Accidental Landlords 1st Sep 2016
‘Accidental landlords’ are landlords whose decision to rent out a property is as a result of circumstance, rather than design. Frequently this is because of a death in the family, and the new owner has inherited the property; it may be due to relocation; or often owners find their only option is to rent out the property as they cannot sell.
A new report funded by the TDS Charitable Foundation, has revealed that accidental landlords are responsible for (often unknowingly) contributing to some of the serious issues in the Private Rented Sector (PRS), including property disrepair and unfair evictions.
Accidental landlords frequently find themselves in a difficult position as they have little, if any, knowledge of the regulations and legislation surrounding the PRS, and they are not able to budget for the real costs of owning, maintaining and renting out a property.
The report highlights the difficulty this can pose for unwitting tenants who end up renting from landlords who don’t understand the PRS or cannot afford to be operating within it. Furthermore, tenancies can prove to be less secure as landlords’ circumstances are more likely to change. Non –accidental landlords tend to be in the game for the long-run and so tenants enjoy more secure lets.
Buy to let landlords generally have an investment strategy, with the overall aim of making money from their investment. Accidental landlords are less likely to have this focus, and, when combined with their lack of knowledge regarding the PRS, let out substandard properties which impacts upon tenants.
The TDS report urges Councils to become more aware of accidental landlords, as they need to be educated and informed in order to comply with rental regulations. Recommendations include the suggestion that lenders and insurance companies provide as much information as possible to help landlords understand their rights and responsibilities, and their tenants’ rights and responsibilities. Consideration should be given as to whether all landlords should be required to join a national landlord scheme (such as the Scottish Association of Landlords). Everyone throughout the industry, from policy makers to letting agents should be urged to communicate specifically with accidental landlords to provide them with the advice and support they need, in order to keep raising standards within the PRS.
It is likely that accidental landlords will be employed elsewhere, and so will not be focussed on learning about the PRS and its many requirements. If this is the case, then this group of landlords would be wise to consider employing the services of a reputable letting agent, who would deal with every aspect of property management on their behalf, including ensuring they are fully compliant with all legal requirements.
Forthcoming changes to mortgage interest tax relief will impact all landlords. Recent research conducted by Direct Line for Business suggests 71% of accidental landlords hadn’t heard about the changes. The implications are that a lot of people with mortgages will have underestimated the amount of tax they will have to pay and, as a consequence, they might not be able to afford to cover their costs. There are strategies that can be put in place for dealing with this and The Key Place are qualified to advise.
The Key Place’s Top 5 Tips for Accidental Landlords:
Consider all costs such as mortgage, taxes, insurance, maintenance, repairs, loss of rent, covering void periods etc verses rental income. Can you cover the costs? It is essential you build in a contingency budget. If you are unsure about your finances and if you can make this rental property work for you, then speak to a qualified financial advisor. A mortgage adviser will be able to advise on the best mortgage for your property.
Register as a landlord
Legally you need to register yourself as a landlord. Follow the process through on www.landlordregistrationscotland.gov.uk. You need a landlord registration number and an Energy Performance Certificate (EPC) rating in order to legally advertise your property for rent.
Prepare your property
Good rents with minimal voids can be achieved for well-presented properties. You may not have a say in location, so do the absolute best with what you’ve got. A fresh lick of neutral paint, professionally cleaned carpets and a spotless property is what tenants are looking for. Deal with any repairs. Be as flexible you can regarding whether it is furnished / unfurnished; whether you accept pets; whether you accept students etc. Ensure you are complying with all safety regulations such as gas safety, EICR, PAT, heat and smoke alarms, legionella testing etc. PRS regulations are a minefield, with large penalties, including hefty fines and a criminal record for non-compliance. Your property is likely to be your biggest asset, do what you can to protect it and yourself.
Price your property
Research local market comparisons. There is no point in being greedy. You are better achieving a good market rent than having your property sitting empty as it is overpriced.
Use a reputable letting agent- let someone who knows what they are doing take the stress out of letting for you.
Join the Scottish Association of Landlords
SAL supports landlords by offering a letting helpline (where you can ask for help for everything from tenancy agreements to how to end a tenancy); training sessions on all aspects of property letting; free downloads of essential paperwork; and local members meetings. SAL also campaign for fairer rights for landlords. They are an invaluable support to many landlords across Scotland.
The Key Place can fully manage your property for you. If you are an accidental landlord with little or no knowledge of your rights and responsibilities, current rental regulations, or how to even go about renting out a property, then we are here to advise every step of the way. Contact us now to have a chat about how we can help.