The sale or purchase of any property will often need the help of a conveyancing solicitor, but this is particularly important in the case of buy-to-let properties. At Lovedays Solicitors, our experienced team can act for property developers and investors throughout all the stages of the transaction, offering expert advice and the first-class service for which we are known.
The Difference Between Buy to Let and Residential Conveyancing
Whilst you might be buying a property like any other, when it is done as a buy-to-let purchase, the legal side of things can be quite different. As the property is intended to be rented out to tenants, you will require a different type of mortgage, and lenders will have other stipulations, such as landlords’ insurance, which you will need to have before you can go ahead.
Your solicitor will also need to check that the property you wish to buy has no restrictions on renting it out.
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The Process of Buy to Let Conveyancing
When you have had an offer accepted on a property, your solicitor will contact the seller for the contract pack, which can be checked, and any queries can be raised. The process of ordering searches should also begin, and the solicitor can check any restrictions on the property. This will ensure that it can be rented out to tenants and can offer advice on planning applications, environmental restriction and the tax implications of your investment.
If you are buying the property with a buy-to-let mortgage, your solicitor will also check this agreement and help you to put together any other legal documents that you might need such as deeds of trust or tenancy agreements. If the property already has tenants in situ, your solicitor can look at the agreement that is in place for this.
Once a completion date is agreed the contracts can be signed and exchanged, and a transfer deed can be prepared. The conveyancer can then ask the mortgage lender to advance the funds, which can be sent to the seller on the day of completion. Any Stamp Duty Land Tax will also be managed by your solicitor, and it is important to remember that you may have to pay an additional stamp duty rate if you already own other property.
Expertise Required in Buy to Let Conveyancing
Buy-to-let purchases require a conveyancer with specialist experience in the field due to the complicated legal responsibilities that are involved. A buy-to-let conveyancer will need to understand the nuances of the different mortgages that are involved and will need to have a clear grasp of the tax implications of your purchase so that they can advise you accordingly and help you to make the best decisions.
An experienced conveyancer will also have a good knowledge of all of the other legal requirements that will affect you as a landlord, as well as your responsibilities and contractual obligations towards tenants who are already in situ.
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Choosing Your Buy to Let Property
When you choose a buy-to-let property, you will have to take different things into consideration compared with when you are buying a property to live in. This is a purchase that needs to be made entirely with your head and not your heart.
You should first look at the local area to see what type of tenants you are likely to attract. You should consider whether you want a family home, a student flat or something that might be suited to young professionals. Consider what the area has to offer and whether this matches your target market. You should also study the local rental market to see how busy it is and what rental yields you can hope to achieve.
As this is an investment property, you will want it to increase in value in order to make a profit when you sell, and so you need to keep this in mind. Look at the trends in the local property market as well as whether the property you are considering has any opportunities for development or where you might be able to add value.
If you do not want the hassle of advertising for tenants and vetting them, you might want to take on a property that already has tenants in situ. This presents you with a different range of properties and considerations about the rental agreement that might already be in place.
Financing Your Buy to Let Property
If you intend on borrowing money to buy your investment property, then it is important to remember that buy-to-let mortgages work very differently to residential ones. The fees for these sorts of mortgages can often be a lot higher, as can the interest rates. The required deposit is also much higher and can be in the region of 20%-40%. Buy-to-let mortgages often tend to be interest-only, which means that you are not paying off any capital during the term and you will need to be able to pay the loan in full at the end.
The amount that you can borrow for a buy-to-let mortgage is based on the rental income you are likely to receive, rather than your salary, and so you need to be sure that the monthly payments can cover this comfortably.
Your conveyancing solicitor will be able to look through your mortgage agreement and will be able to highlight any points of concern or details that you will need to be aware of.
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Understanding the Costs of Buy to Let Conveyancing
The cost of conveyancing when purchasing a buy-to-let property can vary and will not only include the cost of the solicitor themselves, but also the fees for any searches that are completed, the cost of registering the property with The Land Registry and any free holder fees. Depending on your situation and the property in question, there may also be other fees to consider.
The legal fees for conveyancing can range from £600 to £1500 for leasehold properties.
Legal Requirements for Buy to Let Properties
When purchasing a buy-to-let property, you take on certain legal responsibilities as a landlord. You will need to ensure that there are annual gas safety inspections, and an electrical safety check must be conducted before a tenancy begins. Any property which is marketed as available to rent must also have an up-to-date Energy Performance Certificate.
When a tenant pays a deposit, it needs to be put into a Tenancy Deposit Scheme to ensure that it is fully protected, and the tenants must be given the details of this. When you take out your buy-to-let mortgage, you will be required to not only hold buildings insurance, but also landlords’ insurance to protect you and the property.
Any soft furnishings that you supply with the property must all conform to the latest fire regulations and should display a label showing this.
When you have tenants in place, you must have a tenancy agreement which outlines the rights and responsibilities of both the tenants and the landlords regarding the length of the tenancy, the amount payable, and inventory and any rules that cover the use of the property.
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Tax Implications: Income Tax and Capital Gains Tax
Your conveyancing solicitor can advise you on the tax implications of purchasing a buy-to-let property. At the moment, landlords will be required to pay 20% tax on any income £12,571 and £50,270 and income above this will be taxed at the higher rate of 40%.
Capital Gains Tax will be paid on any profit that you make when you sell the property, but the amount will depend on how much income you have earned during the year in which you sell it. The current rate is 18% for basic rate taxpayers earning up to £50,000 a year and 28% for higher rate taxpayers earning more than this amount.
Stamp Duty in Buy to Let Properties
Stamp Duty Land Tax (SDLT) is a tax that is payable on the purchase or transfer of property or land in England and Northern Ireland. The tax is calculated based on the price you pay for the property or land.
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The Role of Solicitors in Buy to Let Conveyancing
A solicitor is incredibly important when buying a buy-to-let property. Not only will they need to liaise between all parties, but they will also need to review any contracts and agreements and make sure that you have all of your legal requirements in place. They can assist you in dealing with your mortgage lender and any tenancy agreements to ensure that all parties are taken care of.
Top Reasons to Choose Our Services
At Lovedays Solicitors, we offer dedicated buy-to-let conveyancing services. We have an experienced team who can guide you through the entire process and ensure that all of your needs are met. Our expertise means that we are in the best position to advise you and make sure that your purchase is successful and stress free.
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