If you’re considering becoming a landlord, these are the pros and cons of buy-to-let properties that you’ll need to know.

Buy-to-let properties have become a cornerstone for landlords looking to diversify their portfolios in the United Kingdom.

The allure of a steady rental income, coupled with the potential for long-term capital appreciation, makes buy-to-let properties an enticing choice. However, the path from contemplating such an investment to reaping its benefits involves a complex legal process that necessitates careful navigation.

In this blog post, we will delve into the legal intricacies associated with purchasing buy-to-let properties in the UK, exploring both the advantages and challenges that landlords may encounter.

The pros of buy-to-let properties in the UK

  1. Steady rental income: A primary appeal of buy-to-let properties is the potential for a consistent rental income stream. Landlords can enjoy regular cash flow, helping offset mortgage payments and other property-related expenses.
  2. Property appreciation: Over time, buy-to-let properties in the UK have shown the potential for capital appreciation. As the property market fluctuates, landlords may benefit from an increase in the value of their investment, providing a lucrative exit strategy.
  3. Portfolio diversification: Diversifying one’s investment portfolio is essential for risk management. Buy-to-let properties offer landlords the opportunity to spread their investments across different asset classes, reducing the impact of a downturn in any single market.
  4. Tax benefits: The UK tax system provides various advantages for landlords. Deductions for mortgage interest, maintenance costs, and other related expenses can contribute to a more favourable tax position.
  5. Inflation hedge: Real estate is often considered a hedge against inflation. Property values tend to rise with inflation, providing landlords with a safeguard against the eroding effects of rising prices on their wealth.

The cons of buy-to-let properties in the UK

  1. Market volatility: While property values can appreciate, they are also susceptible to market fluctuations. Economic downturns can lead to a decline in property prices, potentially affecting the overall return on investment for landlords.
  2. Property management challenges: Being a landlord entails responsibilities beyond the initial purchase. Managing tenants, addressing maintenance issues, and staying compliant with UK regulations can be time-consuming and demanding, especially for those with multiple properties.
  3. Economic downturn risks: Economic uncertainties can impact tenants’ ability to pay rent. In times of recession, job losses and financial instability may lead to an increased risk of rental arrears, placing additional strain on landlords.
  4. Interest rate fluctuations: Buy-to-let mortgages are subject to interest rate fluctuations. A rise in interest rates can significantly impact the profitability of an investment, potentially reducing rental yields and increasing mortgage expenses.
  5. Legislative changes and regulations in the UK: The legal landscape surrounding buy-to-let properties is subject to frequent changes. New regulations, tax laws, and licensing requirements can pose challenges for landlords, necessitating ongoing diligence to stay compliant.

The legal process of purchasing buy-to-let properties in the UK

Financing and mortgage approval:

  1. Credit assessment: Before entering the buy-to-let market, landlords must undergo a rigorous credit assessment. Lenders will evaluate the applicant’s creditworthiness and financial stability to determine eligibility for a mortgage.
  2. Deposit requirements: Lenders in the UK typically require a higher deposit for buy-to-let mortgages compared to residential mortgages. Landlords should be prepared to provide a substantial upfront deposit to secure financing.
  3. Mortgage options: Various mortgage products tailored for buy-to-let investments are available in the UK. Landlords should carefully compare interest rates, terms, and conditions to choose a mortgage that aligns with their financial goals.

Property search and due diligence:

  1. Location analysis: Choosing the right location is crucial for buy-to-let success. Landlords should research market trends, assess demand for rental properties, and consider factors such as proximity to amenities, transportation, and schools.
  2. Property inspection: Conducting a thorough property inspection is essential to identify potential issues that may affect the investment. This includes assessing the property’s condition, checking for necessary repairs, and estimating maintenance costs.
  3. Legal checks: Engaging a qualified conveyancer or solicitor is crucial for navigating the legal aspects of the purchase. Legal professionals will conduct searches to uncover any legal issues, such as outstanding debts, restrictions, or disputes affecting the property.

