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Cap on security deposits could cause problems for tenants with pets

As the recent Queen’s speech reaffirmed the banning of letting fees to tenants, the National Landlord Association have identified a potential issue related to the proposed capping of security deposits to just one month. This change could influence the likelihood of landlords letting to tenants with pets due to the fact that properties that permit pets often have a higher deposit, used to cover any damage.

The NLA have questioned the change and released the following statement.

 “In the initial consultation on the fees ban the Government announced their intention to look at putting a cap on security deposits. Data from the NLA AST statistics show that the average deposit (of those taking a deposit) is 4.92 weeks’ rent.

While not the intention, the Government’s plans for imposing this one-month cap on security deposits will reduce landlords’ willingness to accept pets by removing their flexibility to take a higher deposit to cover for pet damage.

Previous research from the NLA showed that almost half (47%) were unwilling to allow pets, with 41% of those citing the reason as potential property damage.

The Dogs Trust’s Lets with Pets scheme advises landlords to either take a higher deposit or include a “professional cleaning on move-out” clause in the tenancy agreement in order to mitigate the financial risk of property damage.

However, the Government’s plans at present could very well outlaw these practices. The end result? Even fewer landlords willing to let to tenants with pets.”

Obviously, it’s not the intention of the Government, but these changes may directly impact many tenants and their pets.

Cap on security deposits could cause problems for tenants with pets

Landlords warned of potential rise in property fraud

Home owners and buy-to-let landlords across the Midlands are being warned of a potential rise in fraud during the busy summer selling season.

The alert comes from property lawyer Javed Ahmed who said owners could find themselves conned out of hundreds of thousands of pounds by people who “clone” their identities and sell houses and flats out from under them.

Mr Ahmed, from Midlands law firm mfg Solicitors, is concerned there will be a rise in fraud over the summer – typically the busiest time for the property market – and said owners needed to act now to protect themselves.

The assistant solicitor said fraudsters operating across the region had been known to fool estate agents and lawyers by posing as the owner of property and then managing to take out loans or mortgage the building.

Mr Ahmed said: “Property is usually the most valuable asset people will own and it’s a hugely attractive target for fraudsters who want to sell it and pocket the money. It is something people think will never happen to them but it is a very real threat and people here in the Midlands must guard against it.

Those who are most at risk are people who rent out their property, or whose property is vacant.

It’s also an issue for those who own the property outright without a mortgage but one of the best steps is for owners to arrange a restriction on their title to prevent the Land Registry registering a sale without the identities being verified. It’s a process best taken care of by a professional to ensure every box is ticked.”

Top tips on how to keep your home cool this summer

It’s safe to say that as much as we in Britain look forward to a bit of sunshine. Whenever they arrive we suddenly find ourselves struggling to keep cool; even in our own homes we can feel as though we’re walking around in a sauna.

Your first instinct may be to throw money at the problem by booking an air conditioner installation service, but this may not be the best solution. Depending on the state of your home, there could be several cheaper methods for keeping your home cool in the summer, some of which could benefit you all year round.

Stephen Jury, spokesperson at Plentific, had this to say: “When you get home after a hot day in the office, the last thing you want is to step inside a warm house. Before extreme measures of air conditioning are taken, other smaller, and considerably cheaper options are available.

Here at Plentific, we understand how uncomfortable it can be to feel hot and sticky at home, so we’ve put together a guide on how to keep your home cool this summer:

Install insulation

Now, you might be suspicious of this one. Most of the time, we think of insulation as something that keeps our homes warm during winter. While it is true that insulation will stop heat from exiting your home, it can also help to keep it out.

In a nutshell, insulation works by preventing the passage of heat, typically through walls, lofts or roofs. This capability will stop heat from entering into your home during summer, while also making it easier to maintain your property’s internal temperature.

If you do not have insulation in your home, the best place to start will be with a loft insulation installation service. Most roofs are built with materials that absorb heat and then transfer it into the space below; in other words, your loft. This can heat up a house, but by insulating your loft you can ensure that the heat stays concentrated in your attic. Want to check if it’s working? Head up to your loft: it will be roasting.

