Dreaming of a holiday home? Sort out the legals before putting your feet up
Are you are dreaming of owning a property where you can get away from it all? Somewhere for weekend breaks, a few weeks in the summer or New Year with friends? A holiday home offers an ideal retreat, and also a potentially profitable investment opportunity.
Whether you are considering a purchase for your own private use or to provide rental income, Teresa Scoular, Senior Conveyancer with Parnalls Solicitors in Launceston explains that there are several important legal issues to consider.
Private bolthole or rental investment?
One of the first things to think about is how you plan to use the property. Given the costs of owning a second home, including higher stamp duty, many holiday home owners rent out the property when they are not using it. If the property is going to be offered as a holiday let, you need to make sure you have a suitable holiday letting agreement. You must also make sure you comply with your obligations as a landlord, especially around fire safety and potentially hazardous facilities such as a swimming pool or Jacuzzi.
Holiday let mortgages
If you need a mortgage to purchase your holiday home, you will need a specific holiday let mortgage. Buy-to-let mortgages, which give the tenant the right to live in the property for a fixed number of months, do not allow for short-term holiday lets or for seasonal fluctuations in rental prices. The mortgage lender will consider both your income and the rental income from the property, and will usually require that the property is let for a minimum number of months during the year. Typically, the forecast rental income will need to cover the mortgage interest payments by at least 125 per cent.
Your mortgage lender will require you to take out suitable insurance cover. Standard buildings and contents insurance policies will usually exclude properties that are empty for more than 30 days at a time. You will need special holiday home insurance which covers things like loss of rent and damage by tenants. It is also advisable to take out public liability insurance which will cover you if anyone is injured while staying in your property. Your solicitor can advise you on this as well as the need for legal expenses insurance to cover any disputes with tenants.
Planning and rates
If you are offering the property as a holiday let for the first time, planning permission may be required for a change of use. There may also be specific local planning restrictions which must be followed. For example, in St Ives in Cornwall recent legal changes mean that any new build property must be bought and continue to be owned for full residential use, restricting the development of new holiday homes. If your property is available to let as a holiday home for 140 days or more during the year, it will be classified as a self-catering property and therefore valued for business rates rather than council tax.
There are various tax considerations when buying a holiday home, so it is important to take advice at an early stage. The stamp duty surcharge introduced in 2016 applies to additional residential properties and is charged at an extra three per cent in each stamp duty band. Unlike standard stamp duty which applies in tiers, the surcharge applies to the entire purchase price. Any additional residential property bought for £40,000 or more will be caught, including holiday homes in the UK or abroad, and you will have to pay the tax even if you just buy a share in a property as long as your share is worth at least £40,000.
On the positive side, income from a holiday home is taxed more favourably than income from property let to long-term tenants. Holiday lets are treated as a trade for tax purposes, so mortgage interest costs can be deducted from rental income. There are strict rules on what qualifies as a holiday let. For instance, the property must be available for at least 120 days a year and must be let for at least 105 days. Importantly, it must be let commercially, which means you cannot include any days that you let the property to friends and family for free or at reduced rates.
If you require advice on the purchase of a holiday home, or any other conveyancing matter, please contact Teresa Scoular, Senior Conveyancer with Parnalls Solicitors on 01566 772375 or email email@example.com
Coronavirus (COVID-19) and Commercial Property Legal FAQs
Rent Charge Suspensions: Protecting Your Interests
Been Asked to Sign an Employment Settlement Agreement? Seek Advice Urgently...
Services Update: Continuity of Legal Service Provision
Advising You in Uncertain Times
Could carelessness on social media land you in court?
Is an electronic signature on a commercial property document acceptable?
What happens when there is no health & care LPA in place
Social Media Training for Businesses
Information to gather for your probate solicitor
Gazundering, what it is and how to avoid it
Relief from forfeiture – what happens if the tenant forgets to pay the rent?
Not so safe at work - compensation for an accident at work
New organ donation law: giving you control
Running a business from home
Have nude photos of you or your teenager been posted online?
Landowners’ rights and the Electronic Communications Code
Building in your back garden
Christmas is a time for giving (and inheritance planning)
Buying the freehold of your leasehold house
Redeveloping an empty pub for commercial use
Why it takes time to obtain the Grant of Probate
Social Media: The unconscious privacy threat
Is your reputation being threatened?
Making a will after your spouse or partner has died
Interns celebrate completion of internship at solicitors
Selling your home in a flat market, some top tips
Claiming compensation for a serious road traffic accident
New Media and Communications Court list reflects surge in internet defamation claims by Laura Baglow
Has your personal information been shared without your permission?
Planning your escape to the country, what you need to consider – part 2
Government consultation on new national model for shared ownership
Choosing a partnership structure
Planning for what happens when you die by Deborah Adams
Changes to legislation could offer protection for tenants in the private rental sector
Move to the country - Part One
The risks of DIY probate
Will your septic tank still be legal in January?
The death knell for ‘kiss and tell’?
Making a will when you retire
Selling your property at auction
Not looking so good - your guide to compensation for botched non-surgical cosmetic procedures
New threshold of seriousness in defamation proceedings
Legal considerations when building a granny annex
Choosing the right person for your power of attorney
Formal Interviews - Do you need legal representation?
Privacy rights and aerial images
Trustees’ duty to give information to beneficiaries
Five problems with a leasehold property
Taking your first commercial lease
Is your organisation protected from employee social media legal risk?
Have you been targeted by negative social media posts?
Farmers be alert when being inspected
Help for House Sellers?
Don’t let your digital assets end up in a digital grave
Valuing an estate for probate
Development proposals and your local authority search
What can you do if your child is injured in a serious accident
NetRights welcomes new protection for social media users
SHOULD I GET A LAWYER FOR A SPEEDING OFFENCE?
Supreme Court recognises that social media is a “casual medium” in libel battle
Choosing the best conveyancer who is right for you
Making a will after a second or subsequent marriage
Option or promotion agreement – which is best for landowners?
Anonymous pub and restaurant online reviews leave a bad taste
Have you had an accident involving a horse?
Help to Buy – beware of some cracks in the structure
Understanding Lasting Powers of Attorney
Changes to Energy Performance Certificate for Landlords
Had a cycling accident? Your route to obtaining compensation
New year, new home: tips to sell your home in the New Year
Tax Planning for your inheritance
Hearing loss: when your employer may be liable
Buying a home for your retirement, five things you need to consider
Farmers plan to diversify after Brexit
Ministers press ahead with probate fee shake-up - reports BBC News
Botched dental treatment? You may be entitled to compensation
Why a Health and Welfare Power of Attorney is a good idea
Will the new charge on building developments in Cornwall affect you?
Energy Performance Certificates – Do They Matter?
HMRC Challenging Stamp Duty Land Tax Payments
Ben Mitchell qualifies as a solicitor
The potential implications of Brexit on employment law
Appointing a guardian for your children
Houses in multiple occupation – new rules from October 2018
New Agriculture Bill published
Will Brexit affect my pension?
Dreaming of a holiday home? Sort out the legals before putting your feet up
Lasting Power of Attorney by Deborah Adams
Settled status after Brexit by Alexis Hager
How to choose an executor to administer your estate when you die
How overage agreements can boost profits from your land
Top tips for first-time buyers
How Could Brexit Affect My Farm?
Wills & Succession in Spain by Deborah Adams
Brexit – an international and local view by Alexis Hager, Litigation
Capital gains tax - important facts for non-residents of the UK
Buying a home: the importance of making sure the seller is entitled to sell
Changing a will after someone has died: it is possible and it could save you money
Your responsibilities when you have people working in your home
Sad passing of Battle of Britain pilot who served with Parnall family member
Considerations when buying a heritage property
Disciplinary proceedings at work: guide for employers
Employers should have a disciplinary process in place, but just following this may not be enough to avoid falling foul of the law and exposing yourself to the risk of an employment tribunal claim.