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    • Marmotta
    • By Marmotta 4th Dec 17, 8:10 AM
    • 13Posts
    • 0Thanks
    Marmotta
    Few questions about renting a flat from a friend
    • #1
    • 4th Dec 17, 8:10 AM
    Few questions about renting a flat from a friend 4th Dec 17 at 8:10 AM
    I'm going to be moving back to London next month and looking for a 1 bed flat. I have a friend who is looking to move out of his 2 bed flat which he owns in order to rent something with his girlfriend closer to her workplace and he suggested I move in there, which would work out pretty well for the both of us, but I don't think he's really looked into the financial and legal implications and is under the assumption I can just give him a bit of cash and be done with it.

    I have mentioned it would probably be better in the long run if we set it up as a proper landlord/tenant structure with a tenancy agreement in place, as he'd likely have to do so anyway if he wanted to keep the property if/when I leave or don't move in in the first place. If he was to do so, would the cost of mortgage, landlord's insurance, etc be deductible against the rental income? i.e. if I pay him just enough to cover costs, would he need to pay any additional taxes, although I'd assume he'd still need to complete a tax return regardless. Would it be necessary or effective to set up a separate limited company for the rental? As he still has a pretty decent chunk of the mortgage left to pay on the property, would he need to reach an agreement with his lender about the change of use of the property?

    Alternatively (and this is the slightly dodgier route), would he be able to take me in as a lodger, still legally reside at the property, but essentially be absent if his new place is in his girlfriend's name? This is an unlikely scenario anyway, as it would leave one room unoccupied, which I don't think either of us could really afford.

    Any thoughts would be appreciated
Page 1
    • theartfullodger
    • By theartfullodger 4th Dec 17, 8:25 AM
    • 9,117 Posts
    • 12,084 Thanks
    theartfullodger
    • #2
    • 4th Dec 17, 8:25 AM
    • #2
    • 4th Dec 17, 8:25 AM
    .....Alternatively (and this is the slightly dodgier route), would he be able to take me in as a lodger, still legally reside at the property, but essentially be absent if his new place is in his girlfriend's name? This is an unlikely scenario anyway, as it would leave one room unoccupied, which I don't think either of us could really afford.....
    Originally posted by Marmotta
    Slightly dodgier? Sounds like fraud to me, by both of you, a criminal offence.

    Others may hold alternative views..
    • greendoor665
    • By greendoor665 4th Dec 17, 9:12 AM
    • 44 Posts
    • 91 Thanks
    greendoor665
    • #3
    • 4th Dec 17, 9:12 AM
    • #3
    • 4th Dec 17, 9:12 AM
    He can't "legally reside" there if he doesn't live there. Occupation is taken on facts, you can't declare you live somewhere else when you don't.
    • Marmotta
    • By Marmotta 4th Dec 17, 10:42 AM
    • 13 Posts
    • 0 Thanks
    Marmotta
    • #4
    • 4th Dec 17, 10:42 AM
    • #4
    • 4th Dec 17, 10:42 AM
    Slightly dodgier? Sounds like fraud to me, by both of you, a criminal offence.

    Others may hold alternative views..
    Originally posted by theartfullodger
    It would essentially be a case of him spending a lot of time round his girlfriend's place. Obviously I wouldn't entertain it at all if there were other implications or if he attempted to make money from the other room. As mentioned, it's very unlikely anyway, as I probably couldn't cover the costs for the whole place and he'd be unwilling to lose money on the property. Any views about this are more for his benefit, as I think it's the sort of arrangement he'd envisaged, whereas I mentioned I'd rather do it differently, but then the onus is on him to sort everything out.

    As a side note, I'd rather this thread didn't derail into a commentary on this point, if at all possible, which I knew would be a risk when I wrote it. I'd much rather receive advice on the other points mentioned
    • westernpromise
    • By westernpromise 4th Dec 17, 10:48 AM
    • 3,283 Posts
    • 4,086 Thanks
    westernpromise
    • #5
    • 4th Dec 17, 10:48 AM
    • #5
    • 4th Dec 17, 10:48 AM
    You stand to lose both your putative home and your mate TBH. When the washing machine packs up will he replace it as he should or will he blame you and expect you to pay to do so? Say you move in and there's a mark on the carpet. He's never noticed it before (his girlfriend did it and didn't tell him) so when you point it out that'll be your fault.

    Next he's a bit short and decides the rent should be much higher. Or he buys a bike and decides to store it in what he still thinks of as his flat. What happens then?

