Posted on 20.2.13 by Lorraine Lockie
Figures published by the Council of Mortgage Lenders this month show that buy to let lending in 2012 was 19% higher than in 2011 and the sector is set for further growth during 2013.
The surge in demand for rental properties by tenants coupled with increased rent levels has fuelled growing investment in the buy-to-let market. A survey by Mortgage for Business revealed that 55% of landlords are planning to expand their property portfolio and 43% are looking to remortgage in the first half of 2013.
If you are considering a Buy to Let investment, there are a few legal considerations to bear in mind at the outset:
Apply for the correct type of mortgage – some prospective Landlords try and apply for a residential mortgage rather than a ‘buy-to-let’ mortgage, but this could leave you in breach of the residential mortgage conditions.
- Consent to sub-let – if you are buying a leasehold flat or house, double-check with your solicitor that you can sub-let the property – otherwise you’ll be in breach of the lease.
- Managing Agent agreement – if you decide to appoint an agent to manage the property for you, check whether they are a member of an industry body such as ARLA and make sure you have a written contract in place with the Agent.
- Health & Safety – check that you meet obligations in relation to gas safety, electrical appliances and that the property is in good repair.
- Tenancy Deposit Scheme (TDS) – whether or not you use an Agent, make sure that you comply with the provisions of the TDS to protect the tenant’s deposit. If you do not comply with the strict requirements of the scheme, you may not be able to serve notice on the tenant to quit the property and/or may be fined for non-compliance with the prescribed rules.
- Assured Shorthold Tenancy (AST) – Make sure that you enter into a formal AST and complete the relevant sections of the form correctly. A surprising number of Landlords do not have the correct form of AST in place or have not completed the form correctly. Any time taken to correct the errors could delay a potential remortgage.
- Land Registry restriction – Properties occupied by non-owners can be targeted by fraudsters seeking to establish that they own the property. To guard against this the Land Registry offer non-occupier owners the opportunity to register a restriction against the Land Register. The Land Registry will subsequently only register a dealing with the property if a Conveyancer has verified the identity of the person purporting to sell or mortgage the property.