Buy to Let Conveyancing

Buy to let conveyancing refers to the legal process of transferring ownership of a property that is being purchased with the intention of renting it out. In addition to the standard conveyancing

checks, there are a few additional checks that are required for a buy to let property during the conveyancing process. These checks are important to ensure that you are making a sound investment and that there are no legal or financial issues with the property which is why when choosing a solicitor for your buy to let conveyancing, it’s essential to choose a firm that specialises in this type of conveyancing.

HOW CAN BRETHERTON LAW HELP?

Our experienced team of specialist buy to let conveyancing solicitors offer their services for a fixed fee and offer an exemplary level of client care throughout the conveyancing process.

WHY BRETHERTON LAW?

• Fixed fee quotes with no hidden costs
• Same day response promise
• An experienced, friendly and accessible team
• Lexcel and Conveyancing Quality Scheme Accreditation
• Talk to real people. No AI or automated call answering technology.

For a friendly initial chat and a fixed fee quote please use the contact form or call 01727 869 293.

The Buy to Let Conveyancing Process

In addition to the standard conveyancing process, there are a few additional checks that are required for a buy to let property purchase. These checks are important to ensure that you are making a sound investment and that there are no legal or financial issues with the property. Here are some of the additional checks that your buy to let conveyancing solicitor will consider:

1. Tenancy Agreement: It is important to review the existing tenancy agreement, if there is one, to understand the terms and conditions of the tenancy. This will help you determine if there are any restrictions or obligations that you need to be aware of as the new landlord.
2. Rental Income: You should also verify the rental income that the property is generating or is likely to generate. This can be done by reviewing the rental history and any existing rental agreements. It is important to ensure that the rental income is sufficient to cover your mortgage payments and other expenses.
3. Compliance with Regulations: As a landlord, you have certain legal obligations to meet. You should check if the property complies with all the relevant regulations, such as gas safety, electrical safety, and fire safety regulations. It is also important to check if the property has the necessary permissions and licenses, such as an HMO license if applicable.

Houses with Multiple Occupation (HMO) and the HMO Licence

An HMO license, also known as a House in Multiple Occupation license, is required for certain types of rental properties. HMOs are properties where three or more unrelated individuals share common facilities, such as a kitchen or bathroom. The purpose of an HMO license is to ensure that the property meets certain safety and management standards to protect the tenants.

To obtain an HMO license, the landlord must apply to the local council and meet specific criteria. The requirements for an HMO license can vary depending on the location and local authority, but they typically include:

1. Minimum room sizes: There may be minimum size requirements for bedrooms in an HMO to ensure that tenants have adequate living space.
2. Fire safety measures: HMOs must have appropriate fire safety measures in place, such as fire doors, fire alarms, and fire extinguishers.
3. Amenities and facilities: HMOs must have sufficient amenities and facilities for the number of occupants, including kitchen and bathroom facilities.
4. Management standards: Landlords must demonstrate that they are capable of managing the HMO effectively, including dealing with repairs and maintenance, managing tenancy agreements, and responding to tenant complaints.
5. Planning permission: In some areas, landlords may need to obtain planning permission to use a property as an HMO.

Please note that the specific requirements for an HMO license may vary depending on the location. It is important to check with the local council or a buy to let conveyancing solicitor for the specific requirements in your area.

Additional Checks When the Property is Leasehold

When purchasing a buy to let property, there are several checks that need to be made to the lease agreement.

1. Length of Lease: Check the length of the lease and ensure that it is long enough to make the investment worthwhile. A shorter lease may limit your ability to generate rental income or sell the property in the future. Some lenders will not loan against leases with a shorter term.
2. Ground Rent and Service Charges: Review the terms of the lease regarding ground rent and service charges. Understand the amount and frequency of these charges and ensure they are reasonable and affordable.
3. Restrictions and Covenants: Check for any restrictions or covenants in the lease that may affect your ability to rent out the property. Some leases may have clauses that restrict subletting or require permission from the landlord or management company.
4. Lease Renewal and Extension: If you are buying a lease with a short term consider the provisions for lease renewal and extension. Understand the process, costs, and timeline involved in renewing or extending the lease when it approaches expiration.
5. Maintenance and Repairs: Review the lease to understand your responsibilities as a landlord regarding maintenance and repairs. Clarify who is responsible for specific repairs and ensure that the lease does not impose unreasonable obligations on you.
6. Alterations and Improvements: Check if the lease allows for alterations or improvements to the property. Some leases may require permission from the landlord or management company before making any changes.

