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The rise of Britain's 'part-time' landlords

Press release: 01/12/2014

  1. One in twenty (7%) British adults now rents out a property to supplement their main income.
  2. These landlords receive £678 in rent each month on average, equating to nearly £28 billion a year across the country.
  3. Almost 500,000 landlords have not had their property checked by a gas safety engineer in the last twelve months, risking prosecutions and fines of up to £20,000.
  4. Almost a third (32%) of landlords have had their property damaged at some point, which has cost them £1,200 on average to repair

Britain is seeing a boom in ‘part-time’ landlords where people are letting properties on the side to boost their main income, according to new research from LV= landlord insurance.

Over one in twenty (7%) British adults rents out a property to supplement their income and receives an average monthly rent of £678, equating to nearly £28 billion a year across the country. Landlords in London and the South East collect the highest rents at £1,079 and £816 respectively, followed by the West Midlands (£678) and East Anglia (£676). Approximately 60% of this is spent on borrowing costs, management fees and maintenance costs, leaving landlords a healthy pre-tax profit of 40% on average.

A set of house keys and a LET house shaped keyring

The trend is mainly being driven by people moving to a new home and then renting out their old one. In fact, over half (55%) of these landlords are renting out properties that they never intended to, often because they wanted a bigger property (15%), they had to move for work (10%) or they wanted a garden (8%). One in twenty (6%) landlords say they ended up renting out a property because they moved in with a partner and did not want to sell or couldn’t sell their own.

Whatever the reason for letting out a property, all landlords must comply with current regulations on rented homes. By law, all landlords must ensure that gas and electrical equipment is installed and checked annually by a registered engineer. Tenant deposits must be held in a deposit protection scheme and some local authorities insist that landlords in their area obtain a licence.

A managing agent will usually take responsibility to ensure that all legislation is complied with for a fee, as well as check tenants and manage the rent collection. However, nearly half (49%) of today’s part-time landlords manage their rental property themselves and do not have such protection. Of those managing their properties directly, over a quarter (27%, equivalent to nearly 500,000 landlords ) have not had a gas safety check in the past twelve months and risk being prosecuted and fined up to £20,000.

As well as risking fines from the local authority, landlords could find themselves heavily out of pocket should one of their tenants make a claim against them. Slips and trips can result in expensive compensation claims for property owners who are liable for any harm to a tenant or member of the public as a result of the condition of the property. For example, a landlord could be sued by someone who falls and is injured because a pathway has not been maintained. Landlords can also be liable for damage to adjacent properties, such as an overflowing gutter causing water damage to a neighbouring house. Analysis of LV= data shows that the number of liability claims being made against property owners has been steadily increasing in recent years, which can be attributed in part to Britain’s growing compensation culture.

The insurance needs of a rented property are very different to those of an owner-occupied home and standard home buildings insurance will not usually cover homes that are tenanted. Almost a third (32%) of landlords say their rental property has been damaged at some point and has had to be repaired, which has cost them £1,200 on average. Of those who have had their property damaged, the main cause has been damage by tenants (44%), followed by flooding (17%) and storm damage (8%).

One in five (19%) of those who rent out houses – equivalent to over 400,000 landlords - do not have appropriate insurance in place and might not be covered should the worst happen. LV= landlord insurance has been designed to cover a range of scenarios for rented properties and to provide peace of mind to landlords in case things go wrong.

Renting out a property can be a great way to cover your costs if you are unable to sell or want to hold on to a home and make some extra money from it, but it is not without risk. Landlords not only need cover for any damage to their property but they also need to think about their tenants and how they will house them if the property becomes uninhabitable, as well as the lost rental income. If you are thinking of renting out a property you should check the current regulations for letting properties in your area and make sure you have the right cover in place.

John O’Roarke, Managing Director of LV= landlord insurance

Notes:

The research was conducted by PCP Research and commissioned by LV= landlord insurance. PCP questioned 2,278 UK adults including a bespoke sample of 209 adults who own one or two rental properties that they do not live in. The research was carried out between 6 and 15 October 2014.

  1. According to ONS the GB adult population is (48,649,309). According to PCP research, 7% of these rent out one or more two properties to supplement their income (3,405,452) and receives an average monthly rent of £678, equating to nearly £28 billion a year across the UK GB.
  2. Source: PCP research. Landlords receive an average monthly rent of £678 and say that £274 of this is profit (40%) after costs such as borrowing, management fees and maintenance.
  3. Landlords are responsible for keeping rented properties safe and free from health hazards; making sure all gas and electrical equipment supplied is safely installed and maintained by a Gas Safe registered engineer; having a registered engineer do an annual gas safety on each appliance and flue and giving the tenant a copy of the gas safety check record before they move in, or within 28 days of the check; as well as other obligations. Source: https://www.gov.uk/private-renting/your-landlords-safety-responsibilities.
  4. According to ONS the GB adult population is 48,649,309. According to PCP research, 7% of these rent out one or two properties to supplement their income (3,405,452) and of these 49% do not use a managing agent (1,668,671) and 27% of these say they have not had the gas equipment checked and maintained by a registered engineer in the past twelve months or are not sure they have, equating to 450,541 landlords.
  5. Landlords who fail to get an annual gas safety check risk being prosecuted, face imprisonment or a fine of up to £20,000, or both, for each offence. If the case is then referred to the Crown Court the maximum penalty may be imprisonment, or an unlimited fine, or both. http://www.hse.gov.uk/pubns/indg285.pdf.
  6. Source: PCP research. Landlords who paid out to repair their rental property after it was damaged say the average cost is £1,216.
  7. Source: PCP research. 32% of landlords have had their property damaged at some point. Of these, 44% say it was damaged by tenants, 17% by flooding and 8% by storms. 30% say that there property was damaged in some other way that was not classified.
  8. According to ONS the GB adult population is 48,649,309. According to PCP research, 7% of these rent out one or two properties to supplement their income (3,405,452) and of these 67% rent out houses (2,281,653). Of these 19% of these have standard home buildings insurance, not landlord insurance, which will not usually cover tenanted properties. This equates to 433,514 landlords.

For further information please contact:

Vanessa Chance, vanessa.chance@lv.com, 0208 256 6996 / 07947 380074


LV=

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When we started in 1843 our goal was to give financial security to more than just a privileged few and for many decades we were most commonly associated with providing a method of saving to people of modest means. Today we follow a similar purpose, helping people to protect and provide for the things they love, although on a much larger scale and through a wide range of financial services including insurance, investment and retirement products.

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