Introduction – in this section we will help to improve your understanding of just some the property letting risks. In particular we will clarify the types of worries or risks most people think off and then proioritise them...

Rental Voids - rental voids are a part of the natural process of tenants coming and going - the average is around 30 days between tenants.   Rental voids can happen for other unforeseen reasons also (new industrial developments, increased crime rates or even major events... Example: Effect of September 11th on City of London Rental Sector)...  A practical example of rental voids damaging landlords is the collapse of the London Corporate luxury-letting sector. Some analysts have used this market to generalise that “buy to let is dead”. 45% of the London letting market since the mid 1990’s was made up of US citizens working and living in the UK – particularly from US Investment Banks. Since the tragic events of September 11th (and in line with Global economic downturn), the US led, corporate market has virtually disappeared. Banks and other corporate institutions are no longer prepared to pay £2,000 to £3,000 pounds per month for their employees and at the same time have placed travel restrictions on them for safety reasons. This has meant thousands of US executives going back to the US – hence creating an oversupply/ rental void problem.

Rising Interest Rates - rate are prone to MPC fluctuation for macro economic reasons

Failure to Comply with Statutory Guidelines – more property letting risks relate to compliance... it is critical that you comply with all statutory regulations regulations  (PLEASE NOTE THESE ARE INFORMATION ONLY AND NOT LEGAL ADVICE - PLEASE DO INDEPENDENT RESEARCH USING THE SOURCES LISTED AT THE BOTTOM OF THIS PAGE):-

The Furniture and Furnishings (Fire & Safety Amendment) Regulations 1998 – it is an offence to provide items into your property that do not meet these regulations. Specifically, these regulations aim to improve safety by ensuring furniture in rental property passes the “match and cigarette test. All upholstered furniture (sofas, beds, cushions, pillows, loose covers, headboards, armchairs, futons, scatter cushions, garden furniture and mattresses) must have a tag confirming that it meets necessary standard (BS7177) – the tag must not be removed (picture shown right). This is known as the ‘Carelessness Causes Fires’ label/ tag and states that the item will pass the match test. Any furniture not bearing this tag must be immediately removed and replaced with approved furniture. Be especially wary of any second hand furniture for student housing – make sure it complies with regulations.

The regulations do not apply to carpets, curtains, duvets and loose mattress covers. Any furniture made after 1990 is likely to comply. Make sure that a suitable clause is added to your agreement with your letting agent (if you are using one), stating that all furniture and furnishings should comply with relevant regulations. Regulations are enforced by the local council’s trading standards office. Please visit DTI web site at http://www.dti.gov.uk/ccp/topics1/guide/furnitureguide.pdf  for the latest regulatory updates related to fire safety. For further information about the Regulations please see http://www.hmso.gov.uk/si/si1988/Uksi_19881324_en_1.htm and http://www.hmso.gov.uk/si/si1989/Uksi_19892358_en_1.htm

If you do not comply with these regulations, the financial impact is that you could face a level five fine, which could be penalty of up to £5,000 and/ or six months imprisonment. In addition, if a fatality occurred as a result of you breaching these regulations, a civil case could also be brought against you resulting in you paying much higher financial damages than £5,000. You should keep copies of all brochures, receipts of all furniture as in the case of a fire all evidence of safety tags may be destroyed.

Smoke Alarms (Building Regulations 1991) – these regulations require all properties built after 1992 must have mains controlled, inter-linking smoke alarms on every floor of the property. Make sure there is a condition in the tenancy agreement that states the tenant is responsible for replacing smoke alarm batteries every three months. Invest in a fire extinguisher complying with British Safety Standard (BS5423) and fire blanket (BS6575) for the kitchen. For any property built before 1992 we still recommend that smoke alarms be fitted - not least because as older properties are more likely to have building defects or materials that may lead to fire.

