Rhys Owen, Senior Property Advisor, points out three extremely important things all new (and existing!) landlords should check before renting out a property...
If you’ve been thinking about renting out your flat, or perhaps want to rent out a home that you’ve inherited or a property you would like to potentially invest in, then you’re likely wondering what you need to have in place in order to do so.
Fortunately, rules and regulations remain exactly the same regardless of whether it’s a flat, an apartment, or a house that you’re looking to rent out - though things do get a little more complicated if it’s an HMO (House of Multiple Occupation) that you’re interested in.
Check this out to see if an HMO investment is right for you.
When it comes to letting out a property, a landlord has an obligation to comply with the current laws - laws that are ever changing, so you do have to keep yourself updated.
Although the rules and regulations remain the same regardless of the property type, there is one key thing that flat owners have to check, and that’s the leasehold terms and conditions. Almost all flats in the UK are leasehold, and it’s vital that owners check them through as they could potentially stop landlords from having the legal right to rent out their flat.
So, if you want to rent out your flat what exactly do you have to check?
It isn’t a certainty that your lease permits subletting your property. Even if it does allow you to sublet, there may well be certain terms and conditions that must be followed while you do sublet, such as only allowing long-term lets that are for a minimum of 6 months.
You’d be surprised at the overwhelming number of property investors who let out their property on a short-term basis - over a weekend or for just a month or two, for example - unknowingly (or knowingly) going against the terms of their lease. This can have severe repercussions in a worst-case scenario, so it really isn’t worth considering at all.
If the lease permits subletting (yes, renting out a leasehold property is subletting even if you’re the property owner) then you’re good to go - provided you abide by all noted terms and conditions. If there is no mention of restrictions to subletting or none that you can understand (leases are rarely written in the simplest form of English!), then you should check the lease over with a conveyancer so that you can have confirmation and peace of mind.
If your lease clearly prohibits subletting, then unfortunately you’re not able to rent out the property. You can request written permission from the landlord, and you may get lucky, so it’s always worth enquiring to see where you stand going forward.
2. Fully understand your building insurance
If you’re purchasing a flat or property with the sole intention of renting it out, then we’d like to think that you’d make sure you take out adequate building insurance that is suitable for buy-to-let (BTL) properties.
However, if you’re a homeowner who’s new to letting or has only recently considered the possibility of letting out the property you currently live in, it’s easy to see why you might make the dreaded mistake of not informing your insurance provider or taking out the wrong type of policy to begin with. You must understand that a residential building insurance policy cannot cover a BTL property, so if something happens and you need to make a claim it will be invalid. As you can imagine, this is most certainly not a position you ever want to find yourself in as a landlord.
Therefore, ensure your BTL property is covered with a suitable landlord building insurance policy.
3. Check you have the right type of mortgage
In much the same way you need the right type of valid building insurance policy, you also need to ensure you have the right type of mortgage unless you happen to own the property outright.
There are two main types of mortgage - a standard residential mortgage for properties that the owners live in, or a BTL mortgage for properties that are let out. If you let the property out, or plan to do so, you need to make sure you have a BTL mortgage in place.
Now, if you’re currently living in the property with a residential mortgage but plan to move out and let the property, you can either wait for any existing fixed term to come to an end and then take out a new BTL mortgage instead (or pay any exit fee that may be due if you want to change mortgages before the fixed term ends), or you can talk to your lender and see if they will offer you a Consent To Let.
A Consent To Let is when your existing residential mortgage lender grants you permission to rent out the property, usually with a small increase to your interest rate. The permission is usually granted for just a couple of years as they aren’t designed to be a long-term fix, following which you would need to apply to the lenders again. Be aware that your residential lender is under no obligation to grant permission so they may refuse to do so. They may also refuse to allow it even after granting it for previous years.
Check out our handy mortgage guide.
If you’re in any doubt you’d be strongly advised to discuss your circumstances with a qualified mortgage broker.
Are you thinking of renting your property out in Cardiff? Whether you’re ready and all set to go, or seeking an ideal investment property somewhere in the city, our lettings team at CPS Homes has the expertise to help you every step of the way. Learn how we can help by calling 02920 668585, e-mailing email@example.com or by popping into one of our three Cardiff branches.