FREQUENTLY ASKED QUESTIONS

The UK government is introducing new regulations for Serviced Accommodation (SA), including a proposed requirement for planning permission under a new Use Class C5. Existing compliant SAs will receive “grandfather rights,” but new SA landlords must seek approval. Regulations will vary by local authority, with stricter controls in high-tourism areas. Failure to comply could result in fines or closure. While some landlords may exit due to added costs, reduced supply could lead to higher prices and profitability for those who remain. More details on the licensing scheme are expected in the coming months.

As of October 1, 2023, new fire safety regulations apply to all Serviced Accommodation (SA) properties in England & Wales. Key requirements include:

• Fire Risk Assessments: All properties must have a written fire risk assessment, either conducted by a knowledgeable landlord/agent or a qualified assessor.

• Fire Protection Measures: Properties must have thumb turn locks for easy exit, emergency escape lighting, fire blankets/extinguishers, interlinked smoke and heat detectors, and solid 44mm doors or FD30 fire doors for compartmentation.

Non-compliance could result in penalties. Landlords should ensure full compliance to protect guests and avoid legal issues.

Landlords need insurance to protect against risks like property damage, loss of rental income, and liability claims. Here’s a breakdown of essential coverage:

✅ Building Insurance – Covers structural damage from fire, floods, storms, and vandalism. ✅ Contents Insurance – Protects furnishings and appliances you provide. ✅ Loss of Rent – Compensates for income loss if the property becomes uninhabitable. ✅ Liability Insurance – Covers legal and medical costs if a tenant or visitor is injured. ✅ Malicious & Accidental Damage – Protects against intentional or accidental tenant damage. ✅ Legal Expenses – Covers costs for evictions or tenant disputes. ✅ Alternative Accommodation – Funds temporary housing for tenants during repairs. ✅ Rent Guarantee Insurance – Ensures rent is paid even if tenants default.

Common Insurance Claims

1️⃣ Storm damage to the roof. 2️⃣ Fire caused by tenants. 3️⃣ Theft and vandalism. 4️⃣ Tenant injury lawsuits. 5️⃣ Loss of rent due to major repairs. 6️⃣ Eviction legal costs. 7️⃣ Burst pipes causing water damage.

To understand the tax benefits of Serviced Accommodation (SA), we need to go back to the Summer 2015 Budget, when the government restricted the tax relief that Buy-to-Let (BTL) landlords could claim on their mortgage interest. This was a game-changer for property investors, as it significantly reduced the profitability of traditional BTL investments.

In response, many investors shifted towards Serviced Accommodation, where they could still claim full mortgage interest relief as a deductible expense. At the same time, platforms like Airbnb and Booking.com were growing in popularity, making short-term lets a more viable and profitable alternative to long-term rentals.

Beyond tax benefits, SA also offers:

• Higher rental income – SA properties often generate more revenue than traditional lets.

• Greater flexibility – No Assured Shorthold Tenancy (AST) contracts, meaning no long-term tenant obligations or eviction concerns.

• Multiple guest markets – Investors can attract both holiday guests and contractors working away from home, maximising occupancy.

One critical financial consideration for SA investors is VAT (Value Added Tax).

If your annual turnover exceeds £85,000, you are legally required to register for VAT. This can impact pricing strategy:

• Many SA operators initially set their nightly rate at £100, assuming full profit.

• After VAT registration, they must charge 20% VAT, reducing their earnings to £83.33 per night (with £16.67 going to HMRC).

• If they increase prices to £120 to cover VAT, they risk losing guests to competitors offering £100 per night.

To avoid unexpected issues, investors should:

✅ Plan pricing with VAT in mind from the start – Ensure your business is profitable at £83.33 per night. ✅ Keep turnover below £85,000 – Some investors strategically cap their revenue to avoid VAT registration. ✅ Consider business structure – Consulting a property tax accountant can help determine if a Limited Company structure is beneficial for your SA business.

Crewe is a growing investment hotspot due to its strong rental demand, affordable house prices, and major regeneration projects, including the HS2 hub. The town offers high capital appreciation potential, diverse investment strategies (SA, HMO, BTL), and strong tenant demand from professionals and contractors. Its excellent transport links, major employers like Bentley Motors, and improving amenities make it an attractive location for investors.

Serviced Accommodation (SA) is becoming a popular choice for landlords seeking higher returns and more flexibility. With the rise in demand for short-term stays, especially from contractors and business professionals, converting a property to SA can offer several benefits. Here's why it might be the right move for you:

1. Higher Rental Income: SA properties often generate more income than traditional rentals by charging nightly rates. They appeal to contractors, business professionals, and leisure travelers.

2. Flexibility: Landlords can control availability, making it ideal for second homes or frequent travelers.

3. Easier Eviction: SA hosts have more flexibility in ending a guest's stay compared to long-term rentals.

4. Better Property Management: Properties are cleaned and inspected regularly, helping identify issues early and maintain quality.

5. Shorter Tenancy: SA's allow for shorter stays, giving landlords more control over access and adjustments.

6. Reduced Rental Arrears: Guests typically pay in advance, reducing the risk of arrears.

7. Tax Benefits: SA properties may offer tax advantages like capital allowances and mortgage interest relief, but consult a tax professional for details.

• Access to Off-Market Deals: Property sourcing agents typically have access to exclusive off-market deals, often leading to lower prices, more flexibility, and less competition.

• Negotiating the Best Price: Sourcing agents bring experience and knowledge to negotiate better prices, helping you secure a better deal and potentially covering their fees.

• Time-Saving: Searching for properties and arranging viewings can be time-consuming. A sourcing agent provides a shortlist of the best options, saving you time and effort.

• Professional Network: They have a network of trusted professionals (surveyors, conveyancers, solicitors), ensuring a smoother purchasing process.

• Local Knowledge: Property sourcing agents often have in-depth knowledge of the area, including which strategies work, areas to avoid, and local amenities.

• Risk Mitigation: Experienced agents help minimise investment risks by identifying potential issues, such as legal or structural problems, before you proceed with a purchase.

• Sourcing Fees: Sourcing agents charge fees, which can reduce your ROI and increase the upfront capital required for your investment.

• Limited Availability: Agents may not always be available, and you may have to wait to work with them if they are at full capacity.

• Potential for Fraud: There’s a risk of dealing with an illegitimate agent, so it’s essential to verify their compliance and credentials before proceeding with a deal.

• Limited Area Knowledge: Agents usually specialise in specific areas, meaning you may need to work with multiple agents if you want to invest in different locations.

• Lack of Transparency: Some agents might exaggerate the deal to secure their fee quickly. It's important to educate yourself and verify the details of a deal to avoid being misled.