Offer and negotiation:

  1. Making an offer: Once a suitable property is identified, landlords can make an offer. Negotiation skills come into play here, as landlords seek to strike a deal that aligns with their budget and investment objectives.
  2. Sales agreement: Upon reaching an agreement with the seller, a sales agreement is drafted. This legally binding document outlines the terms and conditions of the sale, including the sale price, completion date, and any specific conditions.

Survey and valuation:

  • Property valuation: Lenders in the UK typically require a professional property valuation to assess the market value of the investment. This valuation helps determine the mortgage amount and ensures that the property’s value aligns with the purchase price.
  • Structural survey: While a valuation provides an overview, a structural survey offers a more in-depth examination of the property’s condition. This can uncover hidden issues that may impact the property’s long-term viability and value.

Legal conveyancing process:

  1. Appointment of legal professionals: Landlords should appoint a conveyancer or solicitor to handle the legal aspects of the transaction. These professionals will conduct title searches, review contracts, and ensure that the property has a clear legal title.
  2. Local authority searches: Conveyancers will perform local authority searches to uncover any planning or development issues, restrictions, or outstanding enforcement notices that may affect the property.
  3. Exchange of contracts: Once all legal checks are completed satisfactorily, the buyer and seller exchange contracts, committing both parties to the sale. At this point, the buyer typically pays a deposit, usually around 5-10% of the purchase price.
  4. Completion and transfer of ownership: On the agreed-upon completion date, the remaining funds are transferred, and ownership of the property is officially transferred to the buyer. The buyer is now the legal owner of the buy-to-let property.

Tax implications and compliance:

  1. Stamp duty: Landlords in the UK should be aware of stamp duty, a tax levied on property transactions. The rates vary based on factors such as the property’s value, location, and whether it is a second property.
  2. Income tax: Rental income is subject to income tax in the UK. Landlords can deduct allowable expenses, such as mortgage interest, property management fees, and maintenance costs, from their rental income before calculating tax.
  3. Capital gains tax: If landlords sell the buy-to-let property at a profit, they may be liable for capital gains tax. Understanding the tax implications of a sale is essential for effective financial planning.

Conclusion

In many cases, the relative pros and cons of buy-to-let properties will come down to the individual needs of each landlord. Buy-to-let properties can be a lucrative investment for landlords seeking to build wealth through rental income and property appreciation.

However, the journey from property selection to ownership involves a multifaceted legal process that demands careful consideration. Landlords must navigate the UK-specific regulations, tax implications, and market dynamics to make informed decisions and ensure the success of their buy-to-let investments.

 

Answering the most frequently asked questions about mortgages and buying a home.

The prospect of buying a house is an exciting yet daunting venture, especially when it comes to understanding the intricate details of mortgages and the UK housing market.

In this comprehensive guide, we will address some of the most frequently asked questions to empower potential homebuyers with the knowledge they need to make informed decisions.

1. How much can I borrow?

Determining how much you can borrow is a crucial first step in obtaining a mortgage and buying a home process. Lenders typically use a multiple of your annual income to calculate the maximum amount they are willing to lend. This multiple can vary but is often around 4-5 times your income.

Additionally, lenders assess your affordability by considering your monthly expenses, existing debts, and other financial commitments. The goal is to ensure that your mortgage repayments are manageable and won’t strain your finances.

To get a rough estimate of how much you might be able to borrow, you can use online mortgage calculators. These tools take into account your income, expenses, and other financial details to provide an approximate borrowing amount. However, keep in mind that the final decision rests with the lender, who will conduct a more thorough assessment.

2. When will interest rates change?

Interest rates play a pivotal role in the affordability of your mortgage. In the UK, interest rates are set by the Bank of England, and they can fluctuate based on various economic factors. While it’s challenging to predict the exact timing of interest rate changes, staying informed about economic indicators and central bank announcements can provide some insight.

Fixed-rate and variable-rate mortgages are the two main types of mortgages in the UK. A fixed-rate mortgage offers stability by locking in your interest rate for a specific period, usually two to five years. This shields you from fluctuations in the broader economic environment during that time. On the other hand, variable-rate mortgages can be influenced by changes in the Bank of England’s base rate.

It’s advisable to keep an eye on financial news, as well as to consult with financial experts, to stay informed about potential interest rate changes. When rates are expected to rise, those considering a mortgage may opt for a fixed-rate mortgage to secure a predictable monthly repayment.

