November 5, 2013 | Posted in:Conveyancing

What is buy to let?Buy to Let Conveyancing

Buy to let properties are becoming increasingly popular investments in the modern economic climate. Essentially, these investments are exactly what you would expect from the name. Buy to let properties are those which are purchased with the intention not of residing in them, but of letting them out to tenants to generate a rental income, whilst waiting to make a return on the investment through long-term capital growth. In other words, a property is bought by someone who already has a separate residential property and is rented to a tenant. The buyer never intends to live at the property.

Buy to Let vs. Residential Conveyancing

In many ways, the conveyancing process is the same for buy-to-let or residential properties. Exactly the same steps must be taken in each case. However, buy to let conveyancing transactions tend to be more complex than residential conveyances, due to some of the steps requiring more due diligence or more complicated work. Below are listed some of the main areas where these transaction differ from the norm.

Buying

Deeds

It is very important to have your conveyancing solicitor carefully check all the information contained in the title deeds to the property, in a buy to let conveyance. The deeds to many properties contain restrictive covenants that limit the use that the property can be put to. For instance, it may state in the deeds that changes cannot be made to the property without the permission of the original developer or even that the property cannot be rented out. The limitation on making change may prevent a buyer from renovating a property to make it more appealing to tenants, whereas an outright ban on renting the property would obviously be a major difficulty for a buy to let investment. Many such covenants are archaic and often can be overturned. However, this is a complicated process and will require extra work on the part of your solicitor.

Mortgage Offer

Many lenders offer special buy-to-let mortgages. The mortgage offers are usually quite complex containing many more stipulations than a regular residential mortgage offer. A deposit of up to 40% is usually also required.

Selling

Notice to Tenants

On selling a buy-to-let property, adequate notice must be given to tenants before exchange and completion can take place. Most landlords wish to keep the property tenanted as long as possible, in order to keep making mortgage payments using the rental income. Tenants must be allowed to remain in a property up until the end of any contracted period. After this, they will usually require one month’s notice to move. This can delay exchange or completion and can sometimes lead to difficulties in the chain. It is essential to instruct a conveyancing solicitor with experience to ensure these difficulties are minimised through good management.

Title Guarantee

As the seller has not lived in the property, they have limited knowledge of it. This means the property is sold with limited title guarantee. Again, this can cause difficulties, so an experienced solicitor is essential.

Capital Gains Tax

On selling a property that has not been lived in, the owner will be charged capital gains tax. The arrangements for paying this tax can be made by your buy to let conveyancing solicitor.

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