16 Dec, 2020

The complete guide to becoming a landlord and renting out property in the UK

Axis 7

Whether you are a first time landlord or an experienced investor, there are many things that every landlord needs to know.

Our complete seven-step guide to becoming a landlord in the UK covers landlord responsibilities, property safety requirements, tenancy types, landlord registration requirements, insurance, property management methods, the costs you are liable for, and what yields you can expect to earn as a landlord.

What are your responsibilities as a landlord in the UK?

As a landlord in the UK, you will have a range of basic responsibilities which apply to all properties. As per the UK government website, they are

The above is not a comprehensive list of everything you will need to do as a landlord, but it represents the minimum legal requirements that you must adhere to at all times. If you do not, you are liable to face legal action.

What are the property safety requirements in the UK for landlords?

As a landlord in the UK you are required to provide a living environment which meets basic safety standards. These fall into three main categories.

The first is electrical safety. You must ensure that the electrical system within your property is safe for use, including all sockets and light fittings. You must also test all appliances (like washing machines, cookers and kettles) for safety, and provide a safety certificate to the tenant/s.

Secondly, you must ensure gas safety. All equipment in your property that uses gas must be checked and certified by a qualified Gas Safe engineer. These checks must be carried out annually, and you must provide the tenant/s with a certificate within 28 days of their move in date.

Thirdly, your property must be fire safe. All national fire safety regulations must be followed, and you are required to provide a working, tested fire alarm on each storey, as well as carbon monoxide alarm in any room which has solid-state burning fuel.

All furnishings provided must be fire-safe, and all tenants must have access to suitable escape routes. If you are renting a large house or a house in multiple occupation (HMO), you may be required to provide more fire safety equipment – for more information on this circumstance, please click here to see the official government guidelines.

What are the different types of tenancy in the UK?

The vast majority of tenants in the UK are renting under a formal tenancy agreement, the most common of which is the Assured Shorthold Tenancy (AST). An AST can either be for a fixed term (normally 6-12 months) or can be provided on a ‘rolling’ basis, and is the most common choice due to its simplicity and familiarity – particularly for buy to let investors purchasing an off-plan property.

The AST agreements you provide for tenants should include the following information at a minimum:

  • The name of the tenant(s)
  • The address of the property (or room) you are renting to them
  • Your name and address, and that of the letting agent if you are employing one to let and/or manage your property
  • How much the rent is, the date that it must be paid, and how it should be paid
  • Whether the tenancy cost includes bills paid, or whether the tenants must arrange this themselves. If the latter, you should specify any restrictions on providers.
  • How long the tenancy agreement runs for, and how it can be renewed at the end of the agreement
  • When, and under what circumstances, you can undertake a rent review and potentially increase the rent you charge the tenant
  • When and how a tenancy can be ended by both parties, and what notice periods must be given
  • If a deposit must be paid, details of how this can be done and confirmation of the deposit protection scheme you will be using

Other items which are a good idea to include in the agreement – even though you are not obliged to do so – include the following:

  • Whether smoking is permitted in the property
  • Whether tenants may have a pet
  • Who your tenants should contact about any repairs that may need undertaking, along with details of how to contact them
  • Any conditions around subletting the property

What are the landlord registration requirements in the UK?

By law, you must register as a landlord if you are letting out a property in Scotland, Wales and Northern Ireland. It is not a legal requirement in most of England, but certain areas do require you to do so. We recommend checking with the local authority that your property is located under before letting it out.

If you do have to register as a landlord under local guidelines, it is a cheap and easy process which is beneficial to all. Tenants get the benefit of additional security during their tenancy, and landlords can be safe in the knowledge that rogue-landlords and other bad actors cannot operate in the area, raising confidence in their product.

Despite it not being a requirement, you can still register as a landlord in England with the National Residential Landlords Association (NRLA) to receive all of the above benefits, as well as the extra benefits you will receive as part of that body. For more information, please click here.

What landlord insurance is applicable in the UK?

Landlord insurance protects you from risks associated with renting out your buy to let property to a tenant. It can include buildings insurance and contents insurance, as well as more specific items such as property owners’ liability, cover for loss of rent and insurance for the event of a tenant defaulting on their rent.

The most common types – building insurance and contents insurance – will cover the costs of repairs or rebuilding required due to your property being damaged, or replacing any furniture or other items which are broken or stolen by tenants. By taking out these types of insurance, you can protect yourself easily against a large number of potential problems.

It is important to note that standard home insurance won’t protect you if you rent out your property. For this reason, we strongly advise that you take out specific landlord insurance. Furthermore, while landlord-specific insurance is not a legal requirement, many mortgage lenders will insist on it as a condition of lending.

How do I manage a property as a UK landlord?

Choosing how you manage your buy to let property from day-to-day is one of the most important decisions you will have to make – there are two options.

The first is managing the property yourself. This can initially seem tempting as you will not have to pay any management fees. However, you should be aware from the start that you will be committing yourself to a lot of work. You will have to take care of a whole range of time consuming tasks, including marketing the property, carrying out viewings, arranging and checking all paperwork, arranging any repairs, carrying out inspections etc.

For this reason, most landlords choose to use a property management company. For a relatively small fee – which is likely a lower cost than the time you would otherwise spend managing your property – all of the above will be taken care of on your behalf by trained and qualified professionals in the field. Additionally, a property management company will ensure you are up to date with current legislation at all times, and that your tenancy conforms to best practice.

Our in-house property management company – Alliance City Living – is a prime example of the high level of service you can expect from a professional property management company.

What costs am I liable for as a landlord in the UK?

There are a number of costs to consider as a landlord in the UK which you should take into account as part of your overall investment strategy. These include, but are not limited to, the following:

  • Buy to let mortgage payments
  • Landlord insurance – see previous section for more information on this
  • Stamp Duty Land Tax (SDLT) could apply depending on the value of the property you are purchasing. We are currently in the midst of a SDLT holiday until the next financial year – you can find out more about that by clicking here
  • Letting and property management fees, if you choose to use an agent, will generally be calculated as a percentage of your monthly rental income
  • Solicitor fees for any purchase or sale
  • Ongoing maintenance fees to make repairs, rectify any wear and tear issues and deal with emergencies
  • Income tax on your annual profits from rental income and any capital gains. You will need to pay whatever rates are applicable in the place you are based
  • Loss of income from rental void periods
  • Any bills you have included in the tenancy agreement
  • Annual administration costs including gas safety certificates, paperwork with the letting agent, EPCs every 10 years, any electrical safety checks that are carried out etc

What yields can I expect from being a buy to let landlord in the UK?

The yield you can expect as a buy to let landlord in the UK depends entirely on the variables of the purchase – where the property is, what the local rental market allows for, and so on.

What can be classified as a “good” or otherwise desirable rental yield is entirely dependent on your personal situation and investment strategy, however as a general guideline, a yield of 5% or higher in an area with growth potential is desirable. Good indicators or future prosperity include significant projected population growth and a booming economy.

Your rental yield is the monthly rent as a percentage of the total acquisition cost of your property – including purchase price, legal fees and Stamp Duty Land Tax. The easiest way to work out your potential rental yield is to use our Rental Yield Calculator.

And that is our complete guide to becoming a landlord and renting out property in the UK. If you have any further questions, please don’t hesitate to contact our team who will be able to provide an answer and advise on a profitable property investment strategy tailored to your needs.

Want to know more? Get in touch with our property experts today

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Alliance Investments, 21/Floor, The Centrium
60 Wyndham Street, Central, Hong Kong

+852 9244 2880

+852 9244 2880