What is an accidental landlord?


Not every landlord planned to manage a property. Some homeowners find themselves with no other option but to rent their home because they are struggling to sell it.

The truth is that sometimes circumstances change. A homeowner may decide to move in with a partner. They may need to relocate for work. They may inherit a property from a relative. Or a new baby could render their home completely unsuitable.

It’s impossible to predict the future and there are many reasons why someone suddenly needs to sell a house. But the trouble is, houses aren’t always easy to sell.

Residential properties in the UK are staying on the market for much longer than they did a few years ago. Slower house price growth and weaker demand means selling a property takes time. It has also meant that sellers are having to accept offers nearly £10,000 below the initial asking price in order to sell them.

A survey by YourMove last year revealed that 29% of landlords are accidental landlords. That’s a third of all homeowners letting out a property even though they didn’t set out to do so.

However, more recent research by Hamptons International suggests this figure is falling – the result of changes to tax laws, additional stamp duty on buying a new home, reduced mortgage interest relief against rental income, and the forthcoming increase in capital gains tax when selling.

Top tips for accidental landlords

A row of stone terrace houses

The YourMove research revealed that accidental landlords are more likely to be unhappy about renting out their properties than professional landlords. It also showed accidental landlords found renting a property more stressful than other types of landlords.

If you suddenly find yourself being an accidental landlord, here’s what you need to know to make life as a landlord a bit less nerve-wracking.

1 Inform your mortgage lender

It’s really important you contact your current mortgage provider to let them know the change in circumstances as soon as possible. Failing to do so could result in you being issued a fine and facing mortgage fraud charges.

You mortgage provider has two options:

  1. They could grant you Consent to Let – which allows you to let your property for a maximum of 12 months on your existing mortgage. This is a good option if you think the market could improve and you plan to put the house on the market again.
  2. They may switch your residential mortgage to a buy-to-let mortgage. This is relatively straight-forward and a more long-term solution to the problem. However, you may be offered a lower loan-to-value and have to pay an arrangement fee.

2 You will have to pay income tax

In previous years, landlords have been able to claim tax relief on the mortgage interest they pay on their mortgage repayments (only paying on the profit made). However, this is no longer the case.
Now, landlords must pay tax on their entire rental income and can only claim tax relief at a rate of 20% regardless of their tax band. That means that even if a landlord pays tax on their rental income at 45%, he or she will only be able to claim 20% back as tax relief.

3 You will need landlord insurance

Standard home insurance is not going to cover your rental property so you need to look into landlord insurance. Taking out landlord insurance is not a legal requirement, but it’s worth giving it some serious consideration. Here’s why…

Standard home insurance covers the building and the occupier’s possessions, but landlord insurance will go much further, covering a range of things such as:

  • Missed rental payments
  • Loss of income if the property is left vacant for long periods
  • Legal fees and expenses if disputes with tenants end up in court
  • Home emergency cover if the gas, electricity, heating or water supply is cut off

As a landlord (accidental or otherwise) the different types of landlord insurance include:

  • Landlord building insurance: covering structural damage from fires or floods
  • Landlord contents insurance: if the property is rented as furnished, this covers the cost of replacing or repairing furniture, carpets, kitchenware or electrical items
  • Landlord liability insurance: offers cover if a tenant or visitor is injured while in the property

A large detached town house in a village
4 Stick to your obligations as a landlord

As a landlord, there are certain legal obligations you’ll need to follow. These include:

·        Right to rent: As per the Immigration Act 2014, landlords are legally required to check tenants have a legal right to rent in the UK. This means checking they have the right documents and that they are aged 18 and over.

·        Tenancy deposit: All tenants’ deposits must be kept in a government-backed tenancy deposit scheme. You have a choice of MyDeposits, Tenancy Deposit Scheme and Deposit Protection Service.

·        Energy regulations: All newly-let rental properties must have an energy performance certificate (EPC) rating of at least E. By next year, it will be illegal to let homes with an EPC rating of F or G. EPCs last for ten years; failure to improve energy efficiency in rental properties carries a fine of up to £5,000.

·        Safety checks: Landlords must ensure properties are safe for tenants to live in. This includes getting a registered engineer to carry out a gas safety check, ensuring all furniture is fire resistant and making sure all electrical fittings are safe.

5 Preparing your property for rental

Accidental landlords can find it emotionally challenging letting someone else move into their home so you need to do what you can to prepare.

If you are renting the property as furnished, think about what furniture you are happy to provide. It goes without saying that you should remove anything of value – either financial or sentimental. You don’t want these items damaged and tenants don’t want to live in a property filled with someone else’s belongings.

Make sure you carry out any repairs before renting the property to maximise your chances of finding tenants and getting a good rate of rental income.

If you’ve found yourself becoming a landlord unexpectedly and want to look at your landlord insurance options, get in touch with the team at Insurance Choice.

We help people in the same situation find cover for their rental properties – and can help you find the right cover at a competitive price.