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A Property Owner’s Guide To Letting In 2022

By Darragh Timlin on February 28th, 2022


If you own a property, it can be an incredible asset that provides a source of consistent income. To ensure that your property becomes a reliable source of income, you may want to consider renting it out to tenants. This can be an excellent opportunity to gain financial independence and manage a business. However, as a property owner, it’s important to have insurance coverage to protect your investment. Property owners’ insurance can offer comprehensive coverage to safeguard your property against a range of potential risks and damages, giving you peace of mind and protection for your valuable asset.

Landlords are required to fulfil various responsibilities and obligations, and by understanding what letting a property entails you will be in the perfect position to make the most of your property. There are several factors that you will have to keep in mind, for example location, tax considerations as well as whether you will be letting your property for residential or commercial purposes.

In this definitive guide, we are covering everything that property owner’s should know before embarking on this exciting and lucrative journey.

  1. Tax Considerations
  2. Residential Properties
  3. Commercial Properties
  4. The Importance Of Location
  5. Residential Contracts
  6. Commercial Contracts
  7. Property Insurance For Commercial And Residential Properties

Tax Considerations

First and foremost, it is essential that you become familiar with the various tax considerations that a landlord has to manage. When it comes to letting your property, there are specific rules that have to be followed in order to avoid any difficulties in the future.

What’s more, the tax requirements change significantly depending on whether you have a residential property or a commercial property.

Residential Properties

A residential property is any building that is used for living purposes by individuals and/or households. With a residential property you will be expected to pay taxes on the profits you make from letting the property, once you have made the appropriate deductions for ‘allowable expenses’.

Essentially, allowable expenses are anything you spend money on that is necessary for the running of the property. Permitted examples include letting agents’ fees, maintenance and repairs, accountant fees, buildings and contents insurance, utility bills and council tax. In certain situations, you may be able to claim tax relief for anything you spent on replacing domestic items such as beds, carpets, sofas, curtains and even crockery.

Commercial Properties

A commercial property, on the other hand, is any property that isn’t used for residential purposes. Examples include shops, restaurants, offices, hotels, warehouses, dentists, schools and even prisons.  There are some types of tax relief that you can claim with a commercial property. If you’re thinking of becoming a commercial property landlord, it’s a good idea to be aware of what’s available to you.

For example, you could potentially benefit from a 75% Capital Gains Tax exemption for any properties that are eligible, achieving the entirety of the 75% relief after only 10 years. This is in contract to most residential properties, which only qualify for a lesser relief that reaches a maximum 40% exemption after 10 years.

Of course, this generous exemption is subject to certain conditions and it will only be offered if you are letting your property out to qualifying trading business. Capital allowances are another form of relief that commercial properties can access, which are deductions to your income for any expenditures made for business purposes.

The Importance Of Location

When investing in a property, the location is critical to determining whether it will be a rewarding and profitable venture or not. By understanding the location of your property, you will be able to maximise your return on investment. For example, a residential property should be in a location that is pleasant and attractive and that is likely to appeal to young professions or growing families.

A commercial property such as a restaurant or a shop, however, would be much more successful in a central hub that experiences large amounts of traffic and is easy to access by prospective and existing customers. By keeping an eye on the rental market trends, you will gain insights into the renting hotspots within particular areas.

Other metrics that will impact the suitability of a location include property prices, tenant demographics, rental demand, transport links and career and education opportunities.

Residential Contracts

A tenancy agreement is a contract that stipulates the rights and responsibilities of the landlord and the tenant for the duration of the lease. Residential contracts offer many legal protections that aren’t necessarily applied to commercial contracts. For example, the landlord will be expected to maintain a certain standard when it comes to the living conditions of their tenants within the property. Health and safety standards have to be upheld, such as gas and electricity, mould, asbestos and fire regulations.

A tenant, in turn, is expected to make sure that they pay their rent on time and that the property is kept in reasonable condition. Furthermore, a residential contract should include details such as the duration of the tenancy, the amount payable as well as how often it is paid, the services provided by the landlord and the notice period that the tenant and the landlord will require to legally end the tenancy.

Commercial Contracts

Typically, commercial contracts do not offer as many protections as residential ones, and they have to be negotiated carefully. For example, whilst a landlord is responsible for the maintenance of a residential property, commercial tenants may be required to maintain the property unless the contract explicitly states otherwise. What’s more, commercial contracts can be tailored to reflect the requirements and expectations of the landlord and the tenants.

The contract will also dictate business hours and how the property may be used, early termination conditions and commercial subleasing, responsibility for costs due to insurance and maintenance as well as any rent increases. Commercial contracts are usually more complex and binding than their residential counterparts, and this is why the lease terms tend to be longer as well. A contract for commercial properties establishes which party is responsible for what in the event of a dispute.

Property Insurance For Commercial And Residential Properties

An excellent insurance policy is a must for residential and commercial landlords alike. When you are letting a property for residential purposes, you are responsible for the health and safety of your tenants. There is always a level of risk associated with owning a property, whether you live in it or not. Fire, flood, criminal activities or arson are all risks your property will face and as a landlord it is your responsibility to address any problems as soon as they arise. With residential landlord insurance, you can ensure that you are as prepared for as many of these scenarios as possible.

From an insurance perspective, commercial properties are considered to be more high-risk than residential properties. This is because commercial properties are often equipped with heavy machinery and stock and supplies that are often of considerable value. Employers and members of the public are constantly leaving and entering the premises, which is why ensuring that everyone’s interests’ are protected is essential. With comprehensive commercial landlord insurance policy, you can be reassured that in the event of an accident or a misunderstanding you can easily recover from any mishaps or damages, especially when it comes to claims and complaints. Find peace of mind by partnering with Brisco Business for all your business insurance needs.

Darragh Timlin

With over 25 years’ experience, Darragh is an expert in all things insurance. Starting his career in commercial property underwriting, Darragh has worked for a number of global insurers and is now Managing Director of Brisco Business, part of the wider Henry Seymour Group.

All articles by Darragh Timlin

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