Early Repayment Charge (ERC)
Some lenders may include an Early Repayment Charge to an agreement, so it is important to make sure the borrower is aware of it.
An ERC is charged when the outstanding mortgage balance is paid off before the end of the fixed term or in some cases when there is an excess paid on the set monthly payments.
Electrical Safety
The Electrical Safety Standards in the Private Rented Sector (England) Regulations 2020, require landlords to have electrical installations within their Buy-to-Let property inspected at least every 5 years.
An electrical safety report must be provided to existing tenants within 28 days of the inspection.
Energy Performance Certificate (EPC)
This is a document which determines the energy performance rating of a property.
Currently all Buy-to-Let tenancies are required to have an EPC rating of ‘E’ or above, however this is set to change.
From 2028 new tenancies will be required to have an energy efficiency rating of C or higher, with existing tenancies following suit in 2030.
Fixed-rate mortgage
A fixed rate mortgage means that the interest rate is set for a specific period of time. This can be anywhere from 1-10 years (typically 2- or 5-year fixed terms) and can provide some security as it allows for the borrower to plan ahead and budget accordingly.
Flexible Mortgage
This type of mortgage allows the landlord to be flexible when repaying their mortgage. The landlord can choose to repay more or less than what was initially agreed, it can be used to repay a mortgage in a shorter time frame to reduce the amount of interest charged.
Freehold
Owning freehold means having the ownership of the building and the land which it stands on, outright.
Furnished / Unfurnished
A furnished property will provide tenants with all fittings, furnishing and basic equipment such as beds, sofas, chairs, and dining tables. Small electrical items such as a kettle, microwaves and kettles are also provided.
Unfurnished properties are different as tenants will not be provided with fittings or furniture. However the landlord will still be required to provide certain items, for example ‘white goods’.
Guarantor
This is an individual who agrees to pay for rent if a tenant does not (they are usually a parent or close relative). The landlord can go directly to the guarantor if the tenant fails to provide payment.
A landlord should undergo background checks to make sure that the guarantor is a suitable representative of the tenant.
Holiday Let Mortgage
A type of Buy-to-Let mortgage used to secure properties intended to be used for holiday stays, typically for situations like corporate travel or short holiday getaways.
House in Multiple Occupation (HMO)
This is when a property is let out to at least three tenants who are not from one family. Each tenant will occupy a private bedroom but will share some rooms such as the kitchen, lounge/dining area and potentially bathrooms.
Inventory
This is a list of all the contents in the property, with record of the conditions of the house fixtures (e.g., shelves, hobs, sinks) as well as the condition of the actual property. Keeping records can be invaluable at the end of a tenancy if a dispute should arise.
Joint Tenants
A legal arrangement where two or more individuals share ownership of property. In a joint tenancy, all individuals involved have equal responsibility for the whole property, rather than each having a specific share.
Leasehold
Unlike a freeholder, leaseholders own the property but not the land which it is built on. A lease permits someone to occupy the property, however, once the lease expires the ownership passes to the freeholder.
Before purchasing a leasehold property, it would be wise to ensure that the current leasehold term is sufficiently long to avoid costly extensions in the near future. Also ensure that the lease terms and restrictions are clearly understood, including any obligations related to ground rent, service charges, and maintenance, and that you are aware of your rights concerning lease extensions or purchasing the freehold.
Let to Buy
Let to Buy refers to a situation where a lender allows the landlord to let their current residential property (typically for 12-months), while they purchase a new residential property on a property they wish to live in. This is helpful in situations where a homeowner is finding it difficult to sell their current home or want to turn the first residence into an investment property.
Interest-Only Mortgage
Buy-to-Let interest-only mortgages mean that the borrower only pays for the monthly interest on the loan. The mortgage balance itself is repaid at the end of the term.
Loan-to-value (LTV)
This is the size of the mortgage provided as a percentage of the property’s value. For example, purchasing a property with a 20% deposit would mean a loan to value of 80%.
