Hi all! Hoping to get some advice from my fellow landlords. Apologies in advance for the long post.
I have a small house in East London which I have owned for around 14 years. I initally lived in it for a few years but moved out due work relocation and this became my first BTL! I am now a landlord with other properties, and I consider myself to be fairly experienced in this but by no means an expert! I have good relationships with all my tenants who are generally long-term (at least long-term for London!) and often rent from me for several years at a time. For this East London place, throughout this time, I have maintained it to a reasonable condition e.g. new appliances when required and the odd plumbing / repair jobs but I have not done any major renovation to it due to the fact it didn’t really need it before and it is always occupied by tenants who were fine with it. However, over the years and with general wear and tear, this property is getting to the point where it’s looking really dated. The carpets are threadbare, walls are scuffed and some flaking, creaky floorboards, bathroom tiles starting to crack and leak, etc so I think I will need to do major renovation sooner rather than later - new bathrooms, new kitchen, new flooring, replastering and repainting - everything really! I have done similar renovations on other properties but only in between tenancies i.e. void periods. My rent is around 30% lower than market rate to reflect the condition of the property. I am thinking of getting it renovated to a good standard and then hopefully rent it out at the higher market rate, or possibly sell it. I’m aware I can use improvements to the property to offset some of my CGT which is another consideration if I were to sell.
Has anyone been in a similar situation, i.e. your property is still tenanted but you wish to renovate it? I can’t see how my tenants could stay while these works are happening, and I am concerned about this factor. Would you issue S21s to the current tenants? Or just keep going and maintaining as it is, as long as tenants are happy? Would you consider selling the property as is, rather than renovating, as some local estate agents have advised me? Thanks!
I am a builder and have renovated plenty of places for myself , customers and landlords I feel its better to keep a place as I can pass it on to my kids. I renovate when empty or a tenant dies. If you can do it with them in and they do not mind I would do it. But if you say the rent will go up on completion they may not be so keen !! Only you can decide really
They sound like repairs to me, ie putting the property back into the condition it once was. In which case, they would be deductible for income tax.
If they were improvements (eg an extension or adding extra kitchen units etc), then they would offset against CGT.
Just because you do work just before you sell doesn’t make it capital.
I have known HMRC to argue the case and we had to demonstrate that we had we extended and added significantly more kitchen units before they would allow even a proportion of the costs to be treated as capital gains deductible.
Thanks Cath, good to know. Normally I’m always buying rather than selling so CGT wasn’t something I had looked at before but I definitely should. I can’t imagine it was easy having to demonstrate to HMRC what was repairs vs improvement! I’m currently looking into whether I can claim any private residents relief for the period I lived in it. Makes for great bed time reading
It would be hugely disruptive for the tenants, who would be within their rights to decline the works. If they do agree, they may ask for a rent reduction and could even change their minds mid build.
Hi David, yes agreed the works would be very disruptive, which is why I was considering issuing S21 to tenants before starting the works. I’d love for them to stay (as they would) but I’m concerned that at some point without doing major works, I may not be able to comply with the landlord’s statutory repairing obligations around keeping the structure in good order. Thoughts?
No, they did away with that a few years ago. Just the period that you lived in it and the last 9 months now (think it’s 9 at the moment - they keep changing it).
Speak to your tenants first, leaking items need immediate repair as will anything dangerous or concerning.
Even if the tenants agree to moving out, the prices of other properties will be quite a hit for them and they may have to move further out or a smaller rental. All of this very stressful for them.
Doing major repairs as you list really needs to be done when the property is empty. These will all be tax deductible and lower your over all tax bill. Only added items will go towards CGT.
So the real question is other than immediate repairs do you need to do more?
You may and should increase the rent to align to inflation and any additional maintenance costs which you consider will dent your income. It may even help the tenants decision.
With the recent massive increase in labour and material costs you should keep an eye on your budget very closely. Also if your tenants leave, project managing, coordinating workmen and available materials needs careful crafting to avoid longer property voids.
Hi Brian, thanks for this. Yes agreed re: leaks being urgent, and fortunately I’ve managed to get those repaired shortly after the tenants notified me that was happening. In terms of other immediate repairs, I’m also getting a new front door and garden gate as they’re all on their last legs through usual wear and tear over the years, plus replacing the fuse box in line with regs. The other things I want to do aren’t immediately necessary I suppose, but something will need to be done at some point in the near future… So while the property is functional and safe, it is all looking very tired now - paint peeling off the walls and ceilings, creaky and marked floorboards, kitchen and bathrooms very dated, that sort of thing.
The intention of the refurbishment is definitely not to stress my tenants, I’ve actually held off from doing anything major to avoid inconveniencing them. The intention was more to bring the condition of the property up to a higher standard, similar to that of my other properties, and also to make sure I’m meeting my legal obligations to maintain/repair (I’m paranoid about falling ceilings ha!). I have refurbished other properties when they were empty. Unfortunately, this particular property has been rented non-stop for well over a decade now so I’ve not had the opportunity to do any major works.
Anyway I’ll discuss this topic with the tenants this week… I’ll let you know the outcome!