Tree and ivy planting

One of the best ways to stay cool this summer will be to give yourself some shade. Planting trees in your garden will provide this while also adding variety and beauty to your outdoor space. Plant a fruit tree, and you’ll also have a healthy crop to enjoy in a few years.

The disadvantage of this option is that once you have planted a tree, it can take a while to pay off. An alternative is to grow a seasonal creeping plant, such as ivy, over a wooden trellis or pergola. Although this will require more maintenance, it can give you a simple, quick and attractive source of shade that you’ll be able to enjoy all summer long.

Get cooking outside

While it may sound like a bit of a no-brainer, a lot of heat in the home is generated in the kitchen. Cooking over a hot stove in the middle of summer can quickly become unbearable, so why not take your cooking outside?

Barbecuing is one of the best parts of summer: they make cooking outdoors a lot of fun, give you a chance to experience different tastes and also create plenty of opportunities for enjoying yourself with friends and family. While there are plenty of high end BBQ models, you could easily create a brick BBQ for yourself if you wanted something that will really impress.

If you wanted to take your outdoor cooking a step further, why not speak to a landscape designer about creating an outdoor kitchen? These can be built with attached water taps, gas hobs and even built-in appliances.

Paint it white

Have you ever been on holiday to the Mediterranean and wondered why everyone paints their homes white? There’s a very simple reason: white surfaces reflect heat.

Still, while a full exterior wall painting job for your property might seem like a simple solution, it may not be completely practical, partly because you will struggle to gain planning permission for it! However, painting your roof, or even booking a reflective roof installation service, will deflect a great deal of heat from your property. You could also invest in white curtains and blinds to help reflect heat away from your windows.

As luck would have it, painting your home white also has other advantages. White is a fairly neutral colour that holds a lot of universal appeal. This could, in turn, make your home much more appealing when you come to sell it. White walls can also help to make a room feel warm and open, and the last thing you want on a stuffy day is for a room to feel claustrophobic.

Turn off appliances

In this hot weather, it may be tempting to put off doing chores for as long as possible. You might be glad to hear that you have an excuse: appliances can generate a great deal of heat.

Appliances such as washing machines and dishwashers use a huge amount of hot water , and running them during the hottest parts of the day will raise the temperature in your home. You can avoid this by waiting until the evening and putting them on just before you head to bed.

Cutting down on your appliance usage will also be a big help when it comes to cooling your home. If you have a habit of leaving electronic devices such as computers or televisions on, start switching them off when they are not in use. Instead of using your tumble drier, set clothes to dry on a line outside.

10 ways to beat the tax man for Landlords…

A successful landlord, amongst other things, is a tax efficient landlord. So London based estate agent, Portico, asked the experts for 10 legitimate ways to reduce your tax bill and the results are below.

1. Expense, expense, expense

The first step in making your property tax efficient is knowing what expenses you can offset.

Seasoned landlord, Richard Blanco, has this to say:  “Religiously keep all of your receipts so that you can offset absolutely every expense against your profits. Talk to your accountant about travel costs, certain motoring expenses or types of vehicles that can be set against your profits.”

Here’s a list of some of the most common types of expenses:

• Water rates, council tax, gas and electricity
• Business and contents insurance
• Letting agents’ fees
• Legal fees for lets of a year or less, or for renewing a lease of less than 50 years
• Accountant’s fees
• Rents, ground rents and service charges
• Direct costs such as phone calls, stationery and advertising for new tenants
• The associated costs of running a home office

2. Reduce your stamp duty bill

Richard advises to “Avoid mega stamp duty by extending or expanding your current rental property(ies). Ultimately, the more expensive the property, the greater the theoretical savings.

Now is a good time to extend because permitted development rights are more generous than they have been in the past. However, be mindful of the change in the HMO definition due to come into force in October. From then on, any property with 5 or more sharers will need an HMO license, so if you extend your property and it becomes suitable for more sharers, check it’s up to mandatorily licensable HMO standards. Ask your council’s licensing department if you’re in doubt.

