Currently, landlords can claim a 10 per cent wear and tear allowance if they rent a fully furnished property. This allowance covers the annual cost of replacing items such as beds, curtains, carpets and moveable furniture. This is soon coming to an end though, as it was announced in the summer budget that from April 2016, the current 10 per cent wear and tear allowance would be replaced with tax relief which will enable landlords to deduct the cost of replacing furnishings. However, the initial cost of furnishing the property will be excluded from this tax relief.
This change could lead to an increase in overall property maintenance costs, which landlords need to be ready for. But what can landlords do to prepare themselves for this change and the added costs it could bring?
Understanding what constitutes fair wear and tear
The legal definition of fair wear and tear is “reasonable use of the premises by the tenants and the ordinary operation of natural forces.” Unfortunately, this can cause some confusion, and can often be left up to interpretation. Because of this, landlords will often call on a third party to assess the property for wear and tear before and after a tenancy.
When assessing a property for wear and tear, there are a number of factors which need to be taken into consideration, including: the quality of the item in question, the age of the item, the condition at the start of the tenancy, the condition at the end of the tenancy, the usual life expectancy of the item, and the length of the tenancy.
Even with the current wear and tear allowance and planned tax relief, refurbishing a property after long term tenants can still involve a significant financial investment. It is essential that landlordsplan ahead and take any potential maintenance and refurbishment costs into account when assessing their finances. By saving small amounts throughout the year, landlords can start building a property maintenance fund, which can then be used for any work that’s required in the future.
Saving towards a property maintenance fund can also help to protect landlords against the added cost of initially furnishing a property, which will not be covered in the new tax relief.
Getting a property back on the market
After long term tenants move out of a rental property, it is the landlord’s responsibility to ensure the property is prepared for the next tenants as quickly and efficiently as possible. More often than not, this will include some refurbishment work, to guarantee the property is maintained to a high standard.
However, as long as a property is without tenants, a landlord will be losing money. This is why landlords should aim to keep the void periodsbetween tenants as short as possible by ensuring any necessary work is done quickly and efficiently.
Protecting your investment
It is quite common for landlords to include certain cleaning and maintenance clauses in tenancy agreements, with tenants being expected to return a property in the same condition they received it in. Some landlords will even stipulate in a contract that tenants must have the property professionally cleaned before they leave. If tenants don’t meet the requirements set out in their contract, a portion of their deposit can be withheld to protect landlords against the costs incurred by any cleaning or repair work.
Keep an inventory
When renting out a furnished property, it is vital that landlords include a detailed inventory. Before a tenant officially moves in, they should complete the inventory with the landlord or a third party, noting what furnishings are present and the condition they are in. A second inventory should then be completed at the end of the tenancy, to make sure everything has been returned in the same condition. Having this inventory signed by both parties will ensure there is no confusion or disagreement when the tenancy comes to an end.
Undertaking some moderate refurbishment and redecoration work in between tenants is an excellent way of making a property more attractive to potential new tenants, while also allowing landlords to command a higher rental value for their property.
Depending on the state a property is left in and the amount of work that is required, sometimes there is a need to call in professionals to complete the work. The decision on whether or not to do this is down to the individual. However, sometimes it could be more cost effective to pay a professional, when you take into account the size of the task, the time it would take and the cost of equipment and supplies needed.
If landlords have a property maintenance fund they can access in these situations, they can hire professionals to complete any work quickly and to a high standard. This will have a positive effect on the look and feel of the property and, in turn, it’s market value.
Aldermore offer a full range of variable and fixed rate Buy to Let mortgages. Get in touch with the team today to find out more.