Category: Energy & Utilities

What Is Landlord Boiler Cover?

What Is Landlord Boiler Cover?

If you’re a landlord and wondering whether you need landlord boiler cover, or if it’s even worth it, we’re here to help make up your mind. Taking out landlord boiler cover is essential to make sure your tenants stay warm and cosy and avoid those unexpected boiler breakdowns. Boiler cover, also known as gas boiler cover or boiler breakdown cover, is a type of insurance that protects your boiler if it were to breakdown or encounter a fault. If something was to go wrong with the boiler, the boiler cover will help cover the costs of engineer call outs and labour, as well as an annual boiler service, which is vital to keep the manufacturer warranty valid and the boiler in full working order.

Do I need landlord boiler cover? Is landlord boiler cover worth it?

As a landlord, it’ll be your responsibility to cover the costs associated with a broken or faulty boiler, as well as arranging for an engineer to sort the issue. Your tenants won’t be able to take out boiler cover themselves or arrange the repair themselves, which is why cover is also important in your absence. With your permission and with cover in place, the tenant may be able to arrange an engineer call out or repair if the boiler was to break down in your absence. If you already have landlord home insurance, you may have boiler cover in place as part of your buildings and contents insurance.

Most modern boilers will come bundled with a manufacturer warranty of up to 10 years depending on the installer. If you’ve chosen an installer that’s approved by the manufacturer, you’re more likely to have your boiler protected by an extended warranty. If you’re looking to install a Vaillant or Worcester Bosch boiler, keep a lookout for Vaillant Advanced and Worcester Accredited Installers to take full advantage of an extended warranty. If the boiler is older than 15 years, you may have to pay more for cover as it’s more likely that the boiler will break down due to its age. Some cover products will also have specific terms around whether they can cover you if the boiler has already broken down.

At this point, you’re probably wondering, what’s the point in landlord boiler cover if I have a manufacturer warranty? Your boiler’s manufacturer warranty shouldn’t be the only thing you rely on if your boiler was to run into a fault or break down. The warranty is only there to cover you if your boiler fails or breaks down within a certain number of years. However, if the fault or breakdown is caused by physical damage or limescale, this may void your warranty. It’s important to double check your manufacturer warranty to double check what is actually covered.

Landlord boiler cover takes the stress out of boiler breakdowns and repairs. You’ll avoid having to pay a large sum of money to repair your boiler, as well as a regular annual service scheduled to keep your manufacturer warranty valid. With the cover you’ll also get access to a helpline, unlimited call outs, and the added bonus of repairs to the boiler’s controls should they develop a fault. With cover, it’s always best to double check you’re getting the best deal possible.

What’s the difference between homeowner boiler cover and landlord boiler cover?

Boiler cover for a homeowner will usually include repairs for both your boiler and controls, an annual boiler service, and several call outs included in the monthly price. The main difference with landlord boiler cover is that you’ll get a Landlord Gas Safety Record, which is a legal document that shows that you have had your gas appliances checked annually.

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CP12’s & Gas Safety Regulations

CP12’s & Gas Safety Regulations

What are your landlord responsibilities for gas safety?

The Gas Safety (Installation and Use) Regulations 1998 outline your duties as a landlord to make sure all gas appliances, fittings, chimneys and flues are safe and working efficiently. If you’re letting a property with gas appliances installed, you’ve got three main legal responsibilities:

1. Gas safety checks

To ensure your tenants’ safety, all gas appliances and flues need to undergo an annual gas safety check – and always by a Gas Safe registered engineer. Once this has been done, you’ll be given a Landlord Gas Safety Record or Gas Safety certificate with details of all the checks that were carried out. It can also be referred to as a CP12 certificate.

You can arrange for a gas safety check to be carried out any time from 10-12 months after the last check, without affecting the original check expiry date. If it’s less than 10 or more than 12 months after the last check, you’ll end up with a new deadline date – 12 months from the most recent check.

Appliances owned by your tenants aren’t your responsibility – although it’s still up to you to ensure the safety of any connecting flues, unless they’re solely connected to the tenants’ appliance.

2. Gas Safety Record

Following the annual gas safety check and receipt of your Landlord Gas Safety Record, you’ll need to provide a record of this check to your tenants. By law, a copy of your Landlord Gas Safety Record should be given to your current tenants within 28 days of the gas safety check – and for new tenants, you’ll need to provide this at the start of their tenancy.

For rental periods of less than 28 days, just make sure you’ve clearly displayed a copy of your record within the property. You’ll need to keep copies of this gas safety check record until a further two checks have been carried out..

3. Maintenance

You’ll need to make sure that all gas pipework, appliances, chimneys and flues are kept in safe condition. Check the gas appliances’ manufacturer guidelines to find out how often a service is recommended. If you haven’t got access to these, we’d recommend an annual service – unless your Gas Safe registered engineer suggests otherwise.

Installation pipework isn’t covered by the annual gas safety check, but both we and the HSE recommend that when you request a safety check, you ask your Gas Safe registered engineer to:

  • Test for tightness on the whole gas system, including installation pipework
  • Visually examine the pipework (so far as is reasonably practicable)

There are no formal requirements for you to keep maintenance records, but you’ll need to be able to show that you have regularly maintained the pipework, appliances and flues and completed required repairs.

How much does a Landlord Gas Safety check cost?

The cost of your Landlord Gas Safety check will depend on the Gas Safe registered business who carries out your annual gas safety check. We recommend getting at least three quotes from companies before arranging for the check to be carried out. You can find a registered business in your local area on our Check The Register page. 

Additional information

It’s always a good idea to ensure your tenants know where and how to turn the gas off and what to do in the event of a gas emergency.

In Scotland, a private landlord must provide a carbon monoxide (CO) detector where there is fixed combustion appliance, but this does not apply to appliances solely used for cooking.  In Northern Ireland, a CO detector is required when a new or replacement combustion appliance is installed.

Last but not least, make sure it’s always a Gas Safe registered and qualified engineer that’s carrying out gas work or a gas safety check. Landlords are legally required to make sure this is the case – and it’s the most important step to ensuring your tenants’ safety.

Any issues?

We understand that some relationships between landlords and tenants can become problematic. The tenancy agreement should allow access for maintenance or safety checks, but if your tenant refuses to grant access you must show you’ve taken all ‘reasonable steps’ to comply with the law. This includes repeating attempts to carry out the checks and writing to the tenant to explaining that safety checks are a legal requirement in place for their own safety. Keep a record of any action you take; you may need this at a later date.

The Gas Safety (Installation and Use) Regulations don’t give powers to ‘force disconnection’ of the gas supply in these circumstances and you may need to seek legal advice.

JULY: Safety Checks On Electrical Appliances Become Mandatory

JULY: Safety Checks On Electrical Appliances Become Mandatory

Landlords are already required to make sure that the wiring and appliances in their properties are safe, but from July it will be a legal requirement for private landlords to have their electrical installations inspected every five years and provide safety certificates to tenants and their local authority.

The regulations will apply to all new tenancies from 1 July 2020 and existing tenancies from 1 April 2021.  If serious problems are identified, these will have to be remedied quickly. Local authorities will have a duty to take action if landlords do not comply with the requirements and will be able to issue fines if necessary.

APRIL: Domestic private rented property: minimum energy efficiency standard – landlord guidance

APRIL: Domestic private rented property: minimum energy efficiency standard – landlord guidance

Guidance for landlords of domestic private rented property on how to comply with the 2018 ‘Minimum Level of Energy Efficiency’ standard (EPC band E).

This guidance provides information on the main aspects of the regulations. If your particular situation is not covered, we have more detailed guidance including case studies.

