Accidental Landlord: What does it mean?

Being an accidental landlord means that you have a property that you may rent out due to unforeseen events rather than because you set out to become a landlord.

And this article discusses the primary reasons for becoming an unintentional landlord, as well as what you'll need to do about your mortgage, tax ramifications, and other issues. Continue reading to learn all you need to know.

What is an accidental landlord?

Not every landlord chooses to be in the real estate business. In many circumstances, homeowners have no choice except to rent out their home since they cannot find a buyer.

Circumstances frequently change, necessitating a house shift. Homeowners may elect to share their living space with a new companion. A employment opportunity may need relocating. A new baby may render your existing residence unsuitable. The natural next step would be to sell and move on, but this is not always easy.

Rather than staying there, many homeowners elect to rent out their home, using the rent to pay the monthly mortgage payments and freeing them up to make their next move.

How does becoming an accidental landlord happen?

There are various main factors why you could become an unintentional landlord, including:

• Because you are unable to sell your current home, you decide to rent it out when you purchase a new one.
• Having to relocate for work and deciding to rent out your property so you may live in it when you return
• You inherit a property that you can't sell or that you want to preserve ownership of for your children, so you decide to rent it out.

How does becoming an accidental landlord affect your mortgage?

‍
If you're about to become an unintentional landlord and have a mortgage on the home, it's critical that you chat with a competent mortgage adviser who can walk you through your mortgage alternatives. This is because you will need to notify your present mortgage lender of your changed circumstances in order to obtain permission to rent out your house.

There are two options for renting out your property:

• Getting 'Consent to Let': If your mortgage lender grants you Consent to Let, you will be able to rent out your house without changing your mortgage. If you plan to rent out the property in the short term while you try to sell or, your lender may be more willing to approve. Or if you're leaving for six months or a year and want to return.
• Changing to a Buy-to-Let mortgage: Another alternative is to convert your existing mortgage to a Buy to Let mortgage.

Your new responsibilities as an accidental landlord

Whether you are an unintentional landlord or intend to become a landlord, you will be subject to the same legal requirements. These are some examples:

• You will be in charge of ensuring the safety of the rented property. For example, you must have a registered engineer perform a gas safety inspection on each gas device. You must also adhere to fire safety laws.
• By law, you must ensure that your tenants have the legal right to rent in this nation.
• You'll also need to secure the necessary licences and permits.

Don't worry, you can read our detailed guide: Your Responsibilities As A Landlord.

Do accidental landlords have to pay income tax?

Yes, as a landlord, you must pay income tax on your rental revenue.

When you rent out a home, you must notify HMRC. Hence, when crunching the numbers and calculating how much money you want to make from renting out your house, don't forget to account for the tax you'll have to pay.

Before, landlords could claim tax relief on the mortgage interest they paid on their mortgage instalments. They would only pay taxes on their profits.

This, however, has changed. Landlords must pay tax on their whole rental revenue (not just the profit), and they can only claim 20% tax relief on mortgage payments, regardless of tax bracket. A landlord in the higher tax bracket will therefore pay 40% or 45% tax on rental income but will only be able to receive 20% back as tax relief.

‍

Will you need landlord insurance?
‍

While specific landlord insurance is not required by law, it is worth seriously considering.

Normal home insurance covers the occupier's possessions and the structure itself, but landlord insurance covers a variety of incidentals such as missed rental payments, loss of income if the property is left vacant for long periods of time, legal fees and expenses (in case of disputes with tenants), and home emergency cover if the property's supply of gas, electricity, heating, or water is cut off.

There are various types of insurance available, so it's worth looking into which one is best for you and your property, for example:

• Building insurance for landlords protects against structural damage (fires or floods).
• Landlord contents insurance covers the expense of replacing or repairing furniture, carpets, kitchenware, or electrical goods if your property is rented out furnished.
• Landlord liability insurance protects you in the event that a tenant or visitor is injured on your property.

Safety, Certificates and Paperwork

Being a landlord entails various safety regulations and certifications. After all, you are now accountable for your tenants' safety, not just your own. All of them are legal obligations. Please keep in mind that this is not an entire list, and legislation is subject to change. Please consult the applicable Government site for your nation for the most up-to-date information - gov.uk, mygov.scot, and nidirect.gov.uk.

Gas safety: You must have all gas appliances, pipes, and flues examined annually by a Gas Safe engineer, and you must supply renters with the CP12 certificate when they move in and every year for the duration of their rental.

Electrical safety: A trained engineer must conduct a comprehensive electrical safety examination at the start of the tenancy and every five years thereafter. Any necessary work must be completed within 28 days. Any equipment provided, such as refrigerators or toasters, must be in working order throughout the tenancy.

‍

Energy Performance Certificate (EPC): During the viewing or before the leasing agreement is completed, you must present tenants with an EPC, which measures the energy efficiency of the property. Only properties having a "pass grade" of E or higher are permitted to be rented.

There is no fire safety certificate, but you must install at least one working smoke alarm per floor, a working carbon monoxide monitor in any occupied rooms with a fixed combustion appliance, repair or replace faulty smoke and carbon monoxide alarms when notified of a fault, and ensure that any furniture provided meets the fire resistant requirements of the Furniture and Furnishings (Fire) (Safety) Regulations 1988.

‍

Deposit Responsibilities: All tenancy deposits must be held in a government-backed tenancy deposit programme. You can use MyDeposits, Tenant Deposit Scheme, or Deposit Protection Service.

Right to rent: According to the Immigration Act of 2014, landlords must ensure that their renters have the legal right to rent in the United Kingdom. This includes ensuring they have the proper documentation to verify their ability to be in the UK and to rent here. A list of eligible documents is available at Gov.uk. Failing to do these checks may result in a fine or possibly incarceration.

A little about us

We hope this guide has been helpful!

Find out more about how Oasis Living can find you the perfect tenants and improve your property management experience. Head to our website now or contact one of our property experts. Plus, you can read our guide on renting for tenants.

‍

‍