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Profiting from your private property investments – staying on the right side of the law

PUBLISHED: 12:26 22 February 2016 | UPDATED: 14:23 13 April 2016

For years now, many investors have enjoyed profitable returns from residential buy to let properties.

For years now, many investors have enjoyed profitable returns from residential buy to let properties.

Archant

There are some recent important legal developments which residential landlords should ignore at their peril.

For years now, many investors have enjoyed profitable returns from residential buy to let properties. This type of investment is currently very much in focus following the Chancellor’s announcement in the November Autumn Statement of the 3% Stamp Duty Land Tax surcharge on buy to let and second homes (from 1 April 2016) and new rules regarding the way that tax relief is available on buy to let mortgage interest payments, which is due to be phased in from next year.

On top of these, there are some recent important legal developments which residential landlords should ignore at their peril.

“Right to Rent” Immigration Check Scheme

From 1 February 2016, all landlords, agents and householders letting or subletting residential property in England will have to make checks to ensure that new tenants and occupiers have the right to be in the UK. There is no requirement to check the “right to rent” of existing tenants and occupiers.

The four basic steps to making a “right to rent” check are:-

• Establish how many adults will be living at the property as their only or main home: a landlord will be responsible for checking all adult occupiers (whether or not they are named on the Tenancy Agreement). What constitutes “reasonable enquiries” will depend on a range of factors, including the size and nature of the property;

• Obtain original versions of one or more of the acceptable documents for the adult occupiers: there are two lists of documents which prescribe which documents are acceptable as proof of a person’s right to be in the UK;

• Check the document in the presence of the potential occupier: a landlord must undertake basic visual checks of the documents in the presence of the prospective occupier in order to verify that the documents belong to them and are genuine before allowing a prospective occupier to move into the property.

• Make a copy of the document and retain with a record of the date on which the check is made: a landlord must make a clear and unaltered copy of the original acceptable document before returning it to the prospective occupier and retain that copy for a period of at least one year after the tenancy comes to an end.

If a landlord fails to comply with the requirements correctly, it could result in having to pay a fine of up to £3,000 per breach.

Landlords can have a written agreement with a letting agent who would be responsible for fulfilling the requirements of the Scheme, and therefore who will be liable for any penalty in the absence of establishing a statutory excuse.

Residential Tenancy Deposit Schemes

Whilst landlords of Assured Shorthold Tenancies have had an obligation to register a deposit (with a designate Tenancy Deposit Scheme ), paid by a tenant at the start of their tenancy since April 2007, there have been a number of recent cases that have led to further obligations - so residential landlords need to make sure they monitor their buy to let property tenancies carefully to ensure they comply with all the registration requirements.

The effect of “getting it wrong” can be major. For example, if the mandatory requirements are not complied with, a landlord will be prevented from recovering possession of the property and may have to pay a financial penalty of between one and three times the amount of the deposit.

The Smoke and Carbon Monoxide Alarm Regulations 2015

These Regulations impose duties on landlords of properties in the private rented sector in England to install and test battery powered smoke and carbon monoxide alarms.

The Regulations require all residential landlords to ensure that each floor has a smoke alarm fitted (where used wholly or partly as living accommodation). Also they must fit a carbon monoxide alarm in any room which contains any appliance which burns solid fuel. These alarms must be tested and in working order at the commencement of all new tenancies.

These Regulations are enforced by Local Housing Authorities (there are very limited exceptions), and if a landlord does not comply with a “Remediation Notice”, which is official written notice requiring a landlord to rectify the breaches within a given period of time., then they will face a fine.

Conclusion

In recent years, and as illustrated in this article, the private rented sector has become increasingly regulated. It is fundamentally important that landlords are aware of all their obligations, and buy to let properties are correctly managed, with all legal requirements properly adhered to. If not, a buy to let investment property can quickly become unprofitable!

David Haines is a Partner and a Property Disputes Lawyer with a wealth of legal experience in residential property matters. For further information, please contact David on 01483 252586, or by email on david.haines@crsblaw.com.

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