The majority of residential landlords own just one or two properties, and they will be pleased to know that, despite the pandemic crisis, demand amongst tenants remains consistent, with properties close to the sea and/or with gardens increasingly sought after.
Whilst rents remain comparable with the same period a year ago, the continuing economic uncertainty means some tenants facing reduced job security are likely to want to renew their existing agreements for longer periods, at a discount, or be forced to move elsewhere.
For landlords, this can present a quandary, although it is worth remembering that costs would be involved in finding new tenants who may be less reliable and have behavioural issues, yet still have rights, making it difficult to evict. So, it may be preferable to avoid risk, making a modest financial sacrifice to retain good tenants, provided mortgage and other costs allow for some profit.
Owners of holiday lets also face a dilemma. Despite easing lockdown, the seasonal boom in hospitality and tourism is suffering, unlikely to recover quickly, leaving them out of pocket. Being vacant without management can make properties vulnerable to vandalism, so owners are exploring whether it is time to sell or to opt for longer lets. Before deciding, it is wise to research local demand and rental values; holiday lets in rural villages, miles from anywhere can be very popular, but less so for people needing access to schools, public transport and work!
Before changing a property’s status from holiday let, decide whether it will be permanent or temporary because the process is quite complex, time consuming, and potentially expensive, demanding tight legal compliance, at variance with much regulation applied to short holiday lets.
In addition to tax implications, mortgage providers and insurers will need to be consulted; employing agents to let and manage a property, find appropriate tenants and checking their legal status will involve fees. Consequently, rental income is unlikely to match holiday let payments, even allowing for the necessary high standards of safety, cleanliness and maintenance in between guests. Owners will also lose the flexibility to allow friends and family to use the property off-peak.
If the choice to adapt is temporary, some landlords are now working with local authorities to provide temporary accommodation, with guaranteed income, leaving officials to handle all the paperwork. However, it is wise to agree a property’s condition at initial handover, with an inventory with photos, to avoid any disputes over quality and finish; contracts should be reviewed by a legal specialist to ensure the terms are appropriate, not imposing additional liabilities on landlords. If parking is included, especially in locations where public parking is expensive and limited, it is vital to ensure that it is governed by the same conditions to avoid its use without consent.
Transferring a property from holiday let to a formal tenancy agreement for longer periods should not be done without careful consideration; reversing the process will be equally complex!
Just Mortgage Brokers is on hand to advise landlords on all the relevant issues, from remortgaging to insurance for both holiday lets and Buy to Let rentals.