Find out if your property is covered by the Regulations

The Domestic Minimum Energy Efficiency Standard (MEES) Regulations set a minimum energy efficiency level for domestic private rented properties.

The Regulations apply to all domestic private rented properties that are:

  • let on specific types of tenancy agreement
  • legally required to have an Energy Performance Certificate (EPC)

Answer these questions to find out whether your property is covered by the Regulations

1. Is your property let on one of the following types of domestic tenancies:

  • an assured tenancy?
  • a regulated tenancy?
  • a domestic agricultural tenancy?

2. Is your property legally required to have an EPC?

If the property you let has been marketed for sale or let, or modified, in the past 10 years then it will probably be legally required to have an EPC.

If you answered Yes to both these questions, and your property has an EPC rating of F or G, you must take appropriate steps to comply with the requirements of the MEES Regulations. We explain how to do this below.

If you answered No to one or both of these questions, your property is not covered by the Regulations, and you don’t need to take action to improve the property rating. You may let it with an EPC rating of F or G.

Find out how to get a rating on your property

Find out more about EPC requirements for homes

When you need to take action to improve your property to EPC E

Since 1 April 2020, landlords can no longer let or continue to let properties covered by the MEES Regulations if they have an EPC rating below E, unless they have a valid exemption in place.

If you are currently planning to let a property with an EPC rating of F or G, you need to improve the property’s rating to E, or register an exemption, before you enter into a new tenancy.

If you are currently letting a property with an EPC rating of F or G, and you haven’t already taken action, you must improve the property’s rating to E immediately, or register an exemption.

If your property is currently empty, and you are not planning to let it, you don’t need to take any action to improve its rating until you decide to let it again.

Funding improvements to your property

The cost cap: you will never be required to spend more than £3,500 (including VAT) on energy efficiency improvements.

If you cannot improve your property to EPC E for £3,500 or less, you should make all the improvements which can be made up to that amount, then register an ‘all improvements made’ exemption.

There are 3 ways to fund the improvements to your property:

Option 1: Third party funding

If you are able to secure third-party funding to cover the full cost of improving your property to EPC E, you can use this and you don’t need to invest your own funding:

  • the cost cap does not apply
  • you should make use of all the funding you secure to get your property to band E, or if possible higher. Funding can include:
  • Energy Company Obligation (ECO)
  • local authority grants
  • Green Deal finance

Find out more about funding opportunities for landlords

Option 2: Combination of third-party funding and self-funding

If you can secure third-party funding but it is:

  • less than £3,500, and
  • not enough to improve your property to EPC E

you may need to top up with your own funds to the value of the cost cap.

Please note

  • you can count any energy efficiency investment made to your property since 1 October 2017 within the cost cap
  • if your property can be improved to E for less than the cost cap, that is all you need to spend

Option 3: Self funding

If you are unable to secure any funding, you need to use your own funds to improve your property. You will never need to spend more than the cost cap.

You do not need to spend up to £3,500 if your property can be improved to EPC E for less. If you can improve your property to E for less than the cap, you will have met your obligation.

If it would cost more than £3,500 to improve your property to E, you should install all recommended measures that can be installed within that amount, then register an exemption.

If you have made any energy efficiency improvements to your property since 1 October 2017, you can include the cost of those improvements within the £3,500 cost cap.

Selecting energy efficiency measures

Your EPC report will include a list of recommendations detailing measures which should improve the energy efficiency of your property. It will include both a short list of top actions you can take, and a more detailed list further down setting out all recommended measures. The recommendations will help you choose which measure or combination of measures to install.

Sample table of recommendations from the EPC report

These measures will improve the energy performance of your dwelling. The performance ratings after improvements listed below are cumulative, that is, they assume the improvements have been installed in the order that they appear in the table.

Recommended measuresIndicative costTypical savings per yearRating after improvement
Room-in-roof insulation£1,500-£2,700£837E39
Internal or external wall insulation£4,000-£14,000£195E45
Solid floor insulation£4,000-£6,000£122E49
Increase hot water cylinder insulation£15-£30£142E54
Draught proofing£80-£120£18D55
Low energy lighting£20£21D56
High heat retention storage heaters / dual immersion cylinder£1,200-£1,800£319D67
Solar water heating£4,000-£6,000£57C69
Replace single glazed windows with low-E double glazed windows£3,300-£6,500£123C73
Solar photovoltaic panels£5,000-£8,000£287B83

The MEES Regulations refer to the concept of ‘relevant energy efficiency improvements’. This is a measure, or package of measures, recommended in your EPC report, which can be purchased and installed for £3,500 or less (including VAT) – the cost cap.

Other types of energy efficiency reports may contain the recommendations list from the EPC report, for example, a Green Deal Advice Report (GDAR), or reports produced by qualified surveyors.

If you have installed all ‘relevant energy efficiency improvements’ for your property, but your property’s EPC rating is still below E, you can register an exemption on the grounds that ‘all relevant improvements have been made and the property remains below an E’.

You are free to install any energy efficiency measure(s), but:

  • if your chosen improvements do not appear in the list of ‘recommended energy efficiency improvements’
  • and they fail to improve your property to EPC E

you will not be able to let the property or register an ‘all relevant improvements made’ exemption. You will then need to make further attempts to improve the rating to a minimum of E, in order to let the property.

Registering an exemption

There are various exemptions that apply to the prohibition on letting a property with an energy efficiency rating below E.

If your property meets the criteria for any of the exemptions, you will be able to let it once you have registered the exemption on the PRS Exemptions Register.

Information required for all exemptions

  • address of the property
  • type of exemption you are registering
  • copy of a valid EPC for the property

‘All relevant improvements made’ exemption

Register this exemption if the property is still below EPC E after improvements have been made up to the cost cap (£3,500 incl VAT), or there are none that can be made.

This exemption lasts 5 years. After that it will expire and you must try again to improve the property’s EPC rating to E. If it is still not possible, you may register a further exemption.

To register this exemption, you need to provide this additional information:

  • if you didn’t rely on your EPC report to select measures appropriate for your property, and instead opted for a report prepared by a surveyor for example, you must provide a copy of that report
  • details, including date of installation, of all recommended improvements you made at the property (unless none were recommended)

‘High cost’ exemption

Register this exemption if no improvement can be made because the cost of installing even the cheapest recommended measure would exceed £3,500 (including VAT).

This exemption lasts 5 years. After that it will expire and you must try again to improve the property’s EPC rating to E. If it is still not possible, you may register a further exemption.

To register this exemption, you need to provide this additional information:

  • 3 quotes from qualified installers for purchasing and installing the cheapest recommended measure, demonstrating that the cost would exceed £3,500 (including VAT)
  • written confirmation that you are satisfied that the measure exceeds £3,500 (including VAT)

Wall insulation exemption

Register this exemption if the only relevant improvements for your property are:

  • cavity wall insulation
  • external wall insulation
  • or internal wall insulation (for external walls)

AND

you have obtained written expert advice showing that these measures would negatively impact the fabric or structure of the property (or the building of which it is part).

This exemption lasts 5 years. After that it will expire and you must try again to improve the property’s EPC rating to E. If it is still not possible, you may register a further exemption.

To register this exemption, you need to provide this additional information:

  • a copy of the written opinion of a relevant expert stating that the property cannot be improved to an EPC E because a recommended wall insulation measure would have a negative impact on the property (or the building of which it is part)

Register this exemption if the relevant improvements for your property need consent from another party, such as a tenant, superior landlord, morgagee, freeholder or planning department, and despite your best efforts that consent cannot be obtained, or is given subject to conditions you could not reasonably comply with.

