 are exempt from this regulation.
The Electrical Equipment (Safety) Regulations 1994, Mandatory Since 1st January 1997
* All appliances that are supplied within a rental property must meet a certain criteria certified by a qualified electrician. This applies to both new and second hand appliances. This also includes appliances such as immersion heaters, toasters, washing machines, cookers and showers. * Failure to comply may constitute a criminal offence under the Consumer Protection Act 1987, which carries a maximum fine of £5000.00 and/or a 6-month imprisonment sentence. Energy Performance Certificate
From 1st October 2008 any property that is owned by a landlord and is part of their rental property portfolio will be subject to energy assessment to establish the performance of the building in a similar way to residential domestic property. Certificates must be available to any prospective tenants; there is no need to obtain a new certificate for an existing tenancy. Once obtained a certificate remains valid for up to 10 years.
Smoke Alarms
In all new homes built after 1st June 1992, a legal requirement was introduced by the Department of the Environment, to ensure all builders install mains operated smoke detectors on every floor and that they must be interlinking. Should the property be built prior to the above date then the recommendation is that one smoke alarm should be fitted to provide sufficient early warning of fire if the property is a flat or bungalow. This should be fitted in the hallway between living and sleeping areas. Where there is more than one floor, one alarm should be fitted at the bottom of the staircase with an alarm on each upstairs landing. Please be advised that it is your responsibility as a landlord to ensure the safety of your tenants, therefore anywhere else you see fit to install an alarm we recommend that you do so. Water Meter Please be advised that new legislation came into force with effect from 1st April 2000 under the Water Industry Act 1999, that tenants who are renting for a period of six months or more are entitled to have a water meter fitted without the consent of the landlord, even if the landlord was to forbid this change. Once the meter has been fitted at the property and has been used by the tenant for a period of 12 months or more, then after this time, it will not be possible for the water meter to be reverted back to mains supply. Services The gas, electricity and water companies etc should be advised whenever the property is empty so that meters can be read and accounts prepared, even if this will only be for a relatively short period of time. We will do this for you on the initial letting and also each time there is a change of tenant or the property is to be empty for some other reason. During these ' void ' periods the utility services will be transferred back into your name. The tenant is obviously responsible for the gas, electricity and water/sewerage bills generated by their usage during the tenancy, including standing charges, but their liabilities in this respect clearly finish on the date of their vacation. Telephone Telephone companies will not deal with third parties, therefore you must inform British Telecom (or any other service provider as appropriate) that you are leaving the property and advise them what you want to do with your existing number. The tenants are responsible for arranging any line reconnections and meeting any costs associated with this. The tenancy agreement will forbid tenants from changing an existing number without your consent or indeed taking it with them at the end of the tenancy. However preventing this possibility by giving the provider clear instructions yourself in respect of a specific number is by far the best safeguard. Council Tax Council Tax is a property based tax operating in very broad terms like the old rating system but with payments determined by wide property price bands. Payment is therefore not the Landlord's responsibility whilst the entire property is let. When an unfurnished property is unoccupied it is exempt for 6 months, then 50% of the Council Tax becomes payable. If empty and furnished then the 50% becomes payable immediately and throughout any void period between tenancies. If you still reside at the property whilst acting as a Landlord then you will remain responsible for the Council Tax charge. We will inform the Council Tax office of each and every change in occupancy. Insurance Buildings Insurance is normally incorporated within the mortgage. If not, you must ensure that you do take out a policy, and also inform your Insurance Company that you are renting out your property. It is also advisable that you take out ‘Landlords Contents Insurance’. Gatehouse Estates Property Management is able to supply leaflets that specify different policies that Landlord’s and Tenants are able to take out. |