The golden rule for expanding an existing property is that the uplift in value should be more than the cost of the works. There will be a ceiling price for properties in some areas however, which means your property may not increase over a certain price even if you expand it – unless the area improves.  We’re in a tricky market at the moment so do your sums and expect conservative price growth.”

3.  Transfer your assets

Another way to potentially cut your tax bill is to use your spouse’s 0% and 20% tax bands.

Richard explains that “Generally no Capital Gains Tax is payable if you transfer assets to your spouse, plus if their earnings fall into a lower tax bracket you could pay less tax on the rental profits.”

Stamp duty land tax is not payable on the so long as the property is not mortgaged, and the husband or wife who is passing on the property doesn’t want any money for it.

4.  Save when you sell

If you are selling your rental property, make sure you claim all of the available relief.

Richard states: “If you’re a multi-property landlord, it’s often more tax efficient to sell one property in each tax year to take advantage of the 0% CGT band up to £11,300. Effectively this means you can make gains of up to £11,300 in a given tax year without any tax being due.”

5. Landlord Ltd?

Some landlords find it is more tax efficient to manage their properties through a limited company which effectively acts as a letting agent.  The Company could employ the landlord, relative or member of staff to manage the properties.  Richard advises you to talk to your accountant or tax adviser about this before proceeding.

6. Restructure your portfolio

You can also set up an LLP and Ltd company as a way of allowing all finance costs to be set against profits. This is complex and expensive to set up but it might be a positive way forward for landlords with larger portfolios.

Always be wary of spending a lot of money restructuring your portfolio around tax legislation. The government could change the rules in the next budget and you might then kick yourself for spending money on an expensive restructure.

7. Buy property through a company

If you’re thinking of buying property, setting up a limited company is more tax efficient in the sense that all finance costs can be set against profits. Richard urges landlords to “Beware of the extra cost of commercial mortgages.  This could offset any savings you make in tax.”

If you’re considering setting up as a company to save tax, make sure you read and digest our landlord’s guide to incorporation.

8. Remortgage!

Landlord and property expert Mark Lawrinson says that “A great way of cutting your interest costs is by re-mortgaging. Buy-to-let mortgage interest rates have fallen significantly in recent years, so deals currently on the market may well be substantially better than on products arranged a few years ago.”

9. Get your rental property revalued

With large increases in property prices in London, another tip is to get your rental property re-valued. This will make your lender recalculate your loan to value, and a lower loan to value means a better interest rate and a larger choice of lenders.

10. Fill the voids

If your buy-to-let property is empty for any period of time, remember that expenses such as utilities or council tax incurred can be claimed as an expense.

But more importantly, rather than losing money while your property sits empty, why not Airbnb the property until your find a long-term tenant?

Hosts typically earn up to 50% more on a short-term let than a long term-let, and we offer a premium Airbnb Management service in London so we can take care of the whole process. All you need to do is let us know when the property is available and we’ll organise guest bookings, arrange for 24 hour access, take care of cleaning and organising hotel standard towels and linen, and even kit it out with furniture if needs be.

Portico are keen to point out that they do not provide tax, legal or accounting advice and that this material has been prepared for informational purposes only. Please consult your own tax, legal and accounting advisors before engaging in any transaction.

Landlords adapting to controversial tax change

The nation’s landlords are adapting to ongoing restrictions to tax relief on buy-to-let mortgage interest, according to Mortgages for Business.

Upon releasing its latest Property Investor Survey, the firm says landlords’ appetite for further investment has not been dampened.

The proportion of surveyed landlords seeking to expand their property portfolios has grown to 48%, up from 45% in November and 41% a year ago.

Meanwhile when it comes to buy-to-let mortgages, landlords have been increasingly choosing to fix for five years instead of three.

Five-year fixed rates are now the preferred option for 42% of respondents, up from 33% in November and twice the level recorded in May 2016.