Gas Safety (Installation and Use) Regulations 1994/8 – the reason this legislation came into force is that the is that the Health and Safety Executive (HSE) found on average, 40 people die a year from carbon monoxide poisoning. Gas that has not burnt properly can produce carbon monoxide – a deadly, odorless, tasteless gas. The regulation states that the landlord must make sure his gas pipe work (valves, pipes, regulators and meters) and installed appliances (cookers, hobs, boilers, water heaters, fires, wall heaters, gas fridges, flues, central heating systems, fires etc) are checked, maintained annually and hence safe. The pipes or appliances must never be used if the landlord knows (or suspects) that:-

• There is insufficient air for the appliance to allow for proper combustion
• The removal of products of combustion from an appliance cannot be safely carried out
• The room where an appliance is located is not ventilated properly

Compliance involves annually employing a CORGI registered engineer (approximate cost of £150) to undertake the maintenance. CORGI is the National watchdog for gas safety. Their mission is to continually promote and enhance gas safety, standards and quality in a professional and ethical manner. He will produce a “Gas Safety Report”. Upon successful completion this report (certificate) details the engineer’s name, the property address, work carried out on each appliance, the location of appliances, defects identified and action take, the CORGI registration number and the date. A copy of the certificate must be given to the tenants before they enter the property. This report must be retained for reference purposes for at least two years. Please see http://www.corgi-gas-safety.com/section_gas_law/about_installer_find_installer.asp  and for the latest Health & Safety guidelines for landlords.

If you fail to comply with these regulations you could cause a tenants death. The financial impact would be a £5,000 fine and a criminal conviction under Section 33 or Section 36(1) of the Health and Safety Work Act 1974. If a trading standards officer finds an appliance that’s does not comply with the regulations, the appliance can be disconnected immediately. In addition, if a fatality occurred as a result of you breaching these regulations, a civil case could also be brought against you resulting in you paying much higher financial damages than £5,000.

Electrical Equipment (Safety) Regulations 1994 – under the regulations landlords have a legal obligation to ensure that all appliances are safe for your tenants. For further information please see The HMSO - The Low Voltage Electrical Equipment (Safety) Regulations 1989, (S.I. 1989) document by visiting on-line at http://www.hmso.gov.uk/si/si1989/Uksi_19890728_en_1.htm . In summary, the checklist for making appliances safe:-

• Live parts should not be accessible
• Leads should not be worn or frayed
• Correct plugs (BS1363) should be fitted. Plugs must all be correctly fused
• Any moving parts should be guarded
• Electrical appliances should be serviced annually
• Instructions on all electrical appliances must be left at the property
• Make sure copies of keys to fuse boxes are provided for the agent and tenant
• Keep a detailed written record of all checks so you remember and engineers what was checked
• A CE label must be marked products supplied
• Check and maintain the following appliances – fridges, audio visual, microwaves, irons, vacuums, toasters, hairdryers, de-humidifiers, kettle, storage heaters and alarms

If there is an accident as a result of unsafe appliances and somebody dies you, as the landlord, could face imprisonment if you are found to have exposed somebody to a dangerous supply.

If you fail to comply with these regulations you could cause a tenants death. The financial impact would be a £5,000 fine and a criminal conviction under Section 33 or Section 36(1) of the Health and Safety Work Act 1974. If a trading standards officer finds an appliance that’s does not comply with the regulations, the appliance can be disconnected immediately. In addition, if a fatality occurred as a result of you breaching these regulations, a civil case could also be brought against you resulting in you paying much higher financial damages than £5,000.

The Housing (Management of Houses in Multiple Occupation) Regulations 1990 – an HMO is simply a house that is shared by more than one person who not form into a single household. Please see section 6.4.6 on HMO as a type of letting in great detail. For the purposes of understanding risk, its important that you comply with the HMO Regulations 1990; the regulations specify that certain aspects of the HMO should be maintained, clean and in a working order. Check with your Local Council who may have its own HMO scheme regulations. In particular, the main emphasis of the regulations are as follows:-

• Water supplies should be protected from frost and general damage by insulating pipes.
• The living common area’s i.e. passageways of the property must be free from obstacles.
• The shared internal structure facilities – water, gas, electricity etc must be in good working order
• Lighting and ventilation is provided in common shared areas of the house
• Fire escapes are provided, signposted and kept clear

 

Public Liability – it is prudent to obtain protection against liability from the risk of a member of the public suing as a result of your property causing them injury. For example, one of you loose slates on your roof falls off onto a passer byes head - they then sue you for damages. Or perhaps your tenant falls down the stairs and breaks their legs. These are minor risks in terms of them occurring, but ones, which you must protect yourself against because it could end up so costly if you don’t.