Legal Landscape - 'What should I consider when purchasing a residential investment property?'

Darren Donnithorne and Stephanie Matthews from Marshall Diel & Myers Limited Property & Estate planning team answer your property related questions and issues in this second monthly edition of Legal Landscape with Marshall Diel & Myers Limited.

Question: What should I consider when purchasing a residential investment property?

Buying a residential investment property is an exciting prospect for your future and, if managed carefully, it can provide a welcome boost to your retirement plans. While rental income is an attractive addition to your bank account, one issue that you must consider is the fact that the role of landlord brings with it considerable responsibility. 

Landlord responsibilities – what are they?

There are many obligations that you will have from the first moment your tenants go through the door of your property, clutching their new keys and freshly signed lease. Here are three of the most important things a landlord needs to consider.

1. It’s not your property any more.

One of the most important landlord responsibilities is to allow your tenant to live in the property without interference and with peaceful enjoyment. 

When you grant a lease to a tenant, you are relinquishing many of the rights to the property to your tenant for a period of time. You cannot go in and out of the property as you wish; in fact you can only access the property under the limited circumstances provided for under the terms of the lease. Typically, this will include a right to inspect for damage and to show the property to perspective purchasers. 

2. You are responsible for keeping the property in good condition

Landlord responsibilities set out in the lease will likely include keeping the structure and exterior of the property in proper repair and being responsible for the installations for the supply of water, electricity, gas and sanitation, and water heating. You will need to comply with local regulations and respond to your tenants’ requests for repair in a reasonable fashion. 

Regardless of the contents of the lease, tenancies for a term of less than three years will be deemed to include the above stated obligations by virtue of the Landlord and Tenant Act 1974. Any statement to the contrary within the lease is likely to be invalid. 

3. You can only evict your tenant in accordance with the lease and legislation.

Under circumstances where you have signed a fixed term lease, e.g. one year, and where your tenant is fulfilling his obligations under the lease, you cannot move him out before the end of the term, unless both parties agree in writing to terminate the lease early. 

In addition, if your property falls under Rent Control legislation, there is added protection for the tenant. For example, even though your tenant may only have signed up for one year, there are provisions in the legislation which may enable him to continue the tenancy beyond the initial term, preventing the landlord from bringing the tenancy to an end, except in specific circumstances – in particular:

  • the tenant’s breach of covenant, 
  • where the landlord requires possession of the property for himself and/or for his family, and
  • where the landlord wishes to undertake rebuilding, works or renovations of a significant character. 

Landlord responsibilities are not the first thing most people think about when they consider investing in property and it is important to realize that if you become a landlord you are taking on legal obligations as well as an income stream.

We recommend that you consult with a legal advisor to ensure that you are familiar with all of the obligations that this new and exciting role brings. With the proper advice and careful planning, landlord responsibilities and your investment property can be efficiently managed. 

This article was written by Darren Donnithorne (Senior Associate & Head of the Property and Estate Planning Team) and Stephanie Matthews (Associate of the Chartered Institute of Legal Executives). 

This column is for general guidance only. It should not be used as a substitute for professional legal advice. Before proceeding with any matters discussed here, persons are advised to consult with a lawyer.

Got Questions? 

If you have any property questions or issues, please contact us at darren.donnithorne@law.bm or stephanie.matthews@law.bm. We would be happy to work with you to help you navigate the legal landscape in Bermuda, and you may even find your question featured on propertyskipper.  We look forward to hearing from you! 

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