Over recent years, the property-investment sector has become much more regulated. What’s more, it’s increasingly common for landlords to be required to prove that they have complied with rules rather than on enforcement agencies to prove that they haven’t. With that in mind, here is a quick guide to the current rules for buy-to-let landlords.
The legal framework of being a landlord
Landlords typically have three sets of laws to deal with. These are criminal laws, civil laws and local-authority bylaws. Realistically, for most landlords, the last two are likely to be the more relevant.
It is, however, worth remembering that there are most certainly ways that landlords can get caught up in criminal laws. In particular, if a landlord ignores a tenant using their property for criminal activities, they could end up being viewed as an accessory to them.
Criminal and civil laws can vary across the different countries in the UK. Bylaws vary by local authority and all laws can change over time. Lawmakers tend to give a lot of notice regarding legal changes. This is, however, only relevant if you’re paying attention to the industry news.
For all of these reasons, it can be safest for “accidental landlords” and other small-scale investors to work through lettings agencies. These can make sure that landlords stay on the right side of all relevant laws.
The law and buying property
If you buy property using financing, then, by default, the contract with your lender will be governed by civil law. There is, however, a twist to this. Fraud is a criminal offence. This means that, potentially, buying a buy-to-let property with a residential mortgage could land you with criminal charges.
Similarly, buying residential insurance cover for a buy-to-let property will put you in breach of contract with your insurer. If this is discovered when you make a claim, then your claim will be declined. If it is discovered after a claim has been paid, then, again, you could find yourself looking at fraud charges.
The law and tenant selection
Your tenant selection must be compliant with the Equality Act 2010. In other words, you are not permitted to discriminate on the basis of protected criteria. Discrimination comes in two main forms, direct and indirect. It is the latter that poses a greater risk for landlords.
Indirect discrimination is when a policy that applies to everyone has a disproportionately adverse effect on people with certain characteristics that are considered protected criteria. One key point to note is that refusing to accept tenants on benefits has been ruled indirect discrimination as it disproportionately affects women and disabled people.
Currently, landlords in England also have to perform “Right to Rent” checks. What’s more, they have to do so without breaching the Equality Act 2010.
The law and tenant deposits
Tenant deposits must now be held in a government-approved scheme. It has been suggested that the government make it possible for tenants to transfer deposits between landlords. You can find more details here about deposits https://www.gov.uk/tenancy-deposit-protection.
The law and tenant rents
Currently, there are very limited rent controls in the UK. This could, however, change in the near future. Landlords are banned from charging extra fees to tenants (except in very limited circumstances).
The law and tenant evictions
At present, Section 21 (“no faults) evictions are only banned in Scotland. They are, however, expected to be banned in England and Wales.
The law and property standards
There are multiple laws covering property standards. These include minimum energy efficiency standards and gas and electricity safety standards. Overall, landlords have a duty of care towards their tenants and this includes making sure that a property is healthy and safe.
The law and Houses in Multiple Occupation
By default, an HMO must be licensed if it includes 5 or more households. Local authorities can, however, impose more stringent requirements.
If you would like further assistance on a buy to let mortgage, please do get in touch.
The FCA does not regulate legal services and we act as introducers for it
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