The Fundamentals of Buy To Let
How to be ready to let your property.
Buy-to-let (BTL) regulations are ever changing. So, before you start looking for a tenant, it’s more important than ever to have the foundations in place (metaphorically speaking, of course – I hope the house you’re letting has more than foundations!).
To summarise this, I’ve divided the pre-letting process into a series of questions you should be asking yourself. We start with a landlord’s personal circumstances and then look at how to prepare the property and make sure it’s compliant.
Ready? Let’s dive in.
Have you completed your income calculations and thought about tax?
Understanding income and other tax liabilities is an important part of preparing to receive money from letting a property. There are many different taxes to consider: income tax, capital gains tax, corporation tax, and even potentially overseas (non-resident Landlord) tax to consider.
You may need to contact HMRC about a change in your income or check if you’ll need to register for self-assessment tax returns.
Do you have the correct mortgages set up with consents?
If you have a specific buy-to-let mortgage product, you’ll have the necessary consent to let the property. If you’re letting a property that you own with a mortgage, you’ll need to obtain consent to let. This might require contacting your current lender about your current rate if you’re living in the property you’re planning to let. Or you may need to contact an independent broker who can review the mortgage market with you and find you the best deal.
Have you considered insurance?
When letting a property, the legal minimum is that you obtain building insurance. However, there are some excellent landlord insurance options out there which cover additional issues like public liability cover and similar.
Is the property legally compliant?
Nowadays, tenant safety is of utmost importance in a rental property and therefore a primary consideration for landlords. The minimum expectations in terms of a property’s safety have become stricter. Here is a breakdown of those expectations:
○ Gas Certificate. This must be completed annually (and a copy given to the tenant pre-move in).
○ Electrical certificate. This must be completed every five years (and a copy given to the tenant pre-move in).
○ EPC (Energy Performance Certificate). The property must have a minimum grade E efficiency score. The certificate must be in date at the time of move-in and a copy provided to the tenant.
○ Smoke alarms must be tested and working on each habitable floor of the property.
○ A Carbon Monoxide alarm must be fitted, tested and working next to all open flue and fixed combustion appliances.
The above points are very clear. However, there are grey areas where, although you don’t have to provide a certificate, you do have to be able to demonstrate that you’ve taken steps to prevent certain things from happening should your tenant complain to the council or a solicitor for any reason.
An example of this type of issue is Legionella, a potentially fatal bacteria that can grow in the water systems of a house. While there is no required test, landlords should be aware of standing waters and make sure that…
○ Appliances containing water are clean
○ The water is at a safe temperature
○ Appliances are flushed through before a tenancy starts
For best guidance on these and other points, landlords should refer to the Housing Health and Safety Rating System (HHSRS). This was designed as an exercise to assist local councils with safety assessments of rental properties if a tenant were to complain to Environmental Health (EH).
Useful sources on EH, HHSRS and minimum legal expectations can be found here.
This is by no means an exhaustive checklist of everything a landlord needs to know before letting a property. However, it does offer a summary of the mandatory requirements and some of the potential pitfalls landlords should be aware of.
At Nicol & Co, we always recommend having both your personal circumstances and property in good condition either before advertising or, at the very least, before a tenant is due to move in. Doing so will give you peace of mind and the confidence that your property is safe, compliant and highly lettable. Nicol & Co have access to tax advisors, mortgage brokers and contractors to support landlords with all the points mentioned above. So, if you need any advice, please get in touch on 01905 675 999 or email firstname.lastname@example.org. We’d love to hear from you and use our expertise to support you in your buy-to-let investment.