This exemption lasts:

  • 5 years
  • or, where lack of tenant consent was the issue, until the current tenancy ends or is assigned to a new tenant

In either case, once the exemption comes to an end, you need to try again to improve the EPC rating of the property, or register a further exemption.

To register this exemption, you need to provide this additional information:

  • copies of any correspondence and/or relevant documentation (such as a letter from your tenant, or a planning department decision notification) demonstrating that consent for the recommended measure was required and sought, and that this consent was refused, or was granted subject to a condition that you were not reasonably able to comply with

Property devaluation exemption

Register this exemption if you have evidence showing that making energy efficiency improvements to your property would devalue it by more than 5%. In order to register this exemption you will need a report from an independent surveyor. This surveyor needs:

  • to be on the Royal Institute of Chartered Surveyors (RICS) register of valuers
  • to advise that the installation of the relevant improvement measures would reduce the market value of the property, or the building it forms part of, by more than 5%

This exemption lasts 5 years. After that it will expire and you must try again to improve the property’s EPC rating to E. If it is still not possible, you may register a further exemption.

To register this exemption, you need to provide this additional information:

  • a copy of the report prepared by an independent RICS surveyor that provides evidence that the installation of the recommended measures would devalue to property by more than 5%

Temporary exemption due to recently becoming a landlord

If you have recently become a landlord under certain circumstances (see section 4.1.6 in Chapter 4 of the full Guidance document for details of those circumstances) you will not be expected to take immediate action to improve your property to EPC E. You may claim a 6 months exemption from the date you became a landlord.

This exemption lasts 6 months from the date you became the landlord. After that it will expire and you must have either:

  • improved the property to EPC E
  • or registered another valid exemption, if one applies

To register this exemption, you need to provide this additional information:

  • the date on which you became the landlord for the property
  • the circumstances under which you became the landlord

How to register an exemption

  • create an account
  • enter the address of your property
  • state the type of exemption you want to register
  • upload all the required evidence, including a copy of a valid EPC for the property (the Register can accept pdf, png, jpg, jpeg, doc or docx files, with a maximum size of 4 MB per file)

Exemption data cannot be amended once the data has been submitted. Make sure you have checked everything carefully before submitting.

All exemptions apply from the point you register them.

If you improve an exempt property to E after having registered an exemption (or stop renting the property out) you can cancel the exemption by going to your account ‘dashboard’ page and selecting ‘View or manage my exemptions’.

Register an exemption

Assisted digital to register an exemption

If Assisted Digital support is required to register an exemption please get in touch by email PRSRegisterSupport@beis.gov.uk or call the digital helpline on 0333 234 3422.

The Assisted Digital service provides digital support in lodging an exemption on the register, but it is the responsibility of the landlord to ensure that their property meets the eligibility criteria for an exemption. The service is not able to provide advice on whether individual properties meet the criteria for an exemption.

Members of the public can:

Enforcement and penalties

The MEES Regulations are enforced by local authorities, who have a range of powers to check and ensure compliance.

The Regulations mean that, since 1 April 2018, private landlords may not let domestic properties on new tenancies to new or existing tenants if the Energy Efficiency Certificate (EPC) rating is F or G (unless an exemption applies).

From 1 April 2020 the prohibition on letting F and G properties will extend to all relevant properties, even where there has been no change in tenancy.

If a local authority believes a landlord has failed to fulfil their obligations under the MEES Regulations, they can serve the landlord with a compliance notice. If a breach is confirmed, the landlord may receive a financial penalty.

Non-compliance with the Regulations

Your local authority may check for different forms of non-compliance, including one or more of the following:

  • from 1 April 2018, you let your property in breach of the Regulations
  • from 1 April 2020, you continue to let your property in breach of the Regulations
  • you have registered any false or misleading information on the PRS Exemptions Register

Compliance notices

If a local authority believes a landlord may be in breach, they may serve a compliance notice requesting information to help them decide whether a breach has occurred. They may serve a compliance notice up to 12 months after a suspected breach occurred.

A compliance notice may request information on:

  • the EPC that was valid for the time when the property was let
  • the tenancy agreement used for letting the property
  • information on energy efficiency improvements made
  • any Energy Advice Report in relation to the property
  • any other relevant document

Penalties

If a local authority confirms that a property is (or has been) let in breach of the Regulations, they may serve a financial penalty up to 18 months after the breach and/or publish details of the breach for at least 12 months. Local authorities can decide on the level of the penalty, up to maximum limits set by the Regulations.

The maximum penalties amounts apply per property and per breach of the Regulations. They are:

  • up to £2,000 and/or publication penalty for renting out a non-compliant property for less than 3 months
  • up to £4,000 and/or publication penalty for renting out a non-compliant property for 3 months or more
  • up to £1,000 and/or publication for providing false or misleading information on the PRS Exemptions Register
  • up to £2,000 and/or publication for failure to comply with a compliance notice

The maximum amount you can be fined per property is £5,000 in total.

Right of review and right of appeal

If you do not agree with a penalty notice, you may ask your local authority to review its decision. They can withdraw the penalty notice if:

  • new evidence shows a breach has not occurred
  • a breach has occurred, but evidence shows the landlord took all reasonable steps to avoid the breach
  • they decide that because of the circumstances of the case, it was not appropriate to issue a penalty

If a local authority decides to uphold a penalty notice, a landlord may appeal to the First-tier Tribunal if they think that:

  • the penalty notice was based on an error of fact or an error of law
  • the penalty notice does not comply with a requirement imposed by the Regulations
  • it was inappropriate to serve a penalty notice on you in the particular circumstances

Full compliance and enforcement process

The Local Authority (LA) checks if a property is in breach of Regulations where:

a. from 1 April 2018 it as been privately let to new or existing tenant; or
b. from 1 April 2020 it is privately let; or
c. the landlord registered an exemption and provided false or misleading information

If the property appears to be in breach of the Regulations, the LA may serve compliance notice on the landlord requesting further information.

If the property is in compliance, no further action will be taken.

If satisfied that the landlord is in breach of the Regulations, the Local Authority may serve a penalty notice on the landlord and publish details of the breach:

a. either the landlord accepts the penalty notice and pays the penalty
b. or if the landlord disagrees with the notice, they can request a review of the penalty notice decision.

The LA reviews the decision:

a. either they find in the landlord’s favour and the penalty is quashed
b. or they uphold the penalty notice

If the penalty notice is upheld, the landlord can appeal the decision to the First-tier Tribunal which will review the decision:

a. either the Tribunal finds in the landlord’s favour and the penalty is quashed
b. or the Tribunal rejects the landlord’s appeal, and the penalty is affirmed

The landlord then:

a. either pays the penalty
b. or does not pay the penalty, in which case the enforcement authority may take debt recovery action

More detail and examples

To find the full detail and case studies, read:

Legal disclaimer

Please note that BEIS cannot provide legal advice or a definitive interpretation of the law, as this is a matter for the courts. If you have questions that aren’t covered here, you will need to seek independent legal advice.

Setting long-term energy performance standards

Government has committed to look at a long term trajectory to improve the energy performance standards of privately rented homes in England and Wales, with the aim for as many of them as possible to be upgraded to EPC Band C by 2030, where practical, cost-effective and affordable.

