Consent to let questions - first time landlord

dlghubi

Hi all, 

Hoping you could please offer me some advice.

I accepted a new job recently that requires me to travel around the UK for weeks at a time. I own a 1 bedroom flat and I have been looking into consent to let - as I won't be home very often, following a discussion with my parents, they have offered to let me stay back home for the few days a month I will be back.

I have spoken with my lender (HSBC) who advised that I am very likely to be approved for consent to let for 27 months. I am going to be in this role for at least 12 months. 

What I'm hoping to understand is:

• The requirements of a consent to let landlord - i.e. different insurances etc
• What your letting agent should and shouldn't be doing for you 
• What is included in switching bill payers - i.e. If I am no longer required to pay council tax on the property, do I just inform the council that tenants have moved in or is there more complicated stuff behind this?
• Tax implications. My salary is £53k annually and therefore any additional income I receive will be affected by the 40% tax bracket I believe?

For more context, my current mortgage payments are £700pcm and my flat has been valued to rent at £1,100pcm. A letting agent I have been speaking with wants 12% of the monthly rental price (I believe this is way above the average(?), but it is a reputable agent in the area - advice on this too is also very welcome)

Thanks in advance if you can offer me any guidance on this - I am not taking this option lightly and really want to understand what I am getting myself into. I want to ensure I am not doing anything dodgy, and if I do decide to go down this route I want to be as clued up as possible. 

CSI_Yorkshire

https://www.gov.uk/renting-out-a-property

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1143463/6.8242_DLUHC_How_to_let_March23.pdf

NRLA seem to get talked about as a useful source too.

Just by getting a letting agent in doesn't mean that you can avoid the responsibilities.  Also, have you considered what happens if you want to move back in and your tenants won't move out?

eddddy

If you have a flat (and it's in England or Wales), presumably it's leasehold.

So you need to read the lease to see what it says about sub-letting.

• In some leases, sub-letting is prohibited

• But the most usual case is that the lease says you need the freeholder's/landlord's consent to sub-let (which cannot be unreasonably withheld).

• But there may be other conditions like: the tenant has to sign a deed with the freeholder; you have to provide the freeholder with a copy of the AST; etc

• (And I recently saw one lease where the leaseholder has to pay the freeholder a huge fee - a percentage of the flat's value - foe a licence to sub-let)

And, if there's no deed, you need to make sure that all the lease covenants are reflected in the AST.

For example, if your lease says: no bbqs in the garden, no bikes to be stored in the garden, etc, etc - you have to make sure the AST says that as well.

simon_or

Mandatory insurance for the mortgage - landlords buildings insurance 

Optional insurances (all landlord versions not homeowner ones) - Rent Guarantee Insurance, landlords contents, emergency call out cover, legal cover, etc 

Letting agent service - anything from basic tenant-find all the way to "full management". Be warned that irrespective of how expensive they are, it's very hard to find a really good letting agent who knows the laws/regulations around letting, communicates well, etc. Ultimately, as a landlord you hold the responsibility.

Letting agent fee - 12% of monthly rent is fairly standard for fully managed. Do check if that includes VAT or not.

Tax - if your earnings (excluding rent) are in excess of the higher rate threshold then yes all your rental profit (rent less non mortgage expenses) will be taxed at 40%. You will then get a tax reduction of 20% of the interest part of your mortgage payment.

kingstreet

dlghubi said:

Hi all, 

Hoping you could please offer me some advice.

I accepted a new job recently that requires me to travel around the UK for weeks at a time. I own a 1 bedroom flat and I have been looking into consent to let - as I won't be home very often, following a discussion with my parents, they have offered to let me stay back home for the few days a month I will be back.

I have spoken with my lender (HSBC) who advised that I am very likely to be approved for consent to let for 27 months. I am going to be in this role for at least 12 months. 

What I'm hoping to understand is:

• The requirements of a consent to let landlord - i.e. different insurances etc
• What your letting agent should and shouldn't be doing for you 
• What is included in switching bill payers - i.e. If I am no longer required to pay council tax on the property, do I just inform the council that tenants have moved in or is there more complicated stuff behind this?
• Tax implications. My salary is £53k annually and therefore any additional income I receive will be affected by the 40% tax bracket I believe?

For more context, my current mortgage payments are £700pcm and my flat has been valued to rent at £1,100pcm. A letting agent I have been speaking with wants 12% of the monthly rental price (I believe this is way above the average(?), but it is a reputable agent in the area - advice on this too is also very welcome)

Thanks in advance if you can offer me any guidance on this - I am not taking this option lightly and really want to understand what I am getting myself into. I want to ensure I am not doing anything dodgy, and if I do decide to go down this route I want to be as clued up as possible. 

Only 20% of the interest you pay is allowed as a tax credit, so your monthly payments make little difference. You are going to be paying higher rate tax on a big chunk of that £1,100.

For example with limited expenses and no mortgage balance to work from;-

£1,100 rent less

£156 letting agent (@ 12% + VAT)
£10 certification
£20 other costs =

£914 x 40% = 

£365.60 tax due less
£66.67 mortgage interest credit (eg £100,000 x 4% / 12 = £333.33 x 20%) =

£298.93 tax payable.

gazfocus

Something else to think about would be that you need to make sure the flat is up to the current regulations for tenants (such as you need to have interlinked smoke detectors with a heat detector in the kitchen plus co2 detectors wherever there's a gas appliance).  You also need to have a gas safety check every 12 months plus an EICR every few years.

