If you are thinking about buying a holiday home it is important to do your homework on the legal implications. Here are some useful tips from experienced holiday home solicitors.
Second home or investment opportunity?
The first thing to consider is whether you are buying your holiday home to use exclusively as a private second home or whether you intend to rent it out as a holiday let.
If you are going to get involved in holiday letting then additional legal considerations will arise.
Letting out your holiday home
First, you need to consider the legal duties and obligations that will fall on you as a landlord. This includes ensuring that you have adequate fire safety precautions in place and facilities like swimming pools are safe for guests to use.
Useful resources can be found online, such as this Fire Risk Assessment from Visit Britain.
Your solicitor will need to consider whether planning permission is required for a change of use. Specific local planning restrictions may also be relevant and will need to be checked. In Thurlestone, Devon for instance, new-builds cannot be sold as holiday homes. This should be less of an issue for established holiday homes.
Marketing your holiday home
You will also need to think about where your bookings are likely to come from. Will you be marketing the property yourself, using an agency or perhaps letting it through Airbnb? It might be worth seeking to an agent before you buy to get a feel for the market in terms of demand and income potential.
Holiday home mortgages
If you are buying your holiday home with the aid of a mortgage, you will need to disclose the circumstances to your lenders. Buy-to-let mortgages won’t generally be suitable for the purchase of a holiday home. If you are proposing to offer it as a holiday let, lenders will generally look at the projected level of rental income to ascertain that it will comfortably cover your mortgage interest payments.
Holiday home insurance
It is important to ensure that appropriate insurance cover is in place. This cover needs to be acceptable to your lenders. Special holiday home insurance is widely available. It takes into account the fact that the property may be left unoccupied for extended periods and can include cover for loss of rent or damage by tenants.
If you are letting out the property then you should ensure that public liability insurance is included so you are covered if anyone suffers injury while staying at your holiday home.
Holiday home tax liability
Holiday homes that are available for letting will be liable for business rates rather than council tax if classified as a self-catering property.
Consideration also needs to be given to stamp duty. Additional residential properties, including holiday homes, can be charged an extra 3% in each stamp duty band in relation to the whole purchase price. Your solicitor will provide you with a stamp duty calculation at the outset so you know how much you are going to have to pay.
Income from a holiday lets is currently taxed more favourably than income from residential letting. Mortgage interest costs are deductible from rental income if the lettings satisfy the criteria. Again your solicitor will be able to advise you on the likely tax considerations for the property you are buying.