Mortgage Payment Protection Insurance (MPPI)
This is insurance used to cover the landlord from any risks associated with renting out a building, such as tenants failing to pay their rent or when there is damage done to the property.
Negative Equity
When a home’s value falls lower than the value of the loan originally secured on the property, the home goes into negative equity. This means that the principal amount still owed on the property is higher than the actual value of the property. This typically makes refinancing or selling extremely difficult as the home may have to be sold at a loss.
Non-Resident Landlord (NRL) Scheme
This is a scheme which taxes the UK rental income from people who rent out property but spend more than six months per tax year outside the UK. Tenants and letting agents must also join the NRL scheme if they are dealing with properties owned by a non-resident landlord, otherwise it can lead to tax penalties.
Notice Period
A notice period highlights when a landlord or tenant wants to end a tenancy agreement. Either party must communicate to the other by providing a notice.
Portfolio Landlord
This refers to landlords that have four or more distinct Buy-to-Let mortgaged properties (in the UK) including holiday lets and properties owned by a limited company.
Reference Check
Reference checking is a way of evaluating whether someone will be a suitable tenant for a landlord’s property.
Tenants usually receive a reference from past landlords or from their employers to ensure that they are stable and will be able to afford the rent payments.
Rental Arrears
This is debt built up when a tenant has not kept up with their rent payments. These are ‘priority debts’ and must be dealt with quickly, otherwise the tenant could risk eviction.
Right to Rent
Introduced under the Immigration Act 2014, the Right to Rent is a legal requirement whereby someone must be able to prove that they are in the UK legally, in order for them to be allowed to rent a property.
Section 21
An eviction which landlords can serve their tenants without needing to provide reasoning. It is a legal process where a landlord is retaining possession of their property, however, they may only serve a Section 21 notice when the fixed-term of an agreement is finished or to tenancies that do not involve a fixed end date (known as a periodic tenancy). It must be noted, however, that Section 21 notices will be abolished once the Renters’ rights act comes into full force in May 2026.
Stamp Duty Land Tax (SDLT)
Buy-to-Let properties are always subject to SDLT, unless the Buy-to-Let is the landlord’s first property and they do not own a residential property. For additional properties, including Buy-to-Lets, there is an additional 5% to pay on top of the standard SDLT rates.
More advice on SDLT for Buy-to-Let properties can be found here - https://hoa.org.uk/advice/guides-for-homeowners/i-am-buying/stamp-duty-for-Buy-to-Let/
Standard Variable Rate (SVR)
This is the interest rate change which occurs when the initial mortgage deal period on a fixed rate expires. With an SVR, monthly payments could change going up or down depending on the rate.
This rate changes and is entirely up to the lender but usually it is related to the Bank of England’s base rate.
Tenancy Agreement
A contract between a landlord and tenant establishing the terms of their rental agreement. These are usually written up and put in order before the landlord begins to let out their property. Information is given to the tenant showing what they are responsible for while they are renting the property.
Tenants in Common (TIC)
When speaking of Tenants in Common, ‘Tenants’ refers to the owners of the property, rather than tenants in the modern sense. When two or more entities (individuals or companies) have joint ownership of a property, each individual owns a distinct share of the property. This could be an equal or unequal share. In the event of a co-owner who owns a share passes away, the ownership of the passes down to their beneficiaries in accordance with their will. Ownership will not automatically be transferred to the other owners.
Tenants Fees Act
Established June 2019, this act prohibits landlords and letting agents from charging fees on payments that are not considered as ‘permitted’. Only permitted fees are subject to being charged.
Tenants Deposit Scheme (TDS)
When tenants begin to rent out a property from a landlord, they must usually lay down a deposit. The landlord must protect any deposits by using a government approved Tenancy Deposit Scheme within 30 days of receiving it from the tenant.
Wear and Tear
This is the type of damage, which is caused over a long period of time, which can sometimes be deemed unavoidable (faded curtains, scrapes on the walls).
Landlords generally would not expect a tenant to pay for the cost of any wear and tear damages to their property.
