With Lloyds predicting that home prices will fall 8% in the coming year, there may be opportunities to pick up a property to rent out at a cheaper price.
Landlords are responsible for more than just providing a roof overhead. The roof can’t leak, nor can the property be infested with pests. Homes need to be safe.
The Landlord and Tenant Act states that a property must be in “a condition that…is fit for human habitation” and “will be kept by the landlord fit for human habitation during the tenancy.” Essentially, this means that the landlord must keep a property in a fit state.
The law also states that a landlord is legally required to provide a central heating system and other heat sources (e.g. radiators and water boilers).
The landlord is also responsible for safety. This means ensuring fire safety (e.g. smoke alarms, escape routes, fire-safe furnishings, etc.), installing working carbon monoxide detectors, and providing safe gas & electric systems.
Houses in multiple occupations (HMOs) have additional safety requirements, such as providing fire extinguishers on every floor and fire blankets, which are mandatory in the kitchen.
Local authorities are a good source of information for the requirements in a given area.
Landlord insurance requirements
While renting out a property as a primary business or as an additional source of income is exciting, it is also risky. Therefore, an adequate level of insurance cover is needed to protect from those risks.
According to NimbleFins, there is no legal obligation to hold landlord insurance, but most landlords will buy a policy. There are a few options to consider, depending on the specific risks a landlord wants to protect against.
Here are the most common types of insurance for landlords:
- Building insurance
- Landlord public liability insurance
- Content insurance
- Accidental damage
- Rent guarantee
- Loss of rental income
- Legal expenses
A basic landlord insurance policy should include buildings insurance and landlord liability.
Buildings insurance covers the structure against damage from events like fire, explosion, storm, theft or attempted theft or even flooding. A policy may also cover accidental damage to the building, but this coverage may cost extra. And damage to the building that is the tenant’s fault (e.g. malicious damage) may or may not be covered, depending on the policy.
Landlord liability insurance is essentially a form of specialised public liability insurance. This type of cover protects against claims of damage or injury made by third parties. For example, if a tenant or other visitor to the property trips on a loose tile and falls, injuring themselves, they could come after the landlord for compensation. Landlord public liability insurance can help cover costs and provide expert advice in situations like this.
While landlord liability insurance can be purchased on its own, it is normally part of a landlord insurance package policy.
When buying a policy, a landlord should also take note of whether the contract is written to cover all risks or certain risks. All risks means the policy will cover any event that causes damage to the property with the exception of those listed in the contract. Certain risks only covers the risks listed in the policy.
The cost of a landlord insurance package will differ depending on the types of insurance cover provided, location, property value, and other factors. The average cost of a basic landlord insurance package starts from roughly £170, but this will vary.
Does homeowner insurance cover rented properties?
No, regular homeowner insurance will not cover a rented property. Special landlord insurance packages can provide the cover needed when renting a home.
Commercially rented properties need a different cover called commercial landlord insurance, which allows for business activity on site.
Stamp duty for landlords
Individual landlords now pay a higher stamp duty, with the addition of a 3% extra Stamp Duty Land Tax (SDLT) that is charged when a landlord buys an additional residential property (that is, if the landlord then owns more than one residential property). This extra cost must be factored in when running the numbers on a rental investment.
Rates can differ for landlords that buy properties through a company or trust.
Potential changes to the law regarding pets
Most landlords prefer not to rent to a tenant with pets, simply because pets can be destructive. While there is currently no legal obligation for landlords to accept tenants with pets, that could change in the near future.
In the Government’s new Model Tenancy Agreement, landlords cannot issue blanket bans on pets by default.
While a landlord is not required to use this tenancy agreement, there is a plan to introduce a Renters’ Reform Bill in the 2022-23 parliamentary session to ‘ensure landlords do not unreasonably withhold consent when a tenant requests to have a pet in their home.’
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