TLA Landlord Survey Q2, 2020 (TLALS)

TLA Landlord Survey Q2, 2020 (TLALS)

Introduction and main findings

  1. The 2019-20 TLA Landlord Survey (TLALS) is a survey of landlords and letting agents who own and/or manage privately rented properties in England.
  2. The aim of the TLALS is to provide understanding of the characteristics and experiences of landlords and how they acquire, let, manage and maintain privately rented accommodation.
  3. Since 2010, the private rented sector has undergone substantial growth and change. The number of households in the sector rose by 25% between 2010-11 and 2018-19, from 3.6 million to 5.5 million households.
  4. The private rented sector is now the second largest tenure in England, and is home to over a fifth of all households.
  5. The private rented sector is characterised by diversity, containing a wide range of different sub-markets, serving a wide range of different types of households across all incomes, including an increasing number of families.
  6. In 2019, 46% of households in the private rented sector included dependent children (2.6 million households, up from 1.1 million in 2010-11).
  7. There are high rates of turnover in the private rented sector, with the number of house moves significantly higher than in the owner occupied and social rented sectors, both within the sector and between it and the other sectors.
  8. Since 2010, there have also been a number of policy changes affecting private landlords. These include tax changes for Buy to Let landlords, changes to the Stamp Duty Land Tax, tightening lending criteria on Buy to Let mortgages and the growing role of the Build to Rent sector.

These changes were made as part of the government’s wider efforts to make the housing market work for everyone and to ensure the housing market delivers the homes the nation needs.

The survey involved agents who let and / or manage property on behalf of landlords. For brevity, the term ‘agent’ is used throughout the report to describe agents who let and / or manage properties.

This report provides an overview of the private landlord population in England.

The first chapter covers the characteristics of landlords, why and how they became a landlord and how they view their current role.

We also include an overview of private rented dwellings and the households living in them, including the types and location of rented homes and the types of tenants. It also explores how landlords and agents set rents and the circumstances around how tenancies end.

Our survey examines landlord and agent attitudes, including the willingness of landlords and agents to let to different types of tenants and views on longer tenancies. It also presents findings on landlord and agent compliance with current legal requirements.

Other chapters provide evidence regarding the likely future of the private rented sector by setting out findings about landlords’ stated future plans, attitudes towards landlord insurance, boiler care issues and other landlord trends and habits – both past, present and in the future.

Full details of the survey sampling, weighting and reporting conventions are in the technical notes at the end of this report.

Briefly, the TLALS is an online survey of almost 8,000 landlord members of The Landlord Association and 550 lettings agents – all of whom are registered with The Landlord Association or partnering without profit or monetary gain.

All statistics were gathered between December 13th 2019 – January 22nd 2020 and reflect results for the period between January 20th 2019 to December 1st 2019.

Main Findings

These correspond to an estimated 1.8 million landlords operating in the private, residential property rental sector.

Most landlords operate as private individuals rather than as part of a company or organisation.

94% of landlords rent property as an individual, 4% as part of a company and 2% as part of some other organisation.

While almost half of landlords own just one property, half of private rented sector tenancies are let by the 17% of landlords with five or more properties.

45% of landlords have just one rental property. This represents 21% of the private rented sector.

A further 38% own between two and four properties (representing 31% of the sector). The remaining 17% of landlords own five or more properties, representing 48% of the private rented sector.

Ignoring the methodological differences, since 2010, the proportion of landlords with just one property has declined from 78% to 45% or from 40% to 21% of the sector. Meanwhile, the proportion of landlords with five or more properties increased from 5% to 17% or from 39% to 48% of the sector.

Landlords are, on average, older and less ethnically diverse than the general population. Most have been landlords for some time.

Over half (59%) of landlords are aged 55 years or older. Not surprisingly, given the older age profile, a third (33%) of landlords are retired. The majority (89%) of landlords are White.

70% of landlords have let property for 6 years or more. The average (mean) length of time that landlords had let property was 11.5 years.

Landlords most commonly reported that they had become landlords because property was preferable to other investments and/or to contribute to their pension.

46% of landlords became a landlord because they preferred property to other investments; 44% did so to contribute to their pension. Only 4% became a landlord to let property as a full-time business.

Although 53% of landlords bought their first rental property with the intention of renting it out, 32% did so to live in themselves.

Landlords who had been letting for longer were more likely to have used a mortgage to fund their first rental property and more likely to currently use a Buy to Let mortgage compared to more recent landlords.

Almost two thirds (63%) of those who had been a landlord for three years or less had used a mortgage to fund their first rental property compared to three quarters of those who had been a landlord for longer (73% of those who had been a landlord for between four and 10 years, and 75% of those a landlord for 11 or more years).

About half (49%) of those who had been a landlord for three years or less had a Buy to Let mortgage to fund their current property/ies.

This increased to 58% of those who had been letting for between four and 10 years, and 54% for those letting for 11 or more years.

Landlords, on average, report a gross rental income of £15,000 per year (before tax and other deductions). For most landlords income from rent makes up two fifths (42%) of their total gross income.

The average (median) gross rental income (before tax and other deductions) is £15,000. Three in five (61%) landlords had gross rental income of less than £20,000, while a further quarter (26%) reported between £20,000 and £49,999.

Thirteen percent reported a gross rental income of £50,000 or more.

Using their annual reported gross income (before tax and other deductions and excluding rental income) and their gross rental income, it was calculated that landlords received 42% of their total gross income from rental property.

Over the next two years, half of landlords plan to keep the number of rental properties the same, with similar proportions planning to increase the number of properties as those planning to decrease or leave the rental business.

53% of landlords planned to keep their number of rental properties the same, with 11% planning to increase the number of properties they own. This compared with 10% of landlords who planned to reduce the number of properties (representing 18% of tenancies) and 5% planning to sell all their rental property and leave the
rental business (representing 5% of tenancies).

Letting practices vary between landlords and agents. For example, agents are more likely than landlords to increase rent for a new tenant and for a tenancy renewal. They are also more likely to require a larger deposit.

50% of agents increased the rent for their last letting to a new tenant compared to 42% of landlords. For their most recent tenancy renewal 70% of landlords kept the rent the same compared to 63% of agents. A third (31%) of agents increased the rent for existing tenants, compared to 22% of landlords.

For their last letting, 61% of agents took a deposit of more than four and up to six weeks’ rent (45% of landlords took a deposit of this size). Almost half (47%) of landlords took a deposit of up four weeks’ rent (compared with 29% of agents).

Meanwhile, landlords are less willing than agents to let to certain groups, including those in receipt of Housing Benefit and Universal Credit, non-UK passport holders and families.

52% of landlords and 37% of agents reported that they would be unwilling to let to tenants in receipt of Housing Benefit. Similar proportions reported that they would be unwilling to let to anyone on Universal Credit (47% and 33% respectively).

The most commonly reported reasons for not letting to this group included the risk of delay in payment or unpaid rent and the risk that benefits would not cover the rent.

A quarter (25%) of landlords and 10% of agents are unwilling to let to non-UK passport holders. Reasons for this were not explored.

18% of landlords and 6% of agents are unwilling to let to families.

Most often this was because their property or properties were unsuitable for families and also because of the greater risk of damage to the property.

Landlords were asked how many rental properties they own in England.

  • In 2019, 45% owned one rental property, representing 21% of tenancies.
  • A further 38% owned between two and four rental properties, representing 31% of tenancies.
  • The remaining 17% of landlords owned five or more properties, representing almost half (48%) of tenancies,
  • The portfolios of individual landlords were considerably smaller than those of companies and organisations.
  • Most individual landlords (85%) owned between one and four properties, with just under half (47%) owning only one
    rental property.
  • The remaining 15% of individual landlords owned five or more
    properties.
  • By comparison, 46% of companies owned between one and four properties, with only 10% owning one rental property.
  • Just over half (54%) owned five or more rental properties, including 14% who owned 25 or more
  • Landlords with a Buy to Let mortgage were more likely than landlords with another kind of loan, or with no debt or borrowing, to own multiple rental properties.
  • About a third (37%) of landlords with a Buy to Let mortgage owned one property, with two thirds (63%) owning two or more properties.
  • Of landlords with another kind of loan, the proportion with one property alone increased to half (51%), while half (49%) owned two or more properties.
  • Among landlords with no debt or borrowing to fund their rental property, more than half (55%) owned one property and less than half (45%) owned two or more properties
  • Landlords who had been letting for longer tended to have larger portfolios. Of landlords with 11 or more years’ experience, 70% had two or more properties, compared with 48% of those who had been letting for four to 10 years and
    22% of those who had been a landlord for three years or less
  • Between 2010 and 2019, there has been a significant decrease in the proportion of landlords with just one property, from 78% to 45%. This decrease may in part be a function of the different methodology, e.g. such landlords may have longstanding tenants.