    You'll get the worst of all possible worlds. Don't do it.
    The Lottery, with its weekly pay-out of enormous prizes, was the one public event to which the proles paid serious attention. It was probable that there were some millions of proles for whom the Lottery was the principal if not the only reason for remaining alive. -
    George Orwell, Nineteen-Eighty-Four
    • cjdavies
    • By cjdavies 4th Dec 17, 3:51 PM
    • 2,855 Posts
    • 2,889 Thanks
    cjdavies
    • #6
    • 4th Dec 17, 3:51 PM
    • #6
    • 4th Dec 17, 3:51 PM
    If he can't be bothered to research what being a landlord does, this is not someone i would rent from.
    Last edited by cjdavies; 04-12-2017 at 5:14 PM.
    • googler
    • By googler 4th Dec 17, 4:46 PM
    • 14,472 Posts
    • 9,347 Thanks
    googler
    • #7
    • 4th Dec 17, 4:46 PM
    • #7
    • 4th Dec 17, 4:46 PM
    Never do business with friends or family.
    • Slithery
    • By Slithery 4th Dec 17, 5:00 PM
    • 365 Posts
    • 530 Thanks
    Slithery
    • #8
    • 4th Dec 17, 5:00 PM
    • #8
    • 4th Dec 17, 5:00 PM
    Make sure your friend understands all of the responsibilities of being a landlord...

    http://forums.moneysavingexpert.com/showpost.php?p=67759929&postcount=7
    • saajan_12
    • By saajan_12 4th Dec 17, 5:43 PM
    • 1,010 Posts
    • 678 Thanks
    saajan_12
    • #9
    • 4th Dec 17, 5:43 PM
    • #9
    • 4th Dec 17, 5:43 PM
    I'm going to be moving back to London next month and looking for a 1 bed flat. I have a friend who is looking to move out of his 2 bed flat you need to clarify whether you'll be renting the whole flat (under an AST even if its not written down) or renting a room with friend still having access to the common areas & able to rent the 2nd room to someone else which he owns in order to rent something with his girlfriend closer to her workplace and he suggested I move in there, which would work out pretty well for the both of us, but I don't think he's really looked into the financial and legal implications and is under the assumption I can just give him a bit of cash and be done with it.

    I have mentioned it would probably be better in the long run if we set it up as a proper landlord/tenant structure with a tenancy agreement in place, as he'd likely have to do so anyway if he wanted to keep the property if/when I leave or don't move in in the first place. - the facts of the situation are what's important so even if nothing is written down / 'set up' friend will still need lender's permission, pay tax etc. If he was to do so, would the cost of mortgage, landlord's insurance, etc be deductible against the rental income? -
    insurance, actual cost of repairs, gas safety certs, LA fees are deductible. Then he gets tax relief on the interest portion only of mortgage payments, partly capped at 20%
    i.e. if I pay him just enough to cover costs, would he need to pay any additional taxes, - depends if his costs include paying off mortgage capital, as no tax relief on that. Also yes if he's a higher rate tax payer, then even on the interest rate portion the tax relief is less than the tax paid for the rental income.
    although I'd assume he'd still need to complete a tax return regardless. Would it be necessary or effective to set up a separate limited company for the rental? -
    no, why? he'd need to transfer the property to the company,
    incurring CGT and Stamp duty, register the company and do annual accounts incurring costs.. Income tax can be less if he's higher rate but the net is still likely negative. Also, the company would need to get a mortgage which is unlikely and its a lot more hassle for a result that's not any more 'proper' if thats what youre going for.
    As he still has a pretty decent chunk of the mortgage left to pay on the property, would he need to reach an agreement with his lender about the change of use of the property? - he'd need to apply for Consent to Let or change to a Buy To Let mortgage. The former would likely be for a limited time frame, the latter would likely be at a higher interest rate and require a minimum 25% equity on the current house value.

    Alternatively (and this is the slightly dodgier route), would he be able to take me in as a lodger, still legally reside at the property, but essentially be absent if his new place is in his girlfriend's name? This is an unlikely scenario anyway, as it would leave one room unoccupied, which I don't think either of us could really afford. - No, he couldn't. You legally reside where you actually reside, commute to work from, pay bills, have family,
    receive mail.. not about where you are named.


    Any thoughts would be appreciated
    Originally posted by Marmotta
    Better to get expectations on paper in a contract to make sure every one is on the same page and save the friendship in the event of a disagreement. However regardless of any written contract, if friend doesn't live there and you rent the room/flat, you would be a tenant and friend would have landlord responsibilities to
    - carry out repairs
    - allow you quiet enjoyment of your home
    - carry out Gas Safe reports annually
    - pay tax
    - get CTL or BTL mortgage
    - ...
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