3. How can I get a mortgage?

Getting a mortgage involves several steps, and the process can vary among lenders. Here’s a general overview of the key stages:

Assess your finances

Before approaching a lender, evaluate your financial situation. Check your credit score, gather information on your income and expenses, and review your credit report for any discrepancies.

Save for a deposit

Most lenders require a deposit, typically ranging from 5% to 20% of the property’s value. The larger the deposit, the more favourable your mortgage terms may be.

Shop around for lenders

Different lenders offer different mortgage products with varying interest rates and terms. It’s essential to compare options and find a mortgage that suits your needs.

Get a mortgage agreement in principle

This is a preliminary decision from a lender indicating how much they might be willing to lend you. Having this agreement in principle can strengthen your position when making an offer on a property.

Choose a mortgage type

Decide whether a fixed-rate, variable-rate, or another type of mortgage suits your preferences and financial situation.

Complete a mortgage application

Once you’ve chosen a lender and a mortgage product, you’ll need to complete a formal mortgage application. This involves providing detailed information about your finances, employment, and the property you intend to buy.

Property valuation and survey

The lender will conduct a valuation of the property to ensure it’s worth the amount they’re lending. You may also choose to have a more comprehensive survey to identify any potential issues with the property.

Mortgage offer

If the lender is satisfied with the valuation and your application, they will issue a formal mortgage offer. This document outlines the terms and conditions of the loan.

Exchange contracts

After your offer on a property is accepted, you and the seller will exchange contracts, making the transaction legally binding.

Completion

On the agreed-upon completion date, the funds are transferred, and you take ownership of the property.

It’s essential to work closely with your chosen lender, keep all required documents organised, and seek professional advice if needed during the process.

4. How much is my house worth?

Knowing the value of your property is crucial for various reasons, including setting a reasonable asking price if you decide to sell or understanding your overall financial position. Several methods can be used to determine your house’s value:

Online valuation tools

Numerous websites and tools provide automated property valuations based on recent sales data in your area. While these can give you a rough estimate, they may not account for specific features or conditions of your property.

Estate agent valuation

Local estate agents are often familiar with property values in your area. They can provide a more accurate valuation by considering factors such as the property’s condition, location, and unique features.

Professional valuation

Some homeowners choose to hire a professional surveyor for a comprehensive property valuation. This can be especially beneficial if your property has unique characteristics or if you need a precise valuation for legal or financial purposes.

Comparative market analysis (CMA)

A CMA involves comparing your property to similar recently sold properties in your area. This method is often used by real estate professionals to estimate a property’s market value.

Keep in mind that property values can fluctuate based on market conditions, so it’s advisable to reassess your property’s value periodically, especially if you’re considering selling or refinancing.

5. How much deposit do I need?

The deposit is a significant upfront cost when buying a house, and the amount required can vary. In the UK, most lenders expect a minimum deposit of 5% to 10% of the property’s purchase price. However, a larger deposit, ideally 15% to 20%, can lead to more favourable mortgage terms, including lower interest rates.

Saving for a deposit requires careful financial planning. Consider creating a dedicated savings account and regularly contributing to it. Additionally, explore government schemes designed to assist first-time buyers, such as the Help to Buy ISA or Lifetime ISA, which offer incentives and bonuses to boost your savings.

Keep in mind that the deposit is only one part of the overall cost of buying a house. You’ll also need to budget for additional expenses such as solicitor fees, survey costs, and potential stamp duty.

6. How much is stamp duty?

Stamp duty is a tax paid on the purchase of residential property in England and Northern Ireland. The amount of stamp duty you’ll pay depends on the purchase price of the property and your individual circumstances. As of my last knowledge update in January 2022, the stamp duty rates are as follows:

  • Up to £125,000: 0%
  • £125,001 to £250,000: 2%
  • £250,001 to £925,000: 5%
  • £925,001 to £1.5 million: 10%
  • Above £1.5 million: 12%

First-time buyers may be eligible for a stamp duty exemption on properties valued up to £300,000 and a reduced rate on properties between £300,001 and £500,000.