Ending a Tenancy and Tenant Eviction

  • Three quarters of landlords and agents were willing to offer longer tenancies of more than 12 months.
  • 40% were willing to offer longer tenancies.
  • An additional 38% of landlords and agents were willing to if there was a break clause in place to enable tenants and landlords to break the contract if required.
  • Landlords and agents who reported a tenancy ending within the last two years were asked why this tenancy (or these tenancies) had ended. The findings are reported for both landlords and agents together because agents are likely
    to be responding on behalf of a number of landlords that they represent and it is not appropriate to compare the responses of the two groups.
  • The most common reason, selected by half (50%) of landlords and agents, was that it was the end of the tenancy and the tenant decided not to renew. A quarter (25%) of landlords and agents reported that tenancies ended because the tenant moved out before the end of the tenancy
  • Other reasons for tenancies ending included the landlord or agent asking the tenant to leave (3%), the landlord or agent evicting the tenant (15%)

Eviction Numbers Increasing

Where landlords and agents reported that they had chosen to end a tenancy in the last two years either by asking the tenant to leave, not renewing a tenancy or evicting a tenant, they were asked to select the reasons for this

  • The most common reason for landlords and agents to end tenancies, selected by over half (58%) of landlords and agents, was that the tenant was in arrears.
  • Less than half (45%) of landlords and agents chose to end a tenancy because the property was not cared for.
  • Other reasons for ending the tenancy included to refurbish the property and relet it (18%), to sell the property (10%) and that the tenant had too many complaints about the property (13%)

Landlords and agents were asked what would encourage them to offer longer tenancies.

  • They most commonly reported that they would if it was easier to remove problem tenants (70%).

In most cases, landlords and agents report that it is the tenant’s choice to end a tenancy.

  • 50% of landlords and agents reported that, in the last two years, they had ended at least one tenancy because the tenancy ended and the tenant did not want to renew.
  • A quarter (25%) ended because the tenant had moved out before the tenancy had ended.
  • Meanwhile, 7% of landlords and agents asked the tenant to
    leave, 7% evicted the tenant and 4% decided not to renew.
  • The most common reasons for evicting, asking a tenant to leave or not renewing a tenancy were due to rent arrears (58%) or due to the tenant not caring for the property (45%).
  • In relation to the last tenancy that ended, 60% of landlords and 54% of agents returned the full deposit to the tenant. A quarter (24%) of landlords and 30% of agents returned some of the deposit.
  • Landlords and agents did not return the deposit (either in part or at all) due to damage to the property or contents (65% of landlords and 60% of agents) and to clean the property for the next tenant (65% of landlords and 65% of agents).

Profile of private landlords

This chapter presents findings on the types and characteristics of landlords, their finances, their motivations for becoming a landlord and their perceived role as a landlord. These questions were asked only of landlords and so this chapter does not include agents

Landlord types

  • Landlords were asked how they currently let their property. The majority (94%) let property as an ‘individual or a group of individuals’, with 4% ‘as part of a company’ and the remaining 2% as part of some ‘other’ organisation. (For track, The Landlord Association is not represented as an ‘other’ organisation. We are exempt from the options to avoid confusion when sumissing landlords as individuals when also part of a collective entity)

Landlord population by landlord type

  • Most (83%) tenancies were represented by individual landlords, with companies representing 13% and other organisations 4%,
  • In 2010, 89% of all landlords in England were private individuals, with 5% company landlords and 6% other organisation landlords.
  • Individual landlords represented 71% of all private rented dwellings, with companies representing 15% and other organisations 14%
  • Landlords were asked how many rental properties they own in England. In 2018, 45% owned one rental property, representing 21% of tenancies.
  • A further 38% owned between two and four rental properties, representing 31% of tenancies.
  • The remaining 17% of landlords owned five or more properties, representing almost half (48%) of tenancies
  • The portfolios of individual landlords were considerably smaller than those of companies and organisations. Most individual landlords (85%) owned between one and four properties, with just under half (47%) owning only one
    rental property. The remaining 15% of individual landlords owned five or more properties. By comparison, 46% of companies owned between one and four properties, with only 10% owning one rental property. Just over half (54%)
    owned five or more rental properties, including 14% who owned 25 or more,
  • Landlords with a Buy to Let mortgage were more likely than landlords with another kind of loan, or with no debt or borrowing, to own multiple rental properties. About a third (37%) of landlords with a Buy to Let mortgage owned one property, with two thirds (63%) owning two or more properties. Of landlords with another kind of loan, the proportion with one property alone increased to half (51%), while half (49%) owned two or more properties. Among landlords with no debt or borrowing to fund their rental property, more than half (55%) owned one property and less than half (45%) owned two or more properties
  • Landlords who had been letting for longer tended to have larger portfolios. Of landlords with 11 or more years’ experience, 70% had two or more properties, compared with 48% of those who had been letting for four to 10 years and 22% of those who had been a landlord for three years or less
  • Between 2010 and 2018, there has been a significant decrease in the proportion of landlords with just one property, from 78% to 45%. This decrease may in part be a function of the different methodology, e.g. such landlords may have longstanding tenants for whom they have not taken a
    deposit.

Age, ethnicity and time spent as a landlord

  • Individual landlords were asked questions about their personal characteristics and landlord journey
  • Landlords were, on average (median), 57 years old. This is older than the general population. At the time of the 2011 Census, the median age for the population of England and Wales was 39 years.
  • Over half (59%) of landlords were aged 55 or older, representing 62% of tenancies
  • In 2010, 70% of landlords had been landlords for 10 years or less, representing 48% of tenancies. The difference between 2018 and 2010 suggests that the average length of experience as a landlord has increased since then, but this could reflect changes in methodology

Financing & Buy to Let Mortgages

  • Compared with longer standing landlords, recent landlords were more likely to have bought their first rental property to live in themselves and less likely to have bought it with the intention of letting it. Over a third (37%) of landlords that had been a landlord for three years or less bought their first property to live in themselves, compared with 28% of those who had been a landlord for 11 or more years. On the other hand, half (49%) of those who had been a landlord for three years or less bought their first rental property with the intention of letting it out, compared to two thirds (58%) of those who had been a landlord for 11 or more years
  • Landlords who had bought or built their first rental property were asked about the sources of funding for this purchase or build. Almost three quarters (72%) reported using a mortgage, 37% used personal savings and 8% used an inheritance
  • Recent landlords were less likely to have used a mortgage to fund their first rental property, compared to longer standing landlords. Almost two thirds (63%) of those who had been a landlord for three years or less had used a mortgage. In comparison, around three quarters of those who had been a landlord for longer had used a mortgage (73% of those who had been a landlord between four and 10 years, and 75% of those a landlord for 11 or more years),
  • In 2018, 29% of landlords were employed full-time and 11% part-time. A third (33%) of landlords were retired. Less than a fifth (16%) of landlords were selfemployed (not as landlord), with a further 13% self-employed as a landlord
  • Over half of tenancies were represented either by landlords who were retired (28%) or those self-employed as a landlord (30%)

