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Buy-to-let popularity comes with risks for landlords
The appeal of increased availability of buy-to–let mortgages and high demand in the rental market has prompted Only Law Site in London to warn potential landlords that purchasing a buy-to-let property is not the same as buying a house to occupy.
Only Law Site says that if you are getting a mortgage the lender's requirements are different from buying to occupy and there are additional requirements in relation to the letting terms. Getting the borrowing or letting elements wrong could come at a heavy financial price for landlords.
There were 32,000 buy to let loans, worth £3.5 billion, taken out from April to June, the highest number and value since the last quarter of 2008, according to figures from Council of Mortgage Lenders (CML).
Only Law Site says that in the current climate, with more people, especially those unable to get onto the property ladder, opting to rent, buy-to-let can be a valuable income source, but it can come at a price if you get it wrong.
Only Law Site Director Paul Singh says: “Renting out a property can be a legal minefield. Get it wrong and it could cost you dearly and in some cases you could be prosecuted. Becoming a landlord can be lucrative but it comes with risks and responsibilities which are set out in law.
“If there are disagreements between you and your tenants, it can quickly become a drain on your time and resources. The best approach is to opt for prevention rather than cure when you rent out a property. Consult a solicitor as early as possible and aim to avoid problems before they occur.
“Before you even look for a tenant, Only Law Site can help you decide what the terms of the tenancy ought to be and can build these terms into a written 'tenancy agreement' tailored to your needs.”
Only Law Site points out that a tenancy agreement can cover a range of issues, such as the length of the tenancy, how much notice the landlord and the tenant need to give to end the tenancy, the rent, deposits, setting out who pays council tax, service charges and outgoings to name a few. Where a property is adjoined to the landlord’s own property, there could also be access rights to consider as well.
Only Law Site can also advise on some of the broader issues involved in owning more than one property and being a landlord, such as tax liability and what to do if the property you want to rent out is mortgaged but not on a buy-to–let mortgage.
Paul Singh adds: “It goes without saying a solicitor can help when things go wrong with a tenancy, but involving Only Law Site early on can help to guard reduce the chances of problems and can be in the interests of both tenant and landlord.”
Paul Singh – firstname.lastname@example.org