Help – I’m an accidental landlord

6 Jan

‘Accidental landlords’ are landlords whose decision to let their property is as a result of circumstance, rather than design. There are any number of reasons that someone might become an accidental landlord.

Often the owner inherited the property, or has had to relocate. Or, maybe they have separated from their partner. Whatever the circumstances, the owner(s) has decided that their best, or only, option is to let that property rather than to sell it or remain in residence.

Rightmove’s consumer rental forecast in 2013 found that 30% of UK landlords are accidental landlords. Naturally, accidental landlords tend to be inexperienced when it comes to letting. So, with that in mind, we’ve put together our top tips for accidental landlords.

Talk to your insurer

If you don’t notify your insurer that your home is now being used as a rental property, your insurance policy will most likely be invalidated. That could be a very expensive mistake.

In addition, we advise that you look at taking out public liability insurance to protect you against any incident which takes place in or around your property.

Talk to your mortgage provider

As well as your insurer, you should also talk to your mortgage provider to let them know that you intend to rent your property. Depending on the type of mortgage you have - and who you have it with - you may have to switch or alter your current contract.

Know your legal obligations

By law, there are several legal obligations which all landlords must adhere to. These include things like ensuring any deposits are placed in a government backed tenancy deposit scheme, and ensuring that the property you’re letting is safe.

For more detail on your obligations, take a look at our guide ‘What are my obligations as a landlord’.

Get a proper tenancy agreement

Regardless of who you are letting to, it is essential that you write a clear and legally binding tenancy agreement. This is the contract between you, as a landlord, and your tenant(s) which lays out the terms and conditions of the tenancy e.g. duration, rent, late fees etc.

Do a proper inventory

Before letting your property, it is a good idea to take a full inventory. In the frankest terms, if it’s not on the signed inventory - then your tenant(s) will not have to pay for any damage to (or loss of) that item.

We suggest that you take photos and/or videos of the property itself and any items you are including as part of the tenancy – down to the last throw rug.

At the beginning of the tenancy, you should ask your tenant to sign the inventory to confirm that everything that it lists is both present and in the stated/shown condition. You should also give the tenant(s) a copy of the signed inventory.

Switch over responsibility for utilities payments

Ensure that all the utilities (gas, water, and electricity etc.) are transferred into the name of your tenant(s) and make sure you state their responsibility for payment of utilities in your tenancy agreement.

Know your rights, and the rights of your tenant(s)

You need to make sure that you’ve protected yourself when it comes to evicting a tenant(s). Our guide “Advice for evicting tenants” has more detail on best practice.

Work out your tax liabilities

- Tax returns

All the rent you receive from your tenant(s) is classed as income by HMRC. As such, it needs to be declared in a tax return at the end of the year. (The deadline is the 31st October for paper tax returns, and the 31st January if you do your return online.)

- Capital gains tax

When you sell a property which you have previously rented out for a profit - you will be liable for capital gains tax. You pay capital gains tax on any gains you have made over the initial purchase price of the property. This is charged at a flat rate of 18% (excluding advance rate tax payers).

- Deductions

You should also be aware that there are several tax deductions which you are entitled to claim as a landlord. These are expenses which you can deduct from your taxable rental income. For example:

  • Mortgage interest charges
  • Letting fees
  • Repairs and maintenance
  • Energy efficiency improvements

Hopefully that’s been helpful, and not too overwhelming! You can view the rest of our useful guides here.

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