It’s essential to check for any updates or changes to stamp duty rates, as government policies may evolve. Your solicitor or conveyancer will typically handle the payment of stamp duty on your behalf during the property purchase process.

Conclusion

Navigating the UK housing market and the mortgage process involves careful planning, financial awareness, and a solid understanding of the key factors that impact mortgages and buying a home.

By addressing these frequently asked questions, we hope to empower prospective homebuyers with the knowledge needed to make informed decisions throughout their journey to homeownership.

Remember, seeking advice from financial experts, staying informed about market conditions, and thoroughly researching your options will contribute to a smoother and more successful homebuying experience.

People in Leicester can shop the latest fashion with up to 75% off at a one-time-only summer fashion show.

Taking place at prestigious venue Winstanley House on September 19, real, local women will model the garments on the catwalk. They’ll wear brand new items from our favourite high street brands. The clothes will then be available to buy with huge discounts.

Expect to see items from Asos, Urban Outfitters, Next, River Island, Monsoon, Warehouse, White Stuff, Evans, Marks & Spencer, Topshop, Wallis, New Look and many more. There’ll also be high end French and Italian designer wear on sale too. Sizes range from 6 to 30.

The fashion show will support poverty and abuse charity The Zinthiya Trust and has been organised by local businesses BP Legal with Kazzoo IT as sponsor.

The local companies have joined together to help The Zinthiya Trust support abuse victims and provide practical and financial support.

Fashion forms a large part of many people’s identities. For those who have experienced abuse, clothing is one stepping stone that can help victims claim back their personality. The group of local firms chose to put on a summer fashion show to represent this idea.

SOS Charity Fashion Store will be providing the catwalk and the outfits. The company’s catwalk shows provide immersive and memorable shopping experiences in aid of local charities.

Refreshments will be provided and there’ll be a raffle with a chance to win a voucher to spend on the night.

Tickets are just £5 and are available to buy online or on the door, but advanced bookings are recommended.

The show starts at 7pm with 9pm finish at Winstanley House in Hinckley Road.

Knotweed. Bad news for any property. The stuff is notorious for its fast growth, both through its underground roots or rhizomes. On its way through a building it can do some serious damage blocking drains, growing between slabs of concrete drives, disrupting brick paving, garden walls, and ultimately overwhelming outbuildings and conservatories. Worse than that it’s very difficult to get rid of in its entirety.

From a legal stand point, when it comes to selling a property, Japanese Knotweed on land can create a loss to the property’s market value. The Law Society’s TA6 property information form requires sellers to state whether the property is affected by Japanese Knotweed. Whilst it might be tempting to state ‘no’ or ‘don’t know’ on this form, your potential buyer can come back to you and either rescind the contract or get damages from you as the property is now worth a lot less than they thought.

Solicitors should be cautious of this when dealing with properties especially with new builds and properties near public land. The recent case of Network Rail, for example, where they are being found liable for damages to two homes which have halved in value due to knotweed spreading from the company’s land has brought knotweed to the forefront in the press.

My advice: always seek legal advice if you suspect knotweed lurking anywhere near your property or potential land you own or are looking to buy.

Battling against laws on FGM, supressing abusive relationships, conquering mortgage disputes, and slaying the idea of the traditional law practice, we caught up with this popular Leicester solicitor as she approaches her 10th year in business

 

Taking voluntary redundancy in the middle of a recession at eight months pregnant doesn’t sound ideal. Her friends and family told her she was mad but that didn’t stop Bhumika Parmar (41) quitting her job in 2008 to follow her dream – to revolutionise legal practices.

Applying to the SRA (Solicitors Regulation Authority) to open a practice of her own, the regulatory body conducted an in depth assessment into Bhumika vetting her work ethic, experience,
reputation, business plan and five year forecast. She was given the get-go and opened an office with just one computer and one employee.

“I wanted a modern approach so no 9-5 hours, because 9 times out of 10 clients will be calling on their lunch break. We do home visits and have a 24/7 phone line. Clients have a dedicated case
worker but we all use an app to access files so that all of us can pick up any case.”

Within a year they moved to bigger premises in Belgrave Gate during Bhumika’s second pregnancy. Just two days after giving birth she went back to work taking her new born with her.

