A predicted double dip slump in the UK housing market would result in a tidal wave of reluctant landlords, potentially affecting almost half of the nation's homeowners, as they seek a financially viable means to hold onto their homes, according to research by
MORE TH>N BUSINESS,
Ten per cent of British homeowners - equivalent to 1.75 million properties - say that, in the event of another housing market slump, they would have no other choice but to let their property and downsize.
A further 34 per cent say it is something they would be forced to consider. The threat is most real in London, where 14 per cent of homeowners say they would have no choice but to let their property and downsize. Another 42 per cent say it is something they would consider.
The primary reasons that would-be reluctant landlords cite are to hold onto their property until the market recovers (44 per cent), long-term financial security (33 per cent), to pay off existing debts (27 per cent) and to escape negative equity (20 per cent).
In addition to showing a potential transformation in the landscape of the UK's housing market,
MORE TH>N BUSINESS says its research also reveals just how unprepared reluctant landlords are for the challenges and responsibilities they face.
Of all UK homeowners 78 per cent say they do not have sufficient knowledge about the legal responsibilities of a landlord and 74 per cent do not understand landlord
insurance. A further 48 per cent said they would be fearful about being caught out by red tape or the small print of tenancy laws.
Of the existing reluctant landlords who have already been through the process, just 15 per cent felt it had been completely successful, with the following problems experienced:
• Unprepared for rules, regulations and red tape 46 per cent
• Failed to secure anticipated rent for property 23 per cent
• Property damaged by tenants 22 per cent
"With three-quarters of homeowners not having adequate knowledge of the legal responsibilities involved in being a landlord, we would urge people to carefully plan their actions and not to make any rushed decisions,” said Mike Bowman, Head of
MORE TH>N BUSINESS comments.
“There are numerous potential pitfalls when it comes to letting a property - it's not as simple as finding a tenant and sitting back waiting for the rent to come in.
“A sudden upsurge in rental properties on the market would actually force down rental yields so you may not get the income you anticipated. In addition, first time landlords must be prepared for every eventuality regarding their liabilities and responsibilities.
“That includes making sure your property is safe - from having smoke alarms fitted to compulsory annual checks on gas appliances. One of the key things is to look at your insurance and if it will cover your needs as a landlord.
“Remember, if a tenant burns down your house, it's your problem, not theirs."
To help homeowners who find themselves in the position of being a landlord for the first time, MORE TH>N Business has put together a list of things to think about:
• Certification: Landlords must make sure that electrical installations are safe. Gas appliances must also be checked annually
• Energy Performance Certificates (EPCs): All landlords are now required to provide EPCs to tenants, these will provide information on how energy efficient your property is
• Fire regulations: Landlords must make sure that their property complies with fire safety standards, including fire alarms, exits and extinguishers
• Tenants: You should run various checks on each of your tenants, including credit and reference, so that you know they are of sound character and will be able to pay the rent
• Tenant contracts. You should get a contract in place with tenants: An assured shorthold tenancy agreement is the most common
• Tenants rights: After you have found appropriate tenants you should take the time to familiarise yourself with their rights regarding the property. For instance, you cannot enter the property without their permission
• Deposits: Landlords must put tenant deposits in a tenancy deposit protection scheme to hold the money
• Insurance: Personal home insurance policies won't cover your new needs as a landlord, so make sure you get a landlord policy that, as well as covering your building, will also protect you from liability risks that can arise.
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