Contact Our Residential Property Lawyers
If you want to seek expert advice when you are investing in a residential property, contact our residential property solicitors via the form below or by calling:
1. Finances
You must budget for the residential property's purchase price but remember to factor in the other costs associated with a property purchase.
In addition to the professional fees of your solicitor, there are likely to be other costs, such as property searches, Land Registry registration fees, surveys and mortgage broker fees which will increase the costs.
If you require a buy-to-let mortgage, you should factor in that lenders often require a higher deposit than a standard mortgage. Buy-to-let mortgages tend to require deposits of 25% of the purchase price.
Suppose you are purchasing under a limited company name. In that case, it is also not unusual for lenders to require the directors to obtain independent legal advice and sign personal guarantees for the mortgage, which will add to legal costs.
It would help if you also considered the ongoing costs associated with certain properties. Flats will be subject to service charges which can run into thousands of pounds annually.
Houses, whether freehold or leasehold, can also be subject to service charges if there are shared areas on the estate, such as a private road or children's play area. Service charges may not be obvious from viewing the property, but your solicitor will advise you of any service charges you will be responsible for.
If you plan to rent out the property to tenants, consider that if an appliance within the property breaks, as the landlord, you will be the first port of call to get it replaced or remedied. We have explored other costs landlords are likely to incur below.
2. Stamp Duty or Land Transaction Tax
If the property will be an additional property or you are purchasing in a company name, you will be liable to pay the higher rate stamp duty in England or land transaction tax in Wales.
If you are buying a property in England and are considered a non-UK resident for stamp duty purposes, you must pay a surcharge of 2%.
You are treated as a non-UK resident if you are not present in the UK for 183 days or more in the 12 months before the completion of your purchase.
On the flip side, if you purchase a portfolio of properties in a single transaction, you may be entitled to reliefs which can reduce the tax you pay considerably.
3. Timescales
You are probably hoping for the transaction to complete as soon as possible so that you can get on with renting it out or renovating the property and then reselling it, known as ''flipping''.
It would help if you asked the estate agents or seller to confirm the extent of the chain before you put in an offer, as chains may lead to delays. Remember, the transaction can only move as fast as the slowest party in the chain.
4. Your intentions for the property
When you instruct your solicitor, it is important that you make it clear what you intend to do with the property once you have purchased it so that your solicitor can make relevant investigations for your purpose.
If you want to rent out the property long-term or use the property as a short-term holiday let, you should be aware that houses and flats can be subject to covenants in the title documents, which could restrict what you can do with the property. Some properties may be subject to covenants that restrict business use or restrict who can occupy the property.
The lease of a leasehold house or flat might contain provisions that consent is to be obtained from the landlord for any letting of the property. The landlord can charge a fee for this consent, and further, if you require a mortgage, conditions may be attached to the mortgage restricting the type and length of any tenancy agreement.
If you intend to refurbish and ''flip'' the property, you need to consider what planning permission and building regulations consent will be required for the works.
Not complying with planning permission or obtaining the required consent will likely cause issues when you come to sell the property, even if no enforcement action is taken against you by the local authority during your ownership of the property.
Suppose you intend to convert the property into a house in multiple occupations (HMO) to enable it to be occupied by multiple households. In that case, planning permission may be required if the area of the property is subject to an Article 4 Direction.
Further, if the property is to be occupied by more than one household, depending upon the number of tenants and the local authority, an HMO licence may be required before you can rent it out.
Your solicitor can conduct the relevant searches and report to you on the property any potential obligations or restrictions you may come across so that you can be assured that you are buying the right property for you.
5. The age of the property you are buying
It is worth considering that older properties were not built with today's rules and regulations in mind, and you can sometimes inherit problems, and it may be harder and more expensive to maintain simply due to the age of the property.
From 2025, all newly rented properties must have a minimum EPC rating of C or above. Currently, properties only require a rating of E or above. Existing tenanted properties will have until 2028 to comply.
If you are purchasing a property with renting it out in mind, and the EPC rating is below a C, you will need to carry out improvement works to the property to get the rating to C by 2028.
Older properties are more likely to require the need to make changes to increase the EPC rating, and you should consider the expense of this, which will eat into your return.
As a landlord, you are obligated to ensure that the gas and electrics at the property are regularly inspected and tested to ensure the safety of your tenants. You will require a landlord electrical safety certificate at least every 5 years, and a gas safety certificate every year.