Three-year fixed rates are now less popular than ten-year fixes, being chosen by just 5% of respondents – less than a third of the figure recorded a year ago.

Mortgages for Business’ survey was carried out in May and attracted almost 200 responses from landlords and property investors.

“Although we expect buy-to-let lending to reduce somewhat this year, these results demonstrate that landlords are a resilient bunch, capable of adapting their investment strategies to successfully accommodate the new fiscal and regulatory landscape,” comments Steve Olejnik, chief operating officer of Mortgages for Business.

He says that incorporation – which allows landlords to offset the impact of April’s tax changes – has now become standard practice.

Property industry reaction to election result

After a night where we saw the credibility of the pollsters shattered, calls for Theresa May to resign after a crushing defeat, the housing minister losing his seat and a jubilant Jeremy Corbyn high-fiving Emily Thornberry in the breast, we catch our breath and take a look at how the property industry has reacted.

Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “A hung parliament will result in an extended period of uncertainty with decision-making kicked into the long grass. Theresa May is correct – we need a period of stability as that will quash uncertainty which is bad for the housing market – but it is not clear at the moment whether she can deliver it. Stability is crucial in enabling people to make big decisions such as buying and selling property.

The hopelessness we are seeing on the ground about not being able to get on the housing ladder has come through. If there is one message that has come out of this election, it is that the young have voted overwhelmingly for change.

Politicians will have to consider the needs of the young more than they have in the past which could mean more help for first-time buyers, perhaps extending Help to Buy so that it covers older properties as well as new build, dealing with affordability issues and more help on stamp duty.

One thing all the parties agree on is that we need more housing so it has to be a priority for whichever formal or informal coalition is created.”

Russell Quirk, founder and CEO of, comments: “As we awake today to the opposite of a strong and stable administration but to a rather unexpected hung parliament, I fear that the property market’s post-election return to normality that I’d hoped for may be rather further away still.

Political instability breeds procrastination on the part of homebuyers and sellers and for over a year now we have seen the effects of that on volumes, if not so much prices, as a consequence of the EU vote and then the snap general election.

A hung parliament means that Theresa May does not have the mandate that she sought for herself and for a ‘hard Brexit’. Whilst the Conservatives may be able to form a minority government propped up by the DUP in Northern Ireland, we now face the serious prospect of the selection of a new Prime Minister and then, probably, a further general election in the autumn.

So whilst the UK voter may understandably develop electoral fatigue, transactions in the property market may also stay somewhat anaesthetised until it’s re-awoken by something more politically and economically decisive than we have seen over the past 24 hours.
In addition to the prospect of Theresa May being forced out for grabbing humiliation from the jaws of victory, we will also see yet another Housing Minister in post by next week given that Gavin Barwell has just lost his Croydon Central seat.  That’ll be our 6th Housing Minister in almost as many years.

Regardless, I suspect that the housing brief will take a back seat now, despite politicians’ promises in recent weeks, given the combined weight of negotiating Brexit, stabilising our economy, button-holing political support across the aisle on every vote and, inevitably, campaigning again for the next poll.”

Richard Pike, sales and marketing director at Phoebus Software, had this to say: “The election result shows again that nothing is certain in politics.  What we needed was certainty through a majority, what we are left with is further uncertainty through a hung parliament.  The result  could affect  not only domestic policies but the whole Brexit process.

The Conservatives need to form a Government in whatever way it can if it is to be ready for Brexit negotiations to start in ten days’ time and in order to stabilise the economy. Unfortunately until a new Government has bedded in, many areas that we as an industry wanted to see action on such as housing policy, may well take a back seat”.

Charles Smith, managing partner of LREA, had this to say: “Uncertainty is always unsettling for all markets, not least the property market. Despite this, it was encouraging to hear Michel Barnier making considered and welcoming statements this morning about an EU/Brexit deal, a contrast to the previously hard line being issued by the British government.

Any signal of a mutually happy exit deal will be very welcome, especially in the financial services sector, so important to a healthy property market. The next 48 hours will be very interesting.”

