Overseas Landlord Guide
If you are looking at Buy-to-Let in the UK but you are not resident in the UK, you may find this guide useful. Please not that this is intended to be for general information purpose only and we recommend you seek independent. However, by understanding the law and legal obligations, many landlords have made a successful business out of UK Buy-to-Let.
Letting a property is by no means an easy matter and landlords should appreciate and understand that the legislation around letting in England and Wales is very heavily favouring tenants rather than landlords.
Why is BTL good
With rising property prices in UK and with UK wages not keeping up in line with this rise, it has become increasingly challenging, particularly for first-time-buyers in the UK to purchase their own property. The most common reason is not being able to save for a deposit and not being able to obtain a mortgage. This has also not been helped by the so called "credit crunch". Therefore the alternative which is why the number of people renting homes n the UK has soared by a staggering 89% in 10 years. It is now often known in the UK as "Generation Rent".
The rental process is very easy in the UK, from marketing your property to tenancy.
Marketing the property to rent
Tenant agrees to rent the property
Credit/Affordability checks undertaken
Deposit and Rent taken
Most landlords would undertake a credit check on any prospective tenants looking to rent the property. If you rent your property through Enviro Estates, we will use an external referencing agent to ensure a full report of the tenant and their credit affordability is undertaken. This is important especially if you are considering rent protection insurance.
In the UK, normally tenants are required to pay 1 months' rent in advanced and a deposit of between 1 and 1.5 months' of the rental amount. The deposit is for the purpose of security during the tenancy. It is not a legal requirement to take a deposit, but extremely rare for it not to be asked. If landlords' take a deposit, then it is important to understand the law behind this.
If you are a landlord, and take a deposit from your tenant, or through an agent, which takes a deposit on your behalf, you must ensure that the following is undertaken:
The deposit is protected within the 30 days of the deposit being taken into a government approved deposit protection scheme. There are currently 4 schemes: MyDeposits (By the National Landlords Association); Deposit Protection Scheme (DPS); Deposit Guard (By the Residential Landlords Association) and the Tenancy Deposit Service (TDS).
Confirmation of the protection, together with the scheme terms and prescribed information is provided to the tenant within 30 days of the deposit being taken.
Failure to undertake this can result in the tenant having a legal right to take legal action to claim for up to 3 times the deposit. To avoid this, Enviro Estates makes sure that all tenants sign and date, including witness all legal required documentation within 30 days period, safeguarding landlords from any potential legal recourse.
Most tenancies last around a fixed 6 to 12 month period on an agreement known as an assured shothold tenancy agreement. If the agreement is not renewed after the fixed period, the tenant will still continue to the rent the property under what is known as a periodic tenancy agreement.
Landlords legal requirements
All landlords must ensure that their property is in a "habitable" condition. If you are purchasing new build property, this will most likely not affect you, but under Section 11 of the Landlord & Tenant Act this includes:
keep in repair the structure and exterior of the dwelling, including drains, gutters and external pipes,
keep in repair and proper working order the installations in the dwelling for the supply of water, gas, electricity and for sanitation (including basins, sinks, baths and sanitary conveniences but not other fixtures, fittings and appliances for making use of the supply of water, gas or electricity, and
keep in repair and proper working order the installation in the dwelling for space heating and heating water.
This section only covers repair to the exterior. It is a misunderstanding from many landlords, UK resident or not that damage or disrepair that is not structural will not be covered under the act and therefore may not be enforceable in UK courts, should it not pose any health & safety hazard.
All landlords must ensure that a valid Energy Performance Certificate (EPC) is undertaken once every 10 years. A qualified Domestic Energy Assessor (DEA) will undertake an EPC for you at a cost of around £50. Enviro Estates has a subsidiary company Enviro Energies, one of the largest nationwide EPC providers in UK that can assist you with this legal requirement.
If your property has gas you must ensure a gas safety check is undertaken by a qualified Gas Safe Registered engineer every 12 months. This is a legal requirement. Furthermore, a landlord is advised to put into the property a carbon monoxide monitor as any death from carbon monoxide poising is an offence with a prison sentence likely.
The next piece of legislation to affect landlords is the Government's intention within the Immigration Bill to make landlords legally responsible for checking the immigrant status of tenants and their right to be in the UK.
The tenant must, by law, allow access to the landlord to carry out repairs that he is obligated to do, although the landlord must give the tenant prior warning of the time that he proposes to enter to undertake the repairs(13).
While repairs are being undertaken, the tenant retains his right to occupy the property, and it is only possible to require him to vacate temporarily if the repairs cannot be conducted with the tenant present(14). The fact that the repairs would cost more with the tenant in situ does not entitle the landlord to compel him to vacate while the works are undertaken. In conducting the repairs, the landlord must keep to a minimum the interference with the comfort and enjoyment of the tenant(15).
The tenant for his part must not interfere with the performance of the repairs and he has no right to be re-housed while the repairs are being undertaken. The tenant is merely entitled to special damages for the cost of alternative accommodation during any extra time out of the property caused by the landlord's delay in commencing repairs(16). During the period of repair, the tenant's obligation to pay rent will continue(17). It is because the law still provides little protection to the tenant in such situations, that explicit terms are often inserted into the tenancy agreement whereby it is agreed that the tenant's obligation to pay rent does not continue whilst the property is rendered uninhabitable by fire or similar risks.
However, if the landlord is in breach of repairing obligations and because of this breach the property falls into such a state that the tenant cannot live at the property, the landlord will be liable for the cost of alternative accommodation and removal expenses (as well as any other damages that the tenant can prove as a result of the unfitness of the property).
Grounds 6 & 9
For various reasons, there are situations where, despite it being possible to carry out repairs with the tenant in situ, a landlord will find it more convenient or economical to take possession of the property to carry out repair or general building works. Alternatively, a landlord may wish to carry out repairs or other works (e.g. improvement works) over and above those which he is required to perform by law.
For assured (and assured shorthold) tenancies, the Housing Act 1988 provides two grounds(18) which can be invoked so that the landlord can gain possession for this purpose. Ground 6 is a mandatory ground for possession whereby the landlord can gain possession providing he can prove that the necessary works are substantial (as defined within Ground 6) and cannot possibly be carried out with the tenants in residence. In this case, at least two months' notice would need to be provided to the tenant and the tenant's reasonable removal expenses would have to be paid. If the requirements of Ground 6 are met, then the landlord has no responsibility to provide alternative accommodation to the tenant.
Alternatively, the landlord may use Ground 9 which is a discretionary ground which (unlike Ground 6) requires that the suitable alternative accommodation is made available. Again, the landlord would be liable for the tenant's reasonable removal expenses.
For assured (and assured shorthold) tenancies, the Housing Act 1988 provides two grounds(18) which can be invoked so that the landlord can gain possession for this purpose. Ground 6 is a mandatory ground
As a non-UK resident, you will be part of The Non-resident Landlords Scheme as a way of collecting tax due on the UK rental income of non-resident.
If you let your property through Enviro Estates we will deal with the collection and deduction of tax from the monthly rent, until otherwise advised by HMRC, however when it comes to filing and declaration of tax, due to the highly regulated industry, we would advise you speak with a financial advisor or accountant.
Non-resident landlords may apply to HMRC to have the rent paid without deduction of tax. In this case HMRC will notify the letting agent or tenants that they should not deduct tax. However, the landlord is still liable to pay tax in the UK on the income they are receiving from letting their UK property. Whether or not tax has not been deducted at source (i.e. by tenants or rent collection agent), the non-resident landlord has to complete and submit UK tax returns. The process for this is exactly the same as for UK residents.
This is declared on a Self-Assessment. Tax is paid on the profits you make in each tax year – these run from 6 April, to 5 April the following year.
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