Property values and borrowing

  • Landlords were asked the approximate value of their total rental property portfolio. The average (median) total market value of landlord rental portfolios was £400,000. Nearly a quarter (23%) of landlords had portfolios they valued at less than £200,000. A further 36% had portfolios they valued from
    £200,000 to £499,999. Nearly a quarter (22%) had a portfolio they valued from £500,000 to £999,999, with the remaining 18% having rental property portfolios valued at £1 million or more
  • The longer the time spent letting, the more likely landlords were to have a higher value portfolio. Of those who had been a landlord for three years or less, only 15% had a portfolio valued at more than £500,000. This rose to 32% of those who had been letting for between four and 10 years and to over
    half (54%) of those letting for more than 10 years
  • The average (mean) estimated value per rental property for all landlords was £261,900 with the average house value £243,000
  • Landlords who reported using borrowing or loans to fund their rental property were also asked the approximate value of such borrowing. The average (median) value of loans or borrowing was £180,000. One in three (29%) landlords using borrowing had loans of less than £100,000, with a further 38% having loans of between £100,000 and £300,000. The remaining third (33%) had loans of £300,000 or more
  • The longer a landlord had been letting the higher the value of their loans or borrowing. Only 3% of landlords who had been letting for three years or less had borrowing of £500,000 or more. This rose to 12% for those who had been letting for between four to 10 years and to 27% for those who had been letting for more than 10 years
  • The median equity or net value of landlord rental portfolios was £220,000, calculated from the median value of landlord rental portfolios minus median value of loans or borrowing.
  • For those who had existing loans or borrowing, the loan to value ratio of the borrowing was calculated using the landlord’s estimate of their portfolio’s market value. The median loan to value ratio for these landlords was 50%.
  • Over a third (34%) of landlords with debt or borrowing on their rental properties had a loan to value ratio of 39% or less, with another third (32%) one of 40 to 59%. A quarter (25%) had a loan to value ratio of between 60 to 79%, with a further 9% having a loan to value ratio of 80% or more. Of these
    landlords, 4% had an estimated loan to value ratio of 100% or more,

Portfolio loan to value ratios for landlords with debt

  • Landlords were asked which, if any, types of loans or borrowing they currently have to fund their rental property. Over half (55%) of landlords had a Buy to Let mortgage, representing 61% of tenancies. More than a third (39%) of landlords had no debt or borrowing, representing 30% of tenancies. Smaller proportions had a commercial loan (4%) or a loan from family or friends (3%),

Extent and type of borrowing for funding of rental property

  • Landlords who had been letting for longer were more likely to have a Buy to Let mortgage. Of landlords who had been a landlord for three or less years, almost half (49%) had a Buy to Let mortgage. This increased to 58% of those who had been letting for between four and 10 years, and 54% for those letting for 11 or more years
  • Of recent landlords (three years or less), 43% had no loans or borrowing to fund their rental property, compared to 34% for those who had been a landlord for between four and 10 years and 42% for those landlords who had been letting for more than 10 years

Type of rental property currently let or managed by landlords and agents

  • Landlords with larger portfolios are more likely to be letting a wider range of property types. As such, the proportion of landlords with each property type increased with portfolio size
  • For instance, the most common type of property for landlords with portfolios of all sizes were terraced houses. A third (32%) of landlords with one property had a terraced house, while half (48%) of those with between two and four properties had at least one, as did 70% of those with five or more properties in their portfolio. However, the distribution of types of properties was similar for landlords with different sized portfolios

Gas and Boiler Issues in let property

  • Landlords reported a rise (10%) from 2018 in boiler repairs with 12% of property requiring a repair on a gas boiler within their let properties during 2019. Furthermore, an increase of 2% from 2018-19 required a replacement gas boiler (6%)

Types of Gas Boiler by replacement type

  • Types of gas boilers by replacement type
    • Combi – 44%
    • Regular – 40%
    • System – 16%

By regional breakdown

  • The most boiler repairs were needed in London with 6.08% of boilers estimated to have broken down during this period. This was closely followed by the West Midlands at 6.04% and the North East at 5.59%.
  • Boilers are least likely to break down in Yorkshire with 4.27%, Scotland at 4.38% and the North West at 4.79%.
  • These results, at an average of 5.1% nationally, suggests 30,000+ boiler repairs were undertaken on property within portlofios managed by landlords under the guidance of The Landlord Association

Landlord Insurance

  • up 12% on 2018, 79% of landlords reported having landlord insurance cover for their properties, by type popularity
    • Buildings Insurance
    • Contents Insurance
    • Boiler Care Cover
    • Public Liability Insurance
    • Landlord Emergency Cover
    • Rent Guarantee Insurance
    • Unoccupied Property
  • A further 18% of all landlords indicated that they were either thinking of or actively seeking to insure their properties currently uninsured, up 7% on the previous year
  • Landlords with a single property were less likely to have a insurance policy (68%) than those with a portfolio of two properties or more (87%)

Boiler Cover Insurance

22% of landlords indicated that they have boiler care cover (up 12% on 2018) suggesting that over 130,000 property are insured with some kind of cover to protect their boilers for repair and replacement

of those without boiler care cover, 15% suggested they were either thinking of getting cover or were actively seeking to get cover (90,000 properties).

Of the reasons given for not having boiler cover (1) Not enough time (2) too expensive (3) not important (4) Did not renew previous policy (5) portfolio cover options minimal (6) No gas in property (18%).

© TLA copyright, 2020. 

This survey may be republished in part or full without permission. If you require any further information regarding the collation of this survey or indeed any of the information and statistics included please email dean@landlordexpert.co.uk.

This document/publication is also available on our website at www.landlordexpert.co.uk. All rights reserved by The Landlord Association.

Thousands of renters could be evicted in June. Will the government protect them?

When the lockdown ends what will happen to tenants? Almost nine million households, more than a third of all families in Britain, rent from a private landlord, a council or a housing association.

Because of coronavirus, many are now in financial need. Nearly two million claims for universal credit have been made since lockdown measures were announced in the UK. Welfare claimants are entitled to payments equivalent to housing benefit. But, as a result of changes made to benefits over the last decade (like the bedroom tax and restrictions to local housing allowance), it is increasingly rare for housing benefit to pay all of a tenant’s rent.

Others, although ineligible for universal credit, are also in difficulty: because they have received a redundancy cheque that will soon be spent, or their self-employed grant hasn’t arrived yet. Then there are furloughed workers, paid now, but waiting for news of redundancies from their employer.

Right now, all possession hearings – the main step in evicting a tenant – are “stayed”. This is the legal equivalent of putting food in a freezer. The cases are still there, ready to be thawed out at any moment.

Where a tenant is behind with their rent, landlords can issue them with a notice instructing them to leave, but (for the moment) the tenant can ignore it. On 25 June the housing courts will reopen for business. Judges will have to determine thousands of stayed pre-coronavirus cases, and the even greater number of new claims for possession arising from the lockdown.

Ministers have grasped that hundreds of thousands of homes are at risk. Earlier this week the housing minister, Robert Jenrick, announced that the government was working closely with judges to draft a “pre-action protocol” for when the stay is lifted.

He told MPs that the protocol will “enable tenants to have an added degree of protection, because instead of embarking upon the eviction proceedings immediately, there will be a duty upon their landlords to reach out to them, discuss their situation, and try to find an affordable repayment plan”.

The problem with the protocol is that it is toothless – essentially depending on the benevolence of landlords.

The two most common ways landlords seek possession are under “section 21” and “ground 8”. Section 21 provides that where a landlord has complied with certain procedural requirements (like issuing a notice using the correct form and waiting for a prescribed time before applying to court) the court must order possession.