John Phillips, group operations director at Just Mortgages and Spicerhaart says, “On reflection, I think the housing market has proved to be pretty resilient, all things considered. This is particularly true in terms of the last year and a half, with the Scottish referendum, the snap general election and Brexit. Although the mortgage market has reported a slight slowdown in the last couple of weeks in the run up to the election, this was to be expected, and now that the great British public has spoken, we must once again keep calm and carry on.

Some buyers and sellers have recently adopted the wait and see approach and it is likely that the market will quieten down again next week while things start to settle down. However, as things start to unravel, I am hopeful that the market will soon get back to the norm. We must also remember that housing demand is still outstripping supply, people still want to own their own homes and lenders are still cutting interest rates. Ultimately it is these strong fundamentals that will continue to underpin the market.”

Nick Leeming, Jackson-Stops & Staff Chairman, comments on the General Election result: “The UK was promised a period of stability but today’s announcement provides anything but at this stage. All markets abhor uncertainty and the housing market is no exception. The priority now must be for politicians to provide reassurance by forming a Government as quickly as possible.

The housing market has already been the recipient of doom and gloom in the news this week and certainty is now required to inject confidence and increase fluidity across all levels.

With Gavin Barwell gone, it will be interesting to see what happens to the long awaited Housing White Paper that disappeared from the scene since its publication in February. Regardless of how the Government is formed, it is clear from each of the main political parties’ manifestos that housing is a priority and so a clear strategy must be put in place to tackle the problems of supply, high transaction costs and affordability.”

John East, Director of KFH Land and New Homes, said: “The property market thrives on confidence and it’s important the uncertainty of a hung parliament is quickly resolved and a clear strategy is set out to tackle housing shortfalls, particularly in London.”

Robert McLaughlin, Sales Director at KFH, said: “It’s important a government is quickly confirmed in order to provide all corners of the economy with confidence. Motivated buyers and sellers have not been put off by the politicking of the last two years and we expect that to continue now the election is out the way.”

Carol Pawsey
, Lettings Director at KFH, said:  “The spotlight is firmly on the rental sector as a key component in shoring up housing supply. The new government, however it is compiled, needs to ensure we have a balanced private rental sector that attracts investors and landlords to the market while looking after the long-term interests of the increasing number of tenants looking for quality long-term rental homes.”

Election and Brexit uncertainty delaying tenant moves, says Landbay

The prospect of today’s General Election as well as ongoing uncertainty surrounding Britain’s exit from the European Union is having a negative effect on tenant demand.

The latest Landbay Rental Index shows that average UK rents grew by 0.02% last month – the slowest pace of growth for over five years.

Figures show that London is leading the slowdown with annual growth in the year to May coming in at -0.94%.

Landbay says that rents in the capital have now fallen for 12 consecutive months thanks to dampened demand and heightened supply.

According to the Index, London was the only UK region to see rents fall in May, but seven out of 12 regions ended the month with a slower rate of growth than seen in April.

Across the rest of the UK, growth in the year to May was 1.62%.

Last month, the best year-on-year and monthly figures were recorded in Scotland at 1.27% and 0.11% respectively.

“The election is one of many external factors influencing activity in the buy-to-let market at the moment,” says Landbay founder and chief executive, John Goodall.

“Yes, uncertainty about the future of the UK will cause some people to delay a decision to move, but affordability pressures are also starting to pinch the pockets of renters across the country.”

“Wage growth is now lagging behind inflation for the first time since mid-2014, and with less money to spend on such a major monthly outlay, renters will be factoring this into their tenancy decisions,” he adds.

“On the supply side, a wave of new rental properties caused by last spring’s hike to Stamp Duty, together with falling house prices, will no doubt both be playing a small part in the ongoing softening of rental growth.”

Goodall says that barring a ‘major surprise’ in today’s election or ongoing Brexit negotiations, long-term population and constructions trends suggest that average rents will soon be growing faster than inflation once more.

