New Landlords Take Unessessary Risks

Thursday, September 17, 2015
New Landlords Don’t Always Understand The Risks They Are Taking

New Landlords Don’t Always Understand The Risks They Are Taking

New Landlords Don’t Understand
The Legal Requirements Of Property Rental

According to new research conducted by a leading UK insurer there has been a huge upsurge in the number of landlords in the UK, however the majority of these new landlords have entered the private rental sector accidentally and many have failed to understand the legal requirements that govern the sector.

Many new landlords found themselves in the position of moving home and then renting out their old property because they couldn’t sell it. This is one of the main driving forces behind the growing new landlord trend, with the research finding that 55% of new landlords ended up renting out their former main residence to tenants because of financial need.

The survey, conducted by LV landlord insurance, found that:

  • 15% of new landlords ended up renting to tenants because they wanted a bigger property,
  • 10% said they found themselves in this situation because they had to move for work,
  • 8% moved on because they wanted a garden
  • 6% of landlords said they were renting out property because they moved in with a partner and did not want to sell or couldn’t sell their own property.

LV estimate that 7% of adults in the UK rent out a property to help supplement their earned income, generating an average rental income of around £678 (GBP) per property, per month.The estimated rental income generated by the UK’s private rental sector equates to almost £28 Billion (GBP) a year, no wonder the Government are so keen to grab as much of it as they can by abolishing tax breaks and introducing additional legislation for the sector. However, many new landlords don’t know how to protect rental income and avoid rental defaults.

Landlords with rental properties in London are obviously charging the highest rents averaging £1,079 (GBP) per month, closely followed by landlords with rental properties in the South East who charge an average rent of £816 (GBP).

PRS rental prices in other UK regions are a little more realistic – £678 (GBP) per month in the West Midlands and £676 (GBP) per month in East Anglia.

With more people attempting to boost their income by letting out properties there are indications that many people think they can save money by doing it themselves without using the services of a professional letting or property management agent, but many new landlords are unaware of the risks they are taking.

What many of these new landlords fail to realise is that they must comply with Government legislation that regulates the private rented sector and applies to all rental properties.

UK legislation states all UK private rental sector landlords must ensure that gas and electrical equipment is installed and checked annually by a registered engineer. Tenant deposits must be held in one of the three Government approved deposit protection schemes and some local authorities require all landlords operating within their borough to be licensed.

Professional letting and property management agents can take the worry out of compliance with current legislation for their landlord clients, charging fees to ensure that all legislation is complied with as well as sourcing and referencing tenants and managing property repairs, the collection of rent and dealing with any number of issues that may arise.

Almost half of new landlords choose to manage their rental property themselves, often without bothering to ensure that they have the correct type of insurance for their properties, with many still believing that they are covered by standard residential property insurance rather than the correct landlord insurance.

19% of the new landlords surveyed did not have appropriate insurance in place, which means that they would not be covered in the event of making a claim. Landlord insurance for rental property is very different to owner-occupied home insurance and which does not cover properties that are tenanted.

32% of landlords surveyed said they had suffered rental property damage at some point, with average repair costs of around £1,200 (GBP).

The survey suggested that the main reasons for rental property damage are:

  • 44% – damage caused by tenants
  • 17% – damage caused by flooding
  • 8%  – storm damage

LV discovered that 27% of new landlords, who entered the UK private rental sector accidentally, and who are self managing their rental properties, have not had even conducted a gas safety check in the past twelve months, risking their tenant’s health and safety, prosecution and fines of up to £20,000 (GBP).

New landlords don't understand the risksA high proportion of new landlords fail to understand that they are leaving themselves exposed to prosecution on many levels.

If tenants suffer an injury in rented property and it is due to a failing by the property owner then the landlords could find themselves hit with severe financial penalties and even imprisonment.

Landlords can also be liable for damage caused to adjacent properties, such as an overflowing gutter causing water damage to a neighbouring house, so it is really important to have the correct landlord insurance in place.

Data analysis by LV found that the number of liability claims being made against rental property owners has increased steadily over recent years.

Property rental is not without risk and in order to mitigate such risks, landlords need to comply with all legal requirements, have the correct landlord insurance in place and have rent protection insurance in place as well as taking all the appropriate steps to safeguard their property assets.

This was written by Mike Clarke. Posted on at 10:30 am. Filed under Insurance. Tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , . Bookmark the permalink. Follow comments here with the RSS feed. Both comments and trackbacks are currently closed.