The statute does not require a landlord to have complied with the government’s proposed pre-action protocol. For that reason, even where landlords have rushed to issue proceedings, and have ignored requests from tenants to defer payments for a short time, judges will be required to approve evictions.

Ground 8 provides that where a tenant is in rent arrears (eight weeks if the rent is due weekly), both when the landlord serves a notice on them and when the hearing takes place, the court must order possession.

Again, the court takes no account of the landlord’s conduct; it focuses simply on the amount of the tenant’s arrears. In these circumstances, if the new protocol is as the minister describes it, it will not protect tenants at all.

There are alternatives. In last year’s general election, the Conservatives committed to abolish section 21 as part of their “better deal for renters”. The government reaffirmed that commitment in the Queen’s speech, announcing a renters’ reform bill to include the abolition of section 21. They should be held to that promise. As for ground 8, it too needs to be abolished. Or, if that is impossible, rescinded for such time until tenants have had a chance to reduce their debts once they’re able to go back to work.

Abolishing or rescinding ground 8 would not prevent landlords relying on other grounds of possession. But, without it in place, judges will be free to order possession only if reasonable – thereby giving effect to the tenant defences the government says that it wants in place. One further advantage of abolishing ground 8 is that courts can turn to other possession proceedings in which possession orders are made but suspended, while tenants are given the chance to repay arrears to a realistic plan.

Muddling on without the abolition of section 21 and ground 8 will lead to millions of people forced out of their homes. It will send those evicted scattering – some to stay with elderly relatives, some into local authority housing (although it is at breaking point) and many into homelessness.

The government accepts that street homelessness speeds the transmission of coronavirus: this is the grim calculation that underpins the government’s granting of resources to councils to house rough sleepers. Drifting into a future where huge numbers of people lose their homes needlessly would be just as dangerous – for those who are evicted, and for everyone else.

 David Renton is a housing barrister at Garden Court Chambers

Tenants Unaware They Can Switch Energy Suppliers

A study by Migrate discovered as many as one in 10 renters had been banned from changing provider, despite the fact doing so could save them as much as £300 a year.

Now the auto-switching service is reminding tenants, if they are responsible for their utility bill and pay their energy supplier directly they have the right to switch provider, regardless of whether their landlord has a ‘preferred supplier’.

Migrate said its survey uncovered a number of misunderstandings from private tenants over their energy bills and has estimated tenants could be overpaying for their gas and electricity by a collective £511 million each year.

George Chalmers, CEO of Migrate, said renters were far more likely to remain with the same provider than homeowners.

He added: “No matter what type of tenant you are, if your name is on the energy bill and you pay for your energy directly from a supplier, the likelihood is you have the right to switch your energy supplier and should be doing so regularly to ensure you’re not overpaying.

“Not switching is costing renters as much as £511 million pounds a year. However, migrating energy supplier is easy to do, and with an auto-switching service, you’ll only need to sign up once to receive regular savings of around £316 on average.”

Top five reasons private tenants are not switching (source: Migrate)

  • Too busy (58%)
  • Didn’t think they were allowed to switch (53%)
  • Don’t know how to switch (42%)
  • Feel switching isn’t worth the effort (14%)
  • Explicitly told by landlord/letting agent that they were not allowed to switch (13%)

TLA Mortgages & Finance Guide

When you buy a property as an investment, you won’t be able to fund your purchase with a normal residential mortgage. Instead, you’ll need a specialist buy-to-let mortgage. The good news is that there are lots of deals out there, whether you’re a first-time landlord, an ‘accidental’ landlord, or an experienced investor. The bad news, however, is that the rules around buy-to-let mortgages can be a bit of a minefield. In this guide, you can learn the basics of how buy-to-let mortgages work and get to grips with how lenders will calculate your affordability.

How do buy-to-let mortgages work?

The vast majority of buy-to-let mortgages are provided on an interest-only basis. This means that, for each month of the mortgage term, you’ll only pay the interest on the loan, and none of the capital. While this can be good news in the short term as your outgoings will be less each month, it’s imperative that you have a plan in place to either pay off the full loan or refinance at the end of your mortgage term.

How much deposit do I need for a buy-to-let mortgage?

To get a mortgage on an investment property, you’ll usually need a deposit of at least 20-25% of the value of the home. And, as with standard residential mortgages, the bigger the deposit you put down, the better the rate you’ll be able to get. The best buy-to-let deals are usually only available to investors with deposits of 40% and above. When assessing your affordability, lenders will consider your current portfolio (more on this later) and any previous history of obtaining and paying off buy-to-let finance. Buy-to-let mortgage rates and fees Buy-to-let mortgage rates have remained steady recently after some considerable drops in recent years. In September 2019, the average fixed-rate buy-to-let mortgage had an interest rate of 3.15%, down from 4.26% five years earlier, according to data from Moneyfacts. Variable-rate deals followed a similar pattern, with rates dropping from 4.04% to 3.1% between 2014 and 2019.

Mortgage rates for buy-to-let companies

Cuts to mortgage interest tax relief and wear and tear allowance have resulted in some landlords setting up company structures for their buy-to-let portfolios. Company buy-to-let mortgages make up a relatively small percentage of the market, but they are on the rise – in fact the number of company mortgages on the market tripled from 80 to 235 between 2016 and 2018, resulting in more than 250 deals being available to investors. But moving to a company structure isn’t the best move for everyone, as the interest rates on these deals tend to be significantly higher than those available to individual borrowers. Which? research in spring 2019 found that the initial rate on an equivalent fixed-rate mortgage was around 1% higher for companies. Find out more: discover how your profits could be affected by changes to mortgage interest tax relief.

How to compare buy-to-let mortgages

While headline rates can be attractive, it’s especially important to look beyond the initial rate when choosing a buy-to-let mortgage. That’s because these products have traditionally come with higher up-front fees than traditional mortgages. If you take out one of the market-leading deals, you might need to pay as much as £2,000 up front, and while some lenders are beginning to offer cashback incentives and reduced fees, these offers make up a relatively small proportion of the buy-to-let market.

Affordability rules for landlords

There are plenty of enticing mortgage offers out there for landlords, but you’ll need to prepare yourself for strict affordability tests. That’s because in recent years, the Bank of England (BoE) has looked to cool what it considered to be an overheating buy-to-let market by imposing tougher lending restrictions.

Interest cover ratios on buy-to-let mortgages

As part of their affordability assessments, lenders use interest cover ratios (ICRs) to calculate how much profit a landlord is likely to make. A lender’s ICR is the ratio to which a property’s rental income must cover the landlord’s mortgage payments, tested at a representative interest rate (most banks currently use 5.5%). Lenders are required to test at 125%, meaning the projected rental income must be at least 125% of the landlord’s mortgage payments, but many impose higher levels of around 145%.

Mortgages for portfolio landlords

Professional landlords with four or more properties are often described as ‘portfolio landlords’. This is an important distinction, as rules introduced by the BoE’s Prudential Regulation Authority in October 2017 made it harder for these investors to access additional finance.

Portfolio landlord stress-testing

Previously, portfolio landlords could provide their overall profit/loss figures when applying to borrow more money or remortgage a home in their portfolio, but this has now changed. Instead, you’ll now need to show mortgage details, cash flow projections and business models for every property you own when applying for finance. If you have a heavily mortgaged portfolio, you may find that these regulations make it more difficult for you to obtain extra funds.

Maximum portfolio size and ICR increases

Portfolio landlords also face some other restrictions, which are set from lender to lender. For example, some lenders will set a maximum number of properties you’re allowed to have in your portfolio (up to 10 being the most common) and others use different ICRs and representative interest rates depending on how many properties you have. Other rules imposed by individual lenders include limits on maximum loan-to-value (LTV) ratios across a portfolio (for example, your overall portfolio must be at 65% LTV or lower) or the stipulation that the ICR from every property in your portfolio must be above 100%.