Earlier this week, HomeLet reported that average rents fell for the first time in eight years during May.

Should the government consider a stamp duty holiday for first time buyers?

The latest analysis from estate agent, haart, has revealed that across England and Wales house prices fell during March by 0.2% and are down 3.2% on the year. According to the estate agent, average house prices are now sitting at £223,224.

haart’s data showed that new buyer demand for homes fell by 10.1% on the month and is still down annually by 34.6%. Additionally the number of properties coming onto the market has risen by 0.1% on the month, however is down by 23.8% on the year. This month there are 10 buyers chasing every property across England and Wales.

The market has become more efficient this month, as the number of transactions has decreased at a higher rate than the number of viewings has increased. Meaning that buyers are choosing to look at fewer properties before they buy.

The average purchase price for first-time buyers has risen on the month by 7.7%, and 0.1% on the year. This comes as the number of first-time buyers entering the market has fallen by a significant 10.1% on the month, and by 34.6% on the year.

As average purchase prices rises, so does the average amount first-time buyers are paying for their deposit, by 6.3% on the month, however have increased by 3.3% on the year.

The average property price in London has fallen by 1.7% on the month and 0.5% on the year. The annual fall was less than across the UK. The number of new buyers entering the market has fallen by 8.7% on the month, however, is down by 32.3%. At the same time, the number of new instructions has risen 1.4% on the month, however, is down by 28.6% on the month. Sale transactions are up by 5.7% on the month, however are down by 25.1% on the year.

The number of tenants entering the market has dropped this month, by 11.1% on the month, and 30.7% annually. Despite a drop in demand, rents have increased by 1.1% on the month, as the average rent now sits at £1,250 across the UK. Demand in London has also fallen by 4.1% on the month, and by 32.9% on the year. Rents have fallen by 1%, and the average rental price now sits at £1,779 across London.

The number of landlords registering to buy has fallen this month, by 10.4% in England and wales, and by 10% in London. The annual fall is greater, 39.4% and 55.7% on the year respectively. The number of buy-to-let sales rose on the month by 0.1% in England and Wales, but fell by 18.5% in London. This comes as sale prices rose 5.9% across England and Wales, but fell by 2% in London. This is down 2.3% on the year for England and Wales, but up 11.9% on the year in London.

Paul Smith, CEO of haart, had this to say: “Elections usually see a slow-down in the market, and this year is certainly no different. However thankfully this time round the run up period is short, and soon the property market can jump off this latest political rollercoaster and resume activity again.

A General Election should be a good thing in the long run. A clearer vision on Brexit should hopefully allow for a new Government to stop being distracted, and put more pressing issues – such as housing and homeownership – first. As the chronic housing shortage continues to spiral out of control, and the size of deposits and stamp duty continues to soar, purchasing a property remains nothing but a pipe dream for millions. And that is hardly a vote winner.

The Government should be radical and consider:

A Stamp Duty holiday for first time buyers

Incentives for older families looking to move up the ladder

Incentives for older people looking to downsize

These policies would increase fluidity in the market, and free up more properties – ensuring that more people have an opportunity to put roots down in a community and to have somewhere they can truly call home. Clearly there will be an impact on tax take – but new home owners spend lavishly on white goods, carpets and other services which all carry a 20% VAT.”


What is it?
Clause 24 of Finance Act 2015 will stop private landlords from using 100% of their mortgage interest to offset against their tax bill. It will begin to take effect from April 2017 through a staged process with the full effect coming into place by 2020.

How will it affect you?
As an example; if you have a Rent Roll of £125,000 and Mortgage Costs of £50,000 your effective rate of tax will be 52%. That is a tax increase of 173%. In more general terms this means:

  • A possible tax bill even if a private property business makes a loss
  • A tax on revenue NOT profit
  • A possible tax bill equal to 100% of profit
  • An unplanned move from the Basic Rate to Higher Rate Tax Band
  • A sustainable business becoming an unsustainable business.