“I had clients that needed taking care of. It was a lot trying to juggle but I wasn’t going to have flexibility at other practices. I didn’t want to miss all the milestones in my kids’ lives, and I offer the
same thing to my staff.”

BP Legal now has a team of five comprising of solicitors and trainees, has made headlines, and positively impacted the law raising awareness of important issues. Following that dream nearly 10
years ago resulted in a mammoth contribution to the community internationally.

In 2014 the then 38-year-old dealt with a giant media case that enticed BBC and ITV news reporters to her offices. She represented Afusat Saliu who was at risk of being deported to Nigeria after outstaying her UK visa because she feared her children would be at great risk of female genital mutilation (FGM). Despite losing the devastating case, she says the harsh reality of FGM was brought to the UK that year and demanded a call to action. The case gained an international audience but BP Legal’s work began at home.

She told us: “An Asian lady asked for help, she was abused by her husband and in-laws had no national insurance number, no phone, no money, nothing. She didn’t have the money and I could
have easily turned her away but I said ‘you can’t let it go on’.” Bhumika settled her divorce and immigration status. “But I told her ‘when you start working, come back and settle my fees’. And she
worked and paid me back. Because of that I had a lot of women coming to me. It was a risk to carry out work for clients without payment, but I had faith in them. Not one person hasn’t paid me back. You could call it a charity but it’s not because what I’m giving them is an incentive to work and earn it. I don’t want them on benefits I want them to go out and make something of themselves.”

Bhumika’s work has also impacted the education sector having won a declaration of trust case in the High Court. The case has now become a leading example taught to university and college
students. “I actually went on a conveyancing update lecture and they were citing the case in that,” she laughed. All this media coverage and more even led to an amusing stint on Channel 5’s Love Rats Exposed.

What more could Bhumika dream up for the next 10 years?

As a tenant you have certain rights and responsibilities if you’re in privately rented property. As a tenant, you have the right to live in a property that’s safe and in a good state of repair; have your
deposit returned when the tenancy ends – and in some cases have it protected; challenge excessively high charges; know who your landlord is; live in the property undisturbed; see an Energy Performance Certificate for the property; be protected from unfair eviction and unfair rent; have a written agreement if you have a fixed-term tenancy of more than three years.

When you start a new assured or short assured tenancy, your landlord must give you a copy of the ‘how to rent’ guide if you live in England; EPC certificate; confirmation documents regarding your deposit; and landlords gas safety certificate.

You must give your landlord access to the property to inspect it or carry out repairs. Your landlord has to give you at least 24 hours’ notice and visit at a reasonable time of day, unless it’s an emergency and they need immediate access. You must also take good care of the property; pay the agreed rent, even if repairs are needed or you’re in dispute with your landlord; pay other charges as agreed with the landlord; repair or pay for any damage caused by you, your family or friends. Your landlord has the right to take legal action to evict you if you don’t meet your responsibilities.

Moving house can be a very stressful time, especially during a pandemic. From the neighbourhood to the honesty of the seller, there are many worries to be had. To reduce the number of concerns a buyer has, they’ll often invest in a conveyancer, and for good reason. ‘It most certainly is ‘better to be safe than sorry’ when it comes to making what’s possibly the biggest purchase of your life.

It’s important to select a conveyancer that is part of a Conveyancing Quality Scheme (CQS); a recognised quality standard, which means their service is overseen by The Law Society. BP Legal is of course CQS accredited, and here we give you our official moving home checklist to make sure it’s the right house for you.

Your conveyancing solicitor should:

  • Make sure the property title is marketable and verify ownership
  • Advise on freehold and leasehold
  • Draw up a contract of sale and send it to the buyer’s solicitor
  • Check for restrictive covenants or rights of way
  • Check buildings have correct planning permission, licenses and warranties
  • Check there are no debts owing against a property
  • Carry out local authority searches for zoning restrictions or debts due
  • Arrange additional property searches
  • Check mortgage documents
  • Ensure the deposit has been paid
  • Exchange contracts making the deal legally binding
  • Lodge an interest in the property so it cannot be sold to another
  • Calculate the final figure to pay
  • Arrange for the title to be transferred to the new owner’s name
  • Pay Stamp Duty Tax on your behalf
  • Lodge the title deeds with Land Registry
  • Send a copy of the deeds to your mortgage lender

At a time when statistics are presenting high percentages of failed SMEs within their first five years, a small independent law firm has sailed the stormy seas of success into its 10th year – its director tells us how

Words by Kerry Smith

 

The office is hyped at BP Legal with celebrations afoot for the anniversary that will take the firm over 10 years in business.