‘Top slicing’

With landlords struggling to get finance, some banks have begun to adopt a more holistic approach to lending by introducing a system known as ‘top slicing’. Top slicing takes into account a landlord’s personal income away from their portfolio – such as a salary or pension – and includes it in affordability assessments. This means that if you have significant earnings away from property, you could theoretically use your personal income to bridge any shortfall when you’re assessed by lenders. Only a handful of lenders currently adopt this approach, so if you think top slicing could benefit you, it’s best to discuss this with a mortgage broker.

Remortgaging for landlords

A raft of taxation changes – including cuts to mortgage interest tax relief and the 3% stamp duty surcharge for property investors – has resulted in many landlords deciding to refinance their portfolios rather than adding to them. Indeed, data released by UK Finance in September 2019 showed that the number of landlords remortgaging had increased by 2% year-on-year. One trend in the remortgaging market is lenders are cutting up-front fees to entice landlords.

Accidental landlords: switching to a buy-to-let mortgage

Not everyone who becomes a landlord necessarily sets out to do so. For example, you might have inherited a property, or a change in your circumstances may have resulted in you moving back to the rented sector and choosing to let out your home. Regardless of how you’ve become a landlord, it’s vital that you tell your mortgage lender if you’re going to let out a home that has an outstanding owner-occupier mortgage. Buy-to-let properties carry greater risks for lenders, so if you don’t tell your bank you could theoretically be invalidating your mortgage. Some lenders will grant you a ‘consent to let’ on your current deal, while others may insist on you switching to a buy-to-let mortgage.

 

TLA: Choosing The Best Energy Supplier For Your Rental Property

TLA: Choosing The Best Energy Supplier For Your Rental Property

If, like many tenants, your rental package is not bills inclusive, it will fall upon you to pick your own energy supplier. But how can you go about picking the best one, with the best value for money and the biggest impact on lowering your carbon footprint?

Below, we outline some top tips on the key things you need to be considering when choosing an energy supplier…

Use comparison sites to shop around

For better or worse, the adverts for these sites are now ingrained in our collective consciousness, but they do actually have a use – particularly when it comes to comparing things like the best energy deals on the market.

Picking the right gas and electricity deal could save you considerable amounts of money each year (hundreds of pounds off your energy bills, in many cases), so it’s worth doing your research and shopping around for the best possible package before you commit yourself to a particular provider.

Sites such as Compare The Market and moneysupermarket.com allow you to compare fuel tariffs, while Which? Switch and uSwitch also allow you to compare a range of tariffs in your area.

Which tariff should you choose?

There are a number of things you should bear in mind when choosing your energy supplier. Do you want a fixed, variable or green energy deal? Do you want to combine your gas and electricity in a dual fuel package?

Do you want to be on a ‘time of use’ deal, which lowers rates for your electricity in off-peak hours – usually between midnight and 7am? If you use most of your energy during these hours, time of use is something you may want to consider. In most cases peak energy use will be outside these hours, but for some it might represent the right deal.

Meanwhile, in a similar way to mortgages, a fixed energy deal is often cheaper and more secure than a variable one – with prices fixed for the length of the contract, or fixed at different rates, at separate stages of the contract.

However, on a fixed deal, if energy rates go down, your rate will not be reduced. What’s more, while fixed deals are often the cheapest, they don’t tend to offer much flexibility in terms of switching. If you choose to change deals more than 42 days before the end of your contract, you are liable to pay a fee to do so.

A greener approach – Visit Our Green partners, WorldofRenewables.com

With the growth in renewable energy and greater awareness about climate change, many consumers are keen to take a greener approach to many aspects of life. This includes energy deals, where green energy tariffs are an option. These tariffs use more renewable energy than standard gas or electricity deals.

This could cost you more than other tariffs, but there are certain green suppliers – including OVO Energy, Green Network Energy, Green Star Energy and Ecotricity – who offer cheaper green energy deals.

With BP recently suggesting that renewable energy will be the world’s main power source by 2040, greener energy is likely to be more popular than ever in the coming years and is something you may want consider now to help the environment and, in many cases, secure lower bills.

Check out our Going Green section on the homepage.

Switching tariffs or providers

If you’re already on one tariff, and want to switch to a cheaper one to save money on your energy bills, you can ask your supplier to move you to a cheaper tariff. Or, alternatively, you can switch to a totally new provider.

Switching can save you money and can also allow you to source a more energy efficient tariff and enable you to switch more easily at a future juncture.

Assuming you are not in debt to your current supplier, you can switch by phone or online. You can use the sites mentioned above to search for deals by postcode and compare tariffs, inputting your energy usage to ensure you get the most accurate results possible.

If you have a smart meter, information on your energy usage will be provided – or you could simply look at your latest bill.

Once you’ve found the right deal, you can confirm your switch by providing your new supplier with full bank and address details. It should take around three weeks for the switch to take place, and you may have to pay a small cancellation fee (typically £25 to £30 for each service) to your existing supplier, especially if you’re on a fixed deal.

The Big Six – who are they?

When the topic of energy suppliers in the UK is raised, you’ll often hear about the Big Six – the companies responsible for providing approximately 95% of the country’s energy. But who are these firms?

  • British Gas
  • npower
  • ScottishPower
  • SSE
  • EDF Energy
  • E.ON UK

While these companies provide the vast majority of UK homes with gas and electricity, there are a whole host of smaller suppliers on the market who may offer better deals, including local and green providers.

Often, these smaller companies have higher levels of customer satisfaction as they can offer a more personal service.

What’s more, fears about issues being caused by a small supplier going out of business suddenly are misguided, with energy regulator Ofgem recently introducing measures to protect consumers from losing their energy supply if a small supplier goes bust.

Despite the possible benefits of switching suppliers, many are put off by the time, cost and hassle they perceive to be involved. As a result, less than half of the UK’s population has ever switched their energy supplier, even with regular calls from MPs for people to browse around for better deals.

Paying for your energy

In some cases, people opt for a prepayment tariff, whereby you top up your energy using a prepayment meter. This means you pay for your energy in advance and swerve the prospect of monthly and quarterly bills, offering more flexibility and an effective pay as you go approach to energy.

While this ensures you are more likely to only pay for the energy you need, a prepayment meter typically makes gas and electricity more expensive.

If you don’t have a prepayment meter, you can pay your energy bill on a quarterly basis (by cheque, direct debit or BACS transfer), or via a monthly direct debit. The latter option is very often the cheapest, with most suppliers providing discounts for those paying by direct debit.

One other option is to make regular payments via a credit or debit card, which can be done weekly, every two weeks or every month.

Splitting the bill

If you are part of a house share or living in a student property with your friends while at university, you will want to find a way of splitting the bills you owe fairly and easily.

Sites such as Glide simplify bills for students by combining all utilities into an equal monthly split for each tenant, reducing the possibility of disagreements over who owes what and who paid what when. It also means chasing housemates for money becomes less of an issue.

However you do it, you should decide on a system and stick to it. If one or two people use much more energy than others, they may be willing to contribute more to the monthly energy costs. Work things out fairly and remain consistent with this thereafter.

As you can see, there is quite a lot to get your head around when it comes to choosing the right energy supplier for your rental property. But there is plenty of help out there to help you pick the right package and provider, and you may want to seek advice from your landlord, friends or parents on which energy supplier they would recommend.

Remember, too, switching isn’t as hard as you probably think it is, so it’s worth regularly reviewing your energy package to ensure you’re getting the best possible deal.

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