In the current economic climate of low interest rates more and more people are becoming tempted to enter the Buy to Let market. These are exactly what the name describes. The property is bought by someone who often already owns their own home, with the intention of letting out the property to generate both a rental income and long term capital growth.
Buying an investment property
Whilst in many ways the process in buying the property differs little from the routine conveyancing transaction there are often steps that require expert legal advice.
The deeds to the property must be checked in detail. Typically the deeds may contain covenants restricting the use of the property and preventing it being Let and occupied by a non-owner. Alternatively the consent of the Landlord or a Management Company may be required in advance of the letting.
Many mortgage lenders offer specialised Buy to Let products. Under no circumstances should you buy a property intending to Let it without declaring it in advance to your mortgage lender. The mortgage offer is however often complex and contains a number of special conditions that must be complied with before release of funds. Typically a deposit of between 30% and 40% is required.
Selling an investment property
The important consideration is often as to whether the buyer wants to buy the property with vacant possession or subject to the existing tenancy. If vacant possession is required the tenant must be allowed to remain until the end of the contractual term after which a notice to quit may need to be served. This can of course cause delay and must be factored in during the negotiations. If the buyer wishes to buy subject to the tenancy then an appropriate rent authority will be needed together with an apportionment of rent paid up to the date of completion.
Capital Gains Tax
It must be born in mind that the sale of an investment property will inevitably lead to Capital Gains Tax liability. As you have never lived in the property you will not be able to claim the Private Residence Relief.
For advice on any of the above contact a member of our specialist conveyancing team at Birchall Blackburn Law on 0800 614 722