Financing A Buy to Let Property via a Mortgage

If you are purchasing a buy to let property via finance it’s important to know that buy to let lenders can impose restrictions on rental agreements. Some common restrictions include:

1. Minimum Rental Income: Lenders often have specific requirements regarding the rental income generated by the property. They may require the rental income to be a certain percentage higher than the mortgage payment to ensure that the borrower can cover the mortgage costs.
2. Tenancy Agreements: Lenders may have restrictions on the type of tenancy agreements that are acceptable. For example, they may require a minimum length of the tenancy agreement or restrict certain types of tenancy agreements, such as short-term or holiday rentals. They can sometimes specify restrictions on who the property can be rented to, for example they may restrict tenancies to close family members or DSS tenants.
3. Rental Income Source: Lenders may require that the rental income comes from a specific source, such as long-term residential tenants. They may not accept rental income from commercial tenants or short-term rentals like Airbnb.
4. Rental Income Assessment: Lenders may assess the rental income based on their own criteria. They may use rental valuation reports or rental income calculations to determine the maximum loan amount they are willing to offer.
5. Property Management: Some lenders may require that the property is managed by a professional property management company. This ensures that the property is well-maintained and reduces the risk of rental income loss.
6. Portfolio Size Limitations: Lenders may impose limits on the number of buy to let properties that a borrower can have in their portfolio. This is to manage the borrower’s exposure to risk and ensure that they can manage their properties effectively.

It is important to note that the specific restrictions can vary between different buy to let lenders. During the buy to let conveyancing process your solicitor will scrutinise the lender’s agreement and make you aware of any onerous clauses that will impact on your role as Landlord.

Purchasing a Buy to Let Property Via an SPV (Special Vehicle Company)

A Special Purpose Vehicle (SPV) is a legal entity that is created for a specific purpose, such as purchasing and managing a buy-to-let property. When purchasing a buy-to-let property via an SPV, the property is owned by the SPV rather than an individual.

There are several reasons why investors choose to purchase buy to let properties via an SPV:

1. Limited Liability: By using an SPV, investors can limit their personal liability. If any legal or financial issues arise with the property, the liability is limited to the assets of the SPV rather than the personal assets of the investor.
2. Tax Efficiency: Using an SPV can provide tax advantages for investors. The rental income generated by the property can be taxed at the corporate tax rate, which is often lower than the individual tax rate. Additionally, expenses related to the property can be deducted from the rental income, reducing the taxable profit.
3. Financing Options: Some lenders may offer more favourable financing options for properties owned by an SPV. This can include lower interest rates or higher loan-to-value ratios.
4. Flexibility: Using an SPV allows investors to easily manage multiple properties within a single entity. This can simplify accounting, reporting, and administration processes.

It is important to note that purchasing a buy to let property via an SPV may have specific legal and financial considerations. It is recommended to consult with a buy to let solicitor and tax advisor who specialises in buy to let properties and SPVs to ensure compliance with regulations and to maximise the benefits of using an SPV.

Stamp Duty and Buy to Let Property

When purchasing a buy to let property, you may be subject to Stamp Duty Land Tax (SDLT). SDLT is a tax that is payable on properties in England and Northern Ireland. The amount of SDLT you will need to pay depends on the purchase price of the property.

For buy to let properties, the SDLT rates are higher compared to residential properties. The current rates for buy to let properties can be found on Gov.UK.

Capital Gains Tax and Buy to Let Property

Capital Gains Tax (CGT) is a tax that is payable on the profit made from selling or disposing of an asset, including a buy to let property. When you sell a buy to let property, you may be liable to pay CGT on the difference between the original purchase price and the selling price, minus any allowable expenses and deductions. More information about current rates and exemptions including Private Residence Relief (PRR) can be found on Gov.UK. When selling a buy to let property we advise that you seek independent financial advice from a suitably qualified professional accountant or tax advisor.

GET IN TOUCH

Whether you are a first-time property investor or seasoned landlord with a portfolio of properties, we can guide you through the buy to let conveyancing process.

We are based in the centre of St Albans City. Our buy to let solicitors provide residential conveyancing services across the UK and our team can help you with your property transaction with a level of client care not offered by many conveyancing firms. Over the last 50 years we have built an enviable reputation – but don’t just take our word for it, take a look at what our clients say about us in our testimonials.

Please get in touch for a fixed fee conveyancing quote via the contact form or call us on 01727 869 293. (If you telephone us your call will be answered by a real person no recorded voice saying press this and that number).