If you are buying a property and planning to let it, there are several considerations which should be taken into account in connection with the Conveyancing.
In the first place you should inform all your professional advisers including the solicitor, surveyor and any mortgage broker that it will be a Buy-to-Let purchase. They will then be able to give you appropriate advice throughout your purchase.
Any mortgage finance must be a Buy-to-Let product. Ordinary residential mortgages are intended for owner-occupiers, and letting the property would be a breach of the conditions for such mortgages.
While many of the high-street lenders offer BTL mortgages, there are several other lenders who specialise in this market and may have more suitable products available. It can therefore be worth obtaining advice from an impartial broker before making any decision.
A building survey is especially important
Whether or not you require a mortgage, a proper building survey is always recommended. If the Surveyor knows you will be letting the property then he or she can advise on any matters which might be relevant.
The survey carried out in connection with a mortgage application is often little more than a valuation. Having your own building survey carried out is well worth the small extra expense, especially if it reveals unexpected defects in the property.
It will also be essential to have the electrical system and any gas installation checked by qualified engineers to ensure that they met statutory requirements when letting the property.
Should any survey show that work is required to bring the property up to standard before it can be let, it may be appropriate to negotiate a reduction in price. However you would need to factor in not only the cost of getting the work done after completion, but also the time this will take.
Bear in mind that until any necessary work has been completed and appropriate safety certificates issued, you will be unable to let the property and therefore won’t receive any rental income.
Your Buy to Let Conveyancing Solicitor will check any restrictions on letting the property
Your conveyancing lawyer will want to know if you are buying to let, in case there are any legal restrictions on letting the property. If you are buying a freehold house then there should be no such restrictions. But if the property is leasehold, especially if it is a flat or apartment, it may be subject to a restriction on letting.
Leases always contain many covenants by the leaseholder (or tenant. ) Some of these require the leaseholder to do something, such as pay the rent. But many are in the form of restrictions, such as prohibiting tenants to have pets or play loud music.
It is very common for leases to contain a covenant prohibiting the property from being let or sub-let. This is particularly so with leases originally granted more than thirty years ago, when short-term residential letting was uncommon. Such restrictions are generally intended to prohibit the owner of the flat from granting long-term underleases or sub-letting part of the property.
Your Buy to Let Conveyancing Solicitor will be able to advise you on the exact effect of any restrictions on letting, and the legal implications if you were to let in breach of covenant.
It will be necessary to consider carefully the exact wording of the relevant clause. Many leases prohibit any form of letting, but some allow letting on short-term tenancies. Some leases allow letting provided that the freeholder’s consent has been obtained first.
Many freeholders or their managing agents require payment of substantial fees before considering a request for permission to let the property. Your Solicitor will be able to find out how much these are, as well as any other information relevant to the letting of the property.
Another situation which may require careful consideration is when the freehold of a block of flats is owned by a company in which all the flat-owners have a share. (This is sometimes advertised as ‘share of the freehold’. )
If a majority of the flats are occupied by their owners, these owners may be reluctant to allow other flats to be let on short-term tenancies. In such cases they may strictly enforce any restrictions on letting contained in the flat-leases, or they may add a clause to the company’s articles of association (i.e. its constitution) which would prohibit flat-owners from letting their properties.
How to guard against fraud by tenants
It is important to guard against fraud. Tenants have been known to masquerade as the property owner and mortgage or even sell the property without the real owner knowing about it. It is easy for them to do this if the land registry only has the address of the property as the proprietor’s address.
On completion of the purchase of any Buy-to-let property you will therefore need to instruct your Solicitor as to the address you wish to have registered for service of notices affecting the property. You will want to make sure that any notices or correspondence relating to your ownership of the property are sent direct to you rather than the property, since you cannot rely on a tenant forwarding any post.
You could ask for your permanent address to be included on the land registry title. However you should be aware that anyone can obtain this information from the land register, so if you do not want tenants to know your own address you may prefer to use another address. The land registry will register up to three addresses for proprietors, one of which can be an email address. So you could ask for the address of your Solicitor and/or another agent to be included.
Another way of guarding against such fraud is to ask your Solicitor to have a restriction registered on the property title. This will prevent any transfer or mortgage of the property unless accompanied by a certificate signed by a Solicitor confirming they are satisfied that the person who executed the document submitted for registration is the same person as the registered proprietor.
When you are buying a leasehold property it is also important that any notices or correspondence from the freeholder or managing agents are sent direct to you and not to the property. Your Conveyancing Solicitor will send them a notice after completion confirming details of the transfer, and this should include the address they are to send notices to.
Make sure you have proper insurance
You will need to ensure that the property is properly insured. Do not just rely on standard buildings insurance, but obtain proper landlords insurance cover.
With many leasehold flats the buildings insurance is arranged by the freeholder or agents, and the premiums are passed on to owners as part of the service charges. When letting the flat it is advisable to check what the freeholder’s insurance policy covers, but it will also be necessary to obtain landlords insurance.
Passing on service charges and other liabilities
When letting a flat, you will need to consider what arrangements to make to pass on the ground rent and any service charges to your tenants. Bear in mind that it will be your responsibility to ensure that such charges are paid, so it will be better to pay such charges yourself rather than leave this to the tenants.
However you will want to ensure that you can recover payments from your tenants. Since service charges are often only collected annually or half-yearly it will probably be best to add an amount to the tenant’s rent to cover the anticipated amount of any such charges.
Bear in mind that leases of flats will always contain many restrictions on the occupiers of the flat. Your own tenants should comply with these, so they should be made aware of them. If your tenants breach these restrictions, the freeholder would take enforcement action against you rather than the tenants, so make sure that your letting agreement covers this eventuality.
When purchasing a Buy-to-let property it pays to appoint Conveyancing Solicitors who have experience of such transactions. Fridaysmove have a wealth of experience in buy to let conveyancing and we do not add any additional fees ar charges over and above a standard transaction.
Call us now on 033 0660 0286 for more information on how we can assist with making the process simpler.