What to do when you become an accidental landlord in the UK

Renting a property for the first time can be a daunting experience. The property concerned could be your most significant asset and the income it yields will probably prove vital to the health of your finances. It is all too easy for an inexperienced landlord to make mistakes when the UK property market and the applicable laws are continually changing.

accidental landlord

What is an accidental landlord?

Not all landlords are wealthy entrepreneurs with extensive portfolios and for whom property is a business. While some people have planned their investment in property with the specific aim of yielding rental income, others unexpectedly find themselves in a situation where they have to become a landlord, at least temporarily.

This could be because they need to move but can’t sell their home and so are forced to rent it. Those who are working abroad for a fixed period and wish to return to their home could also find themselves needing to rent their property, as will those who have inherited a home that they cannot sell or wish to retain for their children. An accidental landlord is anyone who hasn’t intended to become a landlord but finds themselves needing to rent out a property they own.

If that sounds like you, there are several things you must do to make a success of your enterprise.

Informing your current mortgage lender

You must contact your mortgage lender to get their permission to rent out your property. Your lender may grant you a Consent to Let, which allows you to let your property for a maximum of 12 months while maintaining your current mortgage. Otherwise, you will need to switch your residential mortgage to a buy to let mortgage. In this case, you will incur an arrangement fee and the rate of the mortgage may differ from your current rate.

Landlord insurance

While specific landlord insurance isn’t a legal requirement, you should give it serious consideration.
The following types of landlord insurance are available:

  • Landlord building insurance – If you own the freehold of the property, buildings insurance is a good idea. It provides cover for damage caused to the building itself, for example due to fire or flood. Some buildings insurance covers malicious damage caused by tenants. You generally won’t be able to get a buy-to-let mortgage without proof of buildings insurance.
  • Landlord contents insurance – Although tenants are responsible for insuring their personal belongings, if you’re renting out a furnished property you might want contents insurance to cover the things you own.
  • Landlord liability insurance – covers you if a tenant or visitor is injured in the property.
  • Rent guarantee insurance – protects you if your tenant falls into arrears.

Safety & certificates

Smoke Alarm

Gas Safety

All gas appliances and chimneys/flues must be safety checked annually by a qualified Gas Safe registered engineer.

Electrical Safety

There is no official legal requirement for annual checks of electrical equipment. However, the law requires all electrics and electrical equipment to be maintained to prevent any danger and to be in good working order. It is good practice to decide on how often each piece of equipment should be checked, write this down, make sure checks are carried out accordingly and record the results.

Fire Safety

Private sector landlords are required from 1 October 2015 to have at least one smoke alarm installed on every storey of their properties and a carbon monoxide alarm in any room containing a solid fuel burning appliance (e.g. a coal fire or wood burning stove).

All upholstered furniture and furnishings provided by the landlord must meet fire safety standards; this means that any sofas, cushions, chairs, or mattresses must carry the fire-resistant symbol.

Tenants must be able to escape quickly in the case of a fire. Landlords must make repairs to ensure that, where possible, fire-resistant materials are used in the structure of the building to stop fire spreading quickly through the property.

Run a right to rent check

Before the start of any new tenancy, you must check that your tenants can legally rent your residential property. This includes all tenants aged 18 regardless of whether they are named on the tenancy agreement. It is against the law to only check people you think are not British citizens. You must ask your tenants for the original documents that prove they can live in the UK, read more here about the right to rent documents you can accept.

Do you need a local license or HMO permit?

All landlords who rent property to five or more people from more than one household require an HMO (House in Multiple Occupation) license. Some councils in England also operate ‘additional’ or ‘selective’ landlord licensing schemes.

You should check with your local council before letting your property.

Is your tenants’ deposit in a protected scheme?

You must place your tenants’ deposit in a tenancy deposit protection (TDP) scheme. These are government-backed schemes that ensure your tenants will get their deposit back if they:

  • meet the terms of your tenancy agreement
  • don’t damage the property
  • pay the rent and bills

You must put your tenants’ deposit in the scheme within 30 days of receiving it. You can use any of the following schemes if your property is in England or Wales:

Is the property adhering to the new energy regulations?

You must order an Energy Performance Certificate (EPC) before you market your property to rent. You will need to find an accredited energy surveyor who will assess your property and produce the certificate. Your EPC will last for 10 years and can be used for multiple tenancies.

Your EPC rating must be E or above; if the rating is F or G you must take action to improve the property’s rating to E before you market the property.

Declaring tax on your income

Declare tax on income

You must pay income tax on any profit you earn from a  rental property you own. This is the rental income you receive less any allowable expenses.

You should inform HMRC when you start renting a property as you will probably need to complete a tax return (even if you are making very little profit or even a loss). Keep a record of how much rental income you receive and allowable expenses you incur in each tax year. Click here for a list of allowable expenses, from 2020 none of the interest on your mortgage payments can be considered an allowable expense.

Stamp duty tax

Owning a buy to let property means that if you purchase another property in the future it will be classed as a second property and you will be subject to higher rates of stamp duty tax. Stamp duty on additional properties is payable at the basic rate plus a 3% surcharge on each band.