Accidental landlord

XXJULESXX

Hi

I rent my property from a local HA, I live with my son and I am 5months pregnant. My partner owns his own 1-bedrm flat, bought 10years ago & mortgage with Northern rock. He is planning on moving in with me and letting out his flat to one of his workmates, with a view to selling in next couple of years when market picks up.
We were quite niave initially about letting it, as after much research there is loads of regulations to take into account, aswell as negotiating the terms of mortgage with lender.
However,as it is a workmate who will move in, the rent he will charge him will barely cover the mortgage - it's more of a convenience thing that aslong as someone's in it the CTax and utilities will be getting paid as well as something towