…..becoming a Landlord brings with it a whole raft of roles
and responsibilities which many landlords to do not expect and are completely
unprepared for. This is a particular
shock to the system for the majority of ‘Accidental Landlords’ as they never
planned to take on this role in the first place!
The term ‘Accidental Landlord’ is an interesting one and
basically relates to those who have inadvertently become a Landlord without any
desire or intention to do so. It may
seem bewildering to many that someone can become a Landlord in this way,
however there are numerous ways in which this can happen. Inheriting property
is a good example whereby property is often acquired unexpectedly and those who
will inherit the property decide to rent the property rather than sell it. It all seems rather simple to find some
tenants and then start collecting rent, however many of those who acquire
property in this way are often unaware and unprepared for the statutory (legal)
requirements and responsibilities (which I will explain later), that they will
be required to meet once they become a Landlord.
Relocation is another example of how someone can become and
Accidental Landlord. A career
opportunity may result in the need to relocate which provides a dilemma for
anyone who currently has a property.
There is always the option to sell, however a better choice for many
will be to rent the property, thereby giving the opportunity to return in the
event that things do not work out. All of a sudden a new Landlord is born, again
with all of the statutory requirements and responsibilities that come with it.
Over the last few years it is fair to say that the housing
market in the UK has been exceptionally flat (although we are now starting to
see signs of improvement). Trying to
sell a property in a flat market is incredibly difficult and some will take the
decision to rent out their existing property until the market improves whilst
at the same time take advantage of the slow market by purchasing another
property. Whilst rental income will
often cover the cost of one of the mortgages, some will not understand that
they are now making themselves Landlords, and as with the examples previously
discussed they will also be required to take on all of their new roles and
responsibilities.
When the housing market in the UK was booming through the
mid to late 1990’s there was a scramble to purchase property, so much so that
people were prepared to buy before a property was built, something referred to
as ‘buying off plan’. This proved to be
very lucrative for many because property prices at the time were increasing at
such a rate that the value of property purchased in this way would often have
increased (sometimes substantially) by the time construction had been
completed. Fast forward a few years when
the property market crashed, some of those who had purchased properties in this
way suddenly found that they could not sell them, and for many renting them was
the only option. They never planned to
become Landlords, however they too had to take on all of the roles and
responsibilities that they were never prepared for. They were Accidental
Landlords.
Accidental Landlords may be more common than you would
think. The most recent census, published by the Office for National Statistics,
shows the number of private renters in England and Wales increased by 88%
between 2001 and 2011:
Accidental landlords make up around 30% of all landlords
according to Rightmove’s figures and are largely seen as a casualty of the
credit crunch. However, rising rents and lack of voids have alleviated their
plight to such an extent that when asked what their plans are for their current
rental property, 12% of this group responded that it had gone so well that they
are looking to buy another property, with a further 69% reporting that we would
be holding onto their rental property and just 16% stating that they still want
to sell it as soon they can.
Source: http://www.rightmove.co.uk/
High demand and a shortage of housing together with
difficulties in securing finance for property purchase, in the UK has created a
strong rental market, where in many areas rental incomes have continued to rise
at a steady pace. Landlords (even accidental ones) are currently benefiting
from this situation however managing rental property and tenants requires
knowledge and understanding and is something that a Landlord cannot afford to
ignore. So what can you expect or indeed
what is expected of you if you become a landlord?
Firstly, you need to choose your tenant’s carefully. No Landlord wants a Tenant who will not pay
their rent on time or fall into rent arrears or indeed will cause damage or
disruption to a property. In the event
that this happens there are legal procedures that can be instigated in order to
remedy the situation, however these can be time consuming, costly and
stressful. The likelihood of this happening can be significantly reduced, by
taking the time to undertake background checks before allowing a tenant to sign
a tenancy agreement. This should include
obtaining references (and checking them!), asking for proof of income to prove
that they can afford the rent and in some instances asking for a guarantor. The
next thing to consider is taking a deposit from the Tenant. Most Landlords take
a deposit of one month’s rent, which the Landlord is legally obliged to protect
in a government-supported deposit protection scheme.
A tenancy agreement will need to be signed by the Tenant
which should provide details/information in respect of the amount of rent and
when it should be paid, the type and length of the tenancy, the notice period
required when the tenant decides to vacate the property, occupation details,
Landlord responsibilities and so on.
Basically, the tenancy agreement is a legally binding contract, which a
Landlord should ensure is carefully worded to provide clarity and protection
for themselves and indeed their Tenant.
There are a number of 'off the shelf’ tenancy agreements that a Landlord
could purchase however, a new or inexperienced Landlord should take the time to
research the content of the agreement to satisfy themselves that they
understand what to expect from their Tenant as well as what responsibilities
they will be taking on. To the new or
inexperienced Landlord this might seem to be quite a daunting task, however,
never be tempted to take on a Tenant without a robust tenancy agreement in
place. There are many examples where
poorly worded, often confusing tenancy agreements have resulted in disputes,
which have proved very expensive for both Landlords and Tenants alike. This is
such an important document that it is always worth getting professional advice
to ensure that the agreement is adequately drafted.
A Landlord also must comply with their statutory (legal)
responsibilities in respect of ensuring that any property they rent is safe and
habitable for the Tenant to occupy. This includes the requirement for gas
safety checks every 12 months, ensuring that the electrical installation is
safe before the start of the tenancy (as well as during the tenancy), making
‘reasonable adjustments’ to a property to accommodate tenants with disabilities
and meeting licensing requirements for Houses in Multiple Occupation (HMO’s).
In summary becoming a Landlord brings with it a whole raft
of roles and responsibilities which many landlords to do expect and are
completely unprepared for. This is a
particular shock to the system for the majority of Accidental Landlords as they
never planned to take on this role in the first place. So next time you see a property related
programme which suggests that it is easy to buy property, refurbish it and rent
it out, you will hopefully appreciate that there is much more to it than just
collecting the rent and increasing your bank balance!
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