How Do I Let My Home?

March 12, 2020Categories: Landlords
Welcome

Whether you have been letting property for a while, or it’s something you are thinking about doing, it’s important to know you can’t simply move in tenants and start charging rent. There are currently more than 400 rules and regulations set by 150 laws that landlords and agents need to abide by when letting, so your legal responsibilities as a landlord go far beyond signing a rental agreement!  

There’s a huge amount you need to know and, with some rules being updated and other new ones being introduced every year, you’ve got to be able to stay up to date. So, unless you’re a professional, full-time landlord, we’d recommend you use a letting and managing agent that is a member of ARLA (as Your Move is), RICS.

  • That will take a lot of the legal responsibility off your hands
     
  • You can be confident you'll always receive the best advice and the highest level of service
     
  • A good agent will also have the advertising reach and negotiating experience to find and secure you the best tenant at the best market rent

To give you an idea of what’s involved in letting your home, there are two main areas you’ve got to consider: your legal obligations and the financing of the property.

1. Preparing your home for the letting market

Essentially, to let a property legally and safely, the property must be ‘fit to live in’. That means it must be comfortable, free from fire and other potential health hazards and the services and utilities must be in good working order. Be aware that you might have to carry out works to bring the property up to standard, which could take time and involve extra costs.​

Some of the things you need to know about your legal obligations:

  • Do you need a licence or to be registered to be a landlord? There are different rules for England, Wales, Scotland and Northern Ireland. In some countries and for some types of let, the properties need a licence; in others, the landlord or managing agent needs to be registered.oes the property meets the minimum EPC rating? Currently in England and Wales, the property must be rated ‘E’ or higher. In Scotland, it must be ‘E’ from April this year, with a minimum of ‘D’ scheduled to apply to new lets from April 2022
     
  • Secure a Gas Safety Certificate (which must be renewed annually) from a Gas Safe registered engineer
     
  • Ensure electrics are safe, ideally by having the installations checked by a ‘Part P’ registered electrician who belongs to NAPIT, NIEIC or ECR, and securing an Electrical Safety Certificate
     
  • Carry out a fire risk assessment and comply with the relevant fire safety regulations, which vary depending on the type of property and how it’s let 
     
  • Make Legionella checks
     
  • Ensure the property is free from damp, mould & condensation

Letting individual rooms in a property

If you’re planning to let each bedroom in the property separately, it will be classed as a House in Multiple Occupation (HMO). That means more rules and regulations will apply, including minimum room sizes and increased fire regulations (e.g. fire doors and a full alarm system). In some areas, you may need planning permission to get a licence for the property – or you might not be allowed to let it as an HMO at all, only as a single unit.

Specific legal criteria you have to satisfy when securing a tenant include:

  • Making Right to Rent checks
     
  • Issuing the correct paperwork
     
  • Protecting a legally appropriate level of deposit
     
  • Ensuring the tenant understands their legal rights and responsibilities

You should also ensure:

  • You protect yourself by having an inventory of the property and its contents
     
  • You take out appropriate landlord insurance
     
  • The property is managed ongoing in a way that is legally compliant

And be aware that if you get things wrong, you risk facing fines, prosecution and may be banned from being a landlord in the future. Come and speak to us about how to go about it the right way. You can find your nearest branch here

2. Make sure you've got the right mortgage for you

Assuming you currently have a standard residential mortgage on your home, you must speak to your lender before letting it. That’s because the way the lender views the mortgage loan differs:

  • When it’s your own home, you usually repay the mortgage out of your personal income and it’s viewed as a fairly low-risk loan
     
  • When you have an investment property, the lender assumes the mortgage will primarily be repaid out of rental income and the loan is seen as higher risk because there may be void periods and tenants might stop paying rent

You've got two options

  1. In most cases, you should apply for a Buy to Let mortgage

    If you don’t need to let the property immediately and/or plan to let it for at least 12 months, it is worth considering applying for a buy to let mortgage. You’ll have to go through the full application process (including having the property valued and the potential rental income assessed) and you’ll almost certainly have to pay a higher interest rate than you did for your residential mortgage. 

    One big thing to consider is that the maximum loan to value will be lower than for your standard residential mortgage. That means if you don’t have sufficient equity in the property, you might have to invest some extra capital to make up the deposit amount. 
     
  2. Ask your lender for consent to let
     

    This tends to be a short-term solution. If you’ve had a change in circumstances and need to let your home as soon as possible, you can ask your lender for ‘consent to let’ under your existing mortgage agreement. You’ll have to complete an application form for your lender and provide information such as:

- Why you’re asking for consent to let

- Whether you can afford to keep making the mortgage payments

- The expected rental income

If your lender agrees, they could raise your interest rate by one or two percent and update the repayment terms. This ‘consent to let’ agreement usually lasts for a maximum of 12 months, then you’ll have to apply for a buy-to-let mortgage.

Note: If you let on a residential mortgage without getting your lender’s permission, you are committing mortgage fraud! They could fine you, dramatically raise your interest rate or, in the most serious cases, insist you repay the mortgage in full.

As such, it’s advisable to speak to a mortgage specialist. Our partners at Embrace Financial Services will be happy to give you a free initial consultation.