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I became an accidental landlord: now what?

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Now What, puzzled man with glasses

 

As the name suggests, becoming an Accidental landlord does not happen by choice. Maybe the property market wasn’t your area of interest. Nevertheless, you’re in it now. This article will help you understand everything about being an accidental landlord and how to navigate its challenges. 

 

What is an Accidental Landlord

 

You are an accidental landlord if you switched jobs, bought another property, or an ancestral property is being handed down. Such instances force you to leave your existing home or apartment and therefore look for ways to rent them out.

 

To understand this better, here’s an example. 

 

Kate knew nothing about the housing market. She wasn’t planning to enter it either.  She was recently promoted to the branch manager of the company she was working for. Sure, she enjoys a promotion. But she is now facing a new problem – she has to move to a new city.  Though she never thought about letting her “home” to someone else, her career path has made her an “accidental” landlord.  Kate now has to understand her situation and learn how to manage her property and the ensuing landlord obligations and responsibilities. And, of course, make the best out of it financially.

 

What are the responsibilities of an Accidental Landlord? 

 

Securing tenant’s deposit

 

It’s the responsibility of all landlords to protect the deposit made by the tenant. You must secure these deposits in government-backed protection schemes. This makes it impossible for landlords to exploit tenants unreasonably when they reach the end of the tenancy period. 

 

The right to rent in the UK 

 

Though it wasn’t the case before 2014, tenants must now have the right to rent houses in the UK. The landlords must verify a tenant’s right to rent before letting them in. Check the government criteria for further information.

 

Safety assurances for the property 

 

Regardless of the type of landlord you are, it’s important to offer safety assurance for the property. It should be in a good and safe condition to live in. 

 

When you’re ensuring the property’s safety, it should be both externally and internally. To do this, you will need the help of qualified professionals to do regular inspections of the gas and electricity supply. It may also include PAT testing any appliances.

 

Additionally, smoke alarms and carbon monoxide detectors must be installed where necessary. 

 

Offer an Energy Performance Certificate (EPC)

 

The Energy Performance Certification is a must-have for all residential rental properties. And a copy of the EPC must be provided to the tenants. The grading for the energy performance ranges from  A to G, the highest being A. 

 

If the property rating is F or G, you can’t rent it out unless you improve it to E or above. This is to ensure carbon emissions and energy consumption are controlled. 

 

Licence for the property 

 

If you are based in Wales, you must have a licence to rent your property. You can refer to the Rent Smart government scheme to learn more about it. If you’re in England, you have to get a licence based on the property location. 

 

Certain local authorities have a licensing scheme for specified areas. If your property falls in that area, you must obtain a licence to rent the property. These schemes are to ensure that the rental properties meet the standards required.  

 

What are the legal requirements of an accidental landlord? 

 

The next crucial part of becoming an Accidental landlord — legality.

 

The mortgage  

 

Before attracting renters, you must know if you can sublet your property under your current mortgage plan. Check with your mortgage provider about the possibilities.

 

In case you’re interested in a short-term solution, the consent-to-let mortgage type might help. If you believe in the UK housing market and see potential improvement – use this mortgage type to rent your property for a year without changing your mortgage. 

 

If a consent-to-let mortgage isn’t your cup of tea, you can opt for a permanent solution – a buy-to-let mortgage. 

 

It’ll be a breach of contract if you don’t have consent from the mortgage provider. And you’ll be subjected to full loan repayment, making you default on your mortgage. 

 

Pro tip: When changing mortgage types, consider the administration fee, insurance, and interest rates. 

 

The landlord insurance

 

You’re transitioning from resident to landlord, so the insurance plan should change too. Landlord insurance will have more protection, such as safety measures for possible fraud by tenants, property damages, and other valid liabilities. 

 

Income tax 

 

You will be receiving a monthly rental that falls under your income. And you’ll be taxed on it. 

 

Before April 2017, the landlords were liable to pay tax on the profit made. But after the government changed the residential landlords’ tax relief, it’s charged on the entire rental income. 

 

This applies regardless of the tax band; you can only get a 20% tax relief.

 

Capital gains 

 

This is when you plan to sell the property you rented out. The tax will be charged on the increased property valuation at the time of selling. The basic rate will be charged at 18%, while the higher rate will be at 28%. 

 

And you will also get private residence relief for the time you resided on your property. With the relief of the last 9 months of ownership, there will be a great deduction on the chargeable tax for an accidental landlord.

 

Accidental or not, you are a landlord now. And you may have more questions than answers.

 

How do I decide on rent? What is the market rate? Can I manage all these on my own? Or how do I find a trusted agent? What about securing good tenants?

 

How Adjoin Can Help

 

We offer you an end-to-end hassle-free real estate service, meaning we take care of all the above for you.

 

Adjoin is a modern and alternative way of letting out your property. It’s a hybrid between renting and selling. We allow you to rent your property for up to 25% higher rent and 50% less operational expenses. 

 

The “secret sauce”? Tenants with skin in the game have the right to buy the property from you and share its value upside. 

 

So with minimum hassle, we offer you both:

 

  • A tenant that cares for your property as their own
  • A future buyer

 

Contact us for more details and join our waiting list!