There are many hidden costs to being a landlord that first-time landlords often forget to factor in when starting out. From landlord insurance and safety certificates to ICO registration and ongoing maintenance, discover the costs of being a landlord you need to consider.
1. Landlord insurance
Landlord insurance isn’t a legal requirement, but is a must-have for any landlord. It helps to protect them against the risks associated with their rental properties.
MoneySuperMarket notes that: ‘buildings and contents insurance is typically included in a landlord’s policy, but property owners’ liability, loss of rent, and tenant default insurance cover are additional cover options that can be added to your policy’. Make sure you shop around for your landlord insurance and decide which level of cover suits your needs as a landlord best.
Cost of landlord insurance – the starting cost can be from £130 per year, but it depends on your provider and also the level of cover you choose.
An inventory is a detailed record of the condition of a property at the start of a tenancy – including all fixtures and fittings. The report will include images, detailed descriptions of the condition of all the rooms and information about the standard of cleaning at the start of the tenancy. This should always be conducted by an independent and accredited clerk.
Landlord inventory cost – the fee payable depends on the individual provider, the number of rooms and whether the property is furnished or unfurnished, but can cost between £85 and £200.
3. Safety certificates
It’s important to budget for safety certificates that you will need to provide for your property, and for the maintenance of the safety of the property. An Electrical Installation Condition Report (EICR) determines whether the wiring and electrics in the property are safe. British Gas recommends that when renting out a property, an EICR is conducted every five years.
For gas safety, every gas appliance in the rental property needs a Gas Safety Certificate or CP12 that is renewed each year. This is a legal requirement for landlords in the UK.
Landlord electrical certificate cost – this is typically between £125 and £300.
Landlord gas safety certificate cost – this is not a fixed cost, but you can typically expect to pay between £60 and £100.
4. PAT testing
Portable Appliance Testing (PAT testing) is the process of assessing appliances for safety, ensuring they are fit for use by the tenants. This should be undertaken by a person with the necessary skills and knowledge, such as a qualified electrician.
While not specifically a legal requirement, it is a good idea for landlords to ensure they have PAT tested the appliances in their rental property to ensure that they meet the Electrical Safety Standards in the Private Rented Sector (2020) regulations in England.
Cost of PAT testing for landlords – initial items can cost between £1 and £2 for PAT testing, but many providers charge an hourly rate of between £40-£60.
5. Landlord services
While not a necessary landlord cost, many landlords opt to enlist the help of a local estate agent to help manage their property. This can help take any stress away from being a landlord, especially for those who are first-time or accidental landlords.
These services range from the agent handling just the paperwork to all aspects of being a landlord – from finding the right tenants to the moving out process.
Landlord services cost – the fee is usually charged as a percentage of the rent per calendar month (pcm). At Stanfords, a Managed Service costs 12% (VAT inclusive) of the rent pcm.
6. Landlord licence
Selective licensing for landlords has been introduced in some local authorities in order to ‘tackle problems in their areas, or any part or parts of them, caused by low housing demand and/or significant anti-social behaviour’. This type of licence makes it compulsory for every privately rented property in a specified area to have a licence.
Not all landlords are required to have a landlord licence – this is dependent on where in the country you live. Some boroughs and local authorities have implemented this, so it is important to check whether you need to apply for a landlord licence. It’s worth noting that there are other types of landlord licence, including mandatory and additional, applying to people letting out houses in multiple occupation (HMO).
Landlord licence (UK) cost – across the UK, you can expect to pay on average £500-700 for a selective landlord licence which typically lasts five years. In LB of Lewisham, it is £500 per bedroom if the property falls into the local authority licensing regulations. Other boroughs and local councils fees will vary, so take care to check the cost (if any) in your local area.
7. EPC certificate
Having a valid Energy Performance Certificate (EPC) is a legal requirement in England and Wales for properties that are being built, sold or rented. These certificates use an A-G scale, where A is the most efficient and G is the least efficient, to rate how energy efficient a building is. EPC certificates last for 10 years, so this isn’t a regular cost of being a landlord.
EPC certificates provide information about the energy usage of the property and offer recommendations on how you could reduce your energy usage, reduce your energy bill and improve your EPC rating. It’s important to note that since the Minimum Energy Efficiency Standard (MEES) Regulations were introduced in 2015, domestic rented properties in England and Wales must have an EPC rating of at least E (subject to change).
EPC certificate cost – typically between £35 and £120. It’s worth noting that there are no fixed fees for EPC certificates, with the cost depending on the assessor and the property – shop around!
8. Smoke and carbon monoxide alarms
Landlords should ensure that their properties are equipped with working smoke alarms and also carbon monoxide alarms. The revised Smoke and Carbon Monoxide Alarm Regulations (2015) in England have specific stipulations about the number of alarms needed in various types of rental properties.
Smoke and carbon monoxide alarms cost – battery-powered smoke alarms can cost as little as £10 to £20, with mains-operated alarms costing more. Carbon monoxide alarms that are battery-powered can come in at as little as £15.
9. ICO registration
Landlords that process and store personal data about their tenants who are EU citizens will need to register with the Information Commissioner’s Office (ICO) and pay a yearly fee. However, some people are exempt from this. We’ve covered all you need to know about GDPR and landlords in a recent blog post.
ICO registration fee – payable fees are tiered, with tier one paying £40; tier two paying £60 and tier three paying £2,900. Most landlords will fall under tier one, but do check with the ICO.
10. Maintenance and repairs
It’s always essential to factor in maintenance costs when considering becoming a landlord. We’ve previously discussed what responsibilities landlords have for repairs and which are down to the tenant.
To find out more about what your letting agent can do for you, why not get in touch with your local Stanfords branch in Catford, Forest Hill or Hither Green today.