Another thing is you'd most likely have to find somewhere to store your furniture and possessions. 

You're also banking on being able to get a tenant out of the flat when you need it back - this is being made much more difficult with new government rules, so when you finish your travels you may struggle to get the flat back.

Personally, on the figures you're talking about, £1100 rent minus £700 mortgage payment, I wouldn't bother because you'll be out of pocket once you've taken in to account the letting agent, insurance and tax.

Out of interest, is your flat somewhere that may appeal to short term rentals on sites like Airbnb? If your mum & dad (or a property manager) can handle the changeovers, it might be a safer way to go. Still don't think the finances will add up but it'll make the flat easier to move back in to plus you wouldn't then need to store your furniture.

eddddy

gazfocus said:

Out of interest, is your flat somewhere that may appeal to short term rentals on sites like Airbnb? 

The mortgage lender probably won't allow that.
The lease probably doesn't allow that.
The freeholder's buildings insurance might not allow that.

simon_or

gazfocus said:

Something else to think about would be that you need to make sure the flat is up to the current regulations for tenants (such as you need to have interlinked smoke detectors with a heat detector in the kitchen plus co2 detectors wherever there's a gas appliance).  You also need to have a gas safety check every 12 months plus an EICR every few years. 

You're also banking on being able to get a tenant out of the flat when you need it back - this is being made much more difficult with new government rules, so when you finish your travels you may struggle to get the flat back.

A few clarifications to the above - with regard to a standard rental property, the statutory requirements in England are -

Smoke alarm - don't need interlinked alarms or anything overly complex. All you need is one smoke alarm on each storey of the property so just one for a single-level flat. I'd be surprised if this wasn't already there in a purpose built flat. If not, you can get a battery operated one that's fixed to the ceiling. 

CO alarm - in the rooms which house a boiler or any other device that uses fuel (gas cookers excluded). Again, you can get a battery operated standalone one, fairly cheap.

Heat detector in the kitchen - not aware of any statutory requirement for this. 

EICR - once every 5 years

Regaining possession of the property - As currently proposed, the new regulations will have new mandatory grounds for the landlord to evict tenants if they or their close family members want to move into the rental property. Obviously there will be safeguards but that shouldn't be an issue for a genuine case like yours.

gazfocus

simon_or said:

gazfocus said:

Something else to think about would be that you need to make sure the flat is up to the current regulations for tenants (such as you need to have interlinked smoke detectors with a heat detector in the kitchen plus co2 detectors wherever there's a gas appliance).  You also need to have a gas safety check every 12 months plus an EICR every few years. 

You're also banking on being able to get a tenant out of the flat when you need it back - this is being made much more difficult with new government rules, so when you finish your travels you may struggle to get the flat back.

A few clarifications to the above - with regard to a standard rental property, the statutory requirements in England are -

Smoke alarm - don't need interlinked alarms or anything overly complex. All you need is one smoke alarm on each storey of the property so just one for a single-level flat. I'd be surprised if this wasn't already there in a purpose built flat. If not, you can get a battery operated one that's fixed to the ceiling. 

CO alarm - in the rooms which house a boiler or any other device that uses fuel (gas cookers excluded). Again, you can get a battery operated standalone one, fairly cheap.

Heat detector in the kitchen - not aware of any statutory requirement for this. 

EICR - once every 5 years

Regaining possession of the property - As currently proposed, the new regulations will have new mandatory grounds for the landlord to evict tenants if they or their close family members want to move into the rental property. Obviously there will be safeguards but that shouldn't be an issue for a genuine case like yours.

My apologies, I was thinking of Scotland with the smoke alarms/heat detector in the kitchen needing to be interlinked, though I’m sure it won’t be long before it’s a requirement in England & Wales as well.

With regards to regaining possession, I mentioned that as while there will be provisions to regain possession, they’re not likely to be easy or cheap. What if a tenant refuses to move out? Especially if they are paying £1100 a month where comparable rents have climbed to say £1500 a month. It could be a real battle getting tenants out and is a huge emotional drain, so something I’d definitely think about before renting if it’s only intended as a short term solution. 

gazfocus

eddddy said:

gazfocus said:

Out of interest, is your flat somewhere that may appeal to short term rentals on sites like Airbnb? 

The mortgage lender probably won't allow that.
The lease probably doesn't allow that.
The freeholder's buildings insurance might not allow that.

Fair enough. I wasn’t sure if there would be some kind of consent to let for short term rental as a short term solution. 

theartfullodger

Three points:

a) To be a lettings agent in England requires no qualifications, no training, no criminal records check.  The whole office could be (legally) staffed with ex-prisoners on early release from their sentences for GBH & fraud: Literally! 

II) Consent to let of a limited period sounds fine.  But a tenancy does not end at end of initial term, nor is tenant compelled to leave then.  If you **** up the paperwork such that an s21 (if still around ) was invalid evicting tenants might be impossible/really really difficult.  See e.g 
. this checksheet to see if it would be valid.. 
https://nearlylegal.co.uk/section-21-flowchart/

- what'cha gonna do now eh??


3) Done any training in how to be a landlord?? If you think education is expensive, try ignorance (I made daft mistakes when starting as a landlord: Expensive, painful, long-drawn out, complicated: Oh my stupidity! Oh the hubris! )

Good luck....