After five years just four in ten small businesses will still be trading, Ormsby Street research suggests. Bhumika Parmar, director of BP Legal, has persevered through tough times and made it out the other side of the dreaded five-year sentence.

“Every morning I come into work and still pinch myself that I launched the business,” she told us. “Even after 10 years I still cannot believe I took the plunge to open BP Legal.” The legal practice was set up when Bhumika subsequently took voluntary redundancy from her previous employment after starting a family. She had a particular vision in mind.

“I wanted a modern approach to legal work and I wanted to instil the principal of doing right by what the client wants. It came to mind that if I was a client then I would want flexibility, so I opened my practice with the intention of avoiding 9-5 hours.

“I took away the whole ‘closed one hour for lunch’ thing as this is the prime-time clients wish to speak to us, and I adopted home visits after 5pm as well as opening on the weekends by appointment.”

In 2009 the 32-year-old started with very little. Just Bhumika and her computer in a small office was the opening chapter to her 10-year story. She now employs three solicitors, one trainee, two paralegals, and one receptionist.

To celebrate the 10-year anniversary, the office will be treated to a special gathering inviting all staff and clients, along with those who have supported the firm along the way. The team will also be jetting off for a weekend stay abroad in a surprise location.

On the reasons behind the success of BP Legal, Bhumika commented: “I have never told myself that I can’t do something. I instead ask myself ‘how can I do this?’ Where there is a will there is a way. I never give up and most importantly, the backbone of my success – my husband and children – have never given up on me either.

“My parents are my biggest inspiration to this day. My father always says to me ‘you can, you will, and you have.’ You need to believe in yourself. Be prepared for sleepless nights and hard work but it is so rewarding.

“It’s important that all businesses support each other. Working together is the way forward. This is how we grow our strength and community. I often have companies calling me for advice and I’m always happy to assist.”

In between anniversary festivities, Bhumika is producing plans to generate more jobs and become affiliated with more businesses taking BP Legal far beyond its 10-year mark.

If you’re preparing to move to a new house, you’ll understand how stressful the process can be.

When you move home a conveyancing solicitor will make the legal transfer of a house to the person buying it from the person selling it. There are many things that can complicate the process
and create delays. This can all result in disappointment on your buying journey. Our team of dedicated staff are there to ease your concerns and explain matters without the complexity of legal jargon.

We help reduce the stress of your transaction by keeping you informed and working with other professionals such as the estate agents, mortgage broker and other solicitors in the chain.

A solicitor will ensure you know as much about your new property as possible from planning permissions to land boundaries so that you know exactly what you’re getting for you money. Your solicitor will take all the steps needed to complete your purchase including stamp duty all the way through to registering your property at Land Registry. They will deal with the legal steps required to complete the transaction and keep you informed by dedicating a Fee earner to deal with your transaction.

Our step by step guidance will help you through each stage of the transaction and our ‘checklist when moving’ will make sure everything is transacted smoothly. And to ease any tension for first time buyers, at BP Legal Solicitors, we are offering those buying their first house a 10% discount to help with their conveyancing fees.

Conveyancing is how a property is legally transferred from one owner to another

You’ll need a conveyancing solicitor when moving home

If you don’t hire one, you run the risk of ending up out of pocket by thousands of pounds

It’s no DIY job

A good conveyancing solicitor will conduct the complex transaction on your behalf and carry out checks and searches against the property with a fine-toothed comb alerting you to any issues they may find.

Buyers gain an added level of protection by hiring a conveyancing solicitor. Conveyancing solicitors are required by law to hold professional indemnity insurance covering any loss to clients, resulting in a stress-free service.