What should you do?
The “informed” view is that you should transfer to a Limited Company because you will can to continue to offset mortgage interest and suffer only 20% Corporation Tax. There are significant problems with a Limited Company:

  • The transfer will be treated as a disposal for Capital Gains Tax. You will pay 18% or 28% of the gain you have made. The gain will be calculated at Market Value. On a gain on a property of £100,000 at 28% you will pay £28,000.
  • You will pay Stamp Duty Land Tax on the transfer. On an average value of £600,625 for a property based in London this will result in a cost cost of £38,050 per property.
  • You will pay Annual Tax of Enveloped Dwellings (ATED). Recent rules demand that property companies pay £3,500 per annum ATED on a property valued at £500,000 and over.
  • You will not qualify for Business Property Relief for Inheritance Tax. Gifts of assets held in a property company will be subject to Inheritance Tax of 40%. A property with equity of £100,000 will cost £40,000 in IHT to pass on.

Can this really be your only option?
No, you can restructure your property portfolio using a Property Management Company Trust.

The Trust is a structure used by our property investors and owners who wish to protect the income potential of a portfolio of assets.

Using a strategy proven and implemented successfully for over 20 years the assets can be moved – under statutory protection – into a protected trust environment. It has the following features:

  • Assets transferred using statutory reliefs.
  • Involves no “tax avoidance”.
  • Profits generated from protected assets are tax exempt.
  • Does not require a DOTAS reference.

Key features:

  • Initial transfer is free of Capital Gain Tax under statutory reliefs (Section 162 of the Taxation of Chargeable Gains Act 1992).
  • No Stamp Duty Land Tax is applicable as there is no transfer of title.
  • Lenders retain 1st Charge on the property.
  • The portfolio is managed by your property management company (a UK fiduciary company) with full investment powers.
  • Net profits from rent roll pass to the UK fiduciary.

Protect Your Rental Income

Understanding malicious and accidental damage

Any damage to your property is a big problem as a landlord and can lead to insurance claims. There are two main caused of damage, malicious or accidental. It is, therefore, important to know the differences between the two in order to get the right cover from your insurer. Not having adequate cover can leave you with a nasty bill.


What is malicious damage?

Malicious damage is damage caused by either your tenant or their guests intentionally to the rented property. This covers anyone who is lawfully allowed to be on your property.

Malicious damage could include smashed windows, doors or furniture, arson in the property, and graffiti on property walls or furniture.

For malicious damage to be covered by an insurer you must be able to prove that the damage was caused with intent and that it’s been reported to the police. This means you’ll need to provide a crime reference number and police station details.


What is accidental damage?

Accidents can happen. Accidental damage is unintentional and usually occurs suddenly, and can include physical damage and/or loss of function.

Accidental damage could include a ball being kicked through the window, a nail hammered through a water pipe, or falling through the ceiling when in the attic.

There are certain exclusions not usually covered by accidental damage, these include:

  • Fair wear and tear
  • Pet damage
  • Defective design or workmanship
  • Contents damage
  • Damage caused by building works


Can you claim from a deposit for damages in the property?

It is not only insurance cover that you need to be aware of when malicious or accidental damage occurs in a property.

If your property is not returned in the same condition as that at the beginning of the tenancy, and there is evidence of malicious or accidental damage, then you may be entitled to make deductions from the tenant’s deposit. These deductions should always be fair and reasonable and you must allow for fair wear and tear in the property which does not qualify for a deduction of the deposit.

In mydeposits experience, cleaning, damage and redecoration are the most common causes of dispute between a tenant and landlord.


Who is liable for the damage?

Even though malicious and accidental damage to your building has been caused by tenants it will fall to you, the landlord, to pay for any repairs. It is, therefore, vital you have comprehensive insurance cover.

Associate director at Total Landlord Insurance, Steve Barnes, explains the importance of having malicious and accidental damage cover included within your policy.

“Whilst your deposit could cover some of the damage in the event of malicious damage by the tenant or their guests, the likelihood is that the damage will be several times the deposit you have taken.

Understanding malicious and accidental damage