Top 5 things new buy-to-let landlords need to know about


There’s a growing number of people entering the UK property market as new buy-to-let landlords right now. However, it’s also more important than ever to know the latest rules, regulations and best practice in the sector.

The buy-to-let sector has become more ‘professionalised’ in recent years. There’s been a rise in landlords operating their properties through limited companies, as well as those with a portfolio of properties.

The past few months have also seen a rise in the number of people investing in property for the first time. In the current climate, many are taking advantage of an active property market and cheap borrowing costs. Overseas investors are also benefiting from the cheap pound sterling. What’s more, during times of unease and instability, and when savings rates are particularly low, property can be a safe haven as an investment option.

There is a wealth of knowledge available for new buy-to-let landlords. Bodies such as the National Residential Landlords Association (NRLA) and NAEA Propertymark and the British Landlords Association (BLA) are a good place to start. The government and HMRC also offer plenty of resources for those getting started.

However, new research from Direct Line has shown up knowledge gaps in certain areas. The firm’s research covers experienced as well as new property investors. Most good buy-to-let landlords in the sector are keen to get things right from the beginning of the investment journey. Below are some common areas that landlords may need to brush up on in the early days.

1. Tenancy agreements

In Direct Line’s survey, 59% of landlords who said they felt unprepared when they first started letting a property cited drawing up a tenancy agreement as the biggest unknown.

A tenancy agreement is a legal contract between the property owner and the tenant. It can be in the form of a document, or a verbal agreement, which is less common. Tenancies can either be for a fixed term, or periodic which means they run on a week-to-week or month-to-month basis.

Some landlords will use an agent to draw up an agreement for them, while others download a template online and do it themselves. Almost two thirds (65%) of landlords in the survey said they have now improved their knowledge in this area. For more detailed information on tenancy agreements, see the government website.

2. Evictions

This has been a hot topic recently with the ongoing coronavirus pandemic. The government has taken action to protect tenants from eviction, which you can read more about here.

Landlords just starting out said eviction rights were an area where they lacked knowledge (51%). According to Direct Line, almost a quarter (27%) said this was also an ongoing concern for buy-to-let landlords. As rules surrounding eviction continue to change as the country’s situation progresses, it is probably no surprise there is uncertainty around this.

However, more than half (55%) of survey participants said they had grown their knowledge around evictions. Again, there is information and guidance on the rules on the government’s website.

3. Deposits

Almost half of landlords (49%) said they had been unsure about deposits when they started out. A tenancy security deposit affects many things, including your right to evict the tenant.

It is now a legal requirement for landlords or agents to put deposits into an authorised tenancy deposit scheme (TDP) within a certain time frame. Schemes include the Deposit Protection Service, MyDeposits and Tenancy Deposit Scheme.

If tenants meet all the terms of their tenancy agreement, don’t damage the property and pay all their rent and bills, they should get their deposit back at the end of the tenancy. Landlords can make reasonable deductions to cover things like unpaid rent or property damage. Other things like missing items, cleaning costs and changes to the property can also come up. The deposit protection service you use should be able to advise.

4. Property damage

Following on from tenancy deposits, 23% of existing landlords said property damage was an ongoing concern in terms of a lack of knowledge in this area. However, 62% stated that they had enhanced their understanding of dealing with property damage.

One of the biggest areas of confusion is around the difference between wear and tear and unreasonable damage. For example, according to Shelter, “damage” as a result of day-to-day living should not be penalised. This could include a brand new carpet showing signs of use, or window frames peeling in bad weather.

Many property investors and buy-to-let landlords opt to take out landlords insurance. This can cover a wide range of aspects including accidental or deliberate damage to a rental home. For example, it is the property owner’s responsibility to repair damage caused by neighbours. This could include a leak from a neighbouring flat, or damage caused by a neighbour’s building work. The same normally goes for crime-related damage.

5. Getting good yields

For anyone who owns a property that they rent out, yields are important. You can normally calculate this by dividing your annual rental income by the property value and multiplying by 100. For property investors and landlords, working this out can help you make a decision on what to buy.

While this may be an area of uncertainty at the beginning, 61% of landlords said they had improved their knowledge. Rental yield data is available from a number of sources and studies. There are many indices that chart the best and worst locations for yields, such as Totally Money. Landlords can seek professional financial advice in this area, too, or speak to a property investment consultant if they are considering an investment.

A step in the right direction

Some of the knowledge gaps landlords face are “troubling”, says Direct Line’s landlord business manager, Jamie Chaplin. It is hugely important that anyone working in the industry takes steps to improve their knowledge and any compliance issues.

He adds: “But there are signs for optimism. Many landlords are taking steps to improve their knowledge and are learning through experience, evidenced by most saying that they’ve improved their understanding of key issues such as tenant security deposits, tenancy agreements, property damage and getting good rental yields.

“However, something they do need to consider is the importance of protection – which can minimise some of the risks associated with a lack of legal expertise and knowledge.”

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Top 5 things new buy-to-let landlords need to know about


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