Are you an accidental landlord? This is where you have become a landlord out of circumstance rather than choice. Maybe you inherited a property and have decided to keep it as an investment? Or, maybe you are earning an extra income by renting out a room in your home under the Rent A Room scheme?
Whatever the reason, there are 5 things you need to do to ensure you don’t run in to problems.
- Check with your mortgage provider (if you have a mortgage on the property)
Your mortgage was offered to you on the basis of being a residential owner-occupied property. If it is now being let, or you have a lodger, this could affect your contract with your mortgage provider.
Make sure you tell your provider what you are planning to do and get their written approval. Depending on your circumstances, you may need to switch mortgage type.
- Tell your insurer
If you have standard home buildings and contents insurance on your property, then you need inform your insurer that you are taking in a lodger or changing the property use to that of a let property.
They will then be able to change your insurance cover (typically to a landlords insurance policy) to cover the extra risks you now face having a tenanted property (or someone who is not family living in your home).
This may typically attract an additional premium, but you will have the peace of mind that if something should go wrong (for example, your tenant injures themselves on or around your property and tries to claim compensation) you are financially protected.
Failure to inform your insurer of the change in circumstance could invalidate your existing cover.
- Know your obligations
Once you are a landlord, then you have certain obligations you legally need to meet. These include annual gas inspections from a GasSafe registered engineer, electrical safety inspections, plus you must provide a safe environment for your tenant or lodger. You can read more here on the Government website.
- Draw up a tenancy agreement and take an inventory
No matter who you are renting to, whether a stranger or a good friend, you must draw up a tenancy agreement. This highlights the rights and responsibilities of you both as well as when rent is due, the duration of the tenancy, and who pays for what bills etc.
A tenancy agreement keeps you both on a legal footing.
An inventory should also be drawn up at the same time – you can see a sample inventory here – which should be checked through and signed by both of you. You may also want to include photographs of some high value items so there is no dispute over its condition at the end of the tenancy.
- Keep records and receipts
Being a landlord, even in your own home, is still classed as running a business. This means that you will need to keep accurate books, records and receipts of any income and expenditure relating to your let.
Different rules apply depending on the type of let you have. If you have a lodger, this Money Advice Service guide may help. If you are letting an investment property, then visit the Government website or seek advice from a qualified adviser.
Being a landlord can be a fun and financially rewarding thing to do. Making sure you carry out these five steps will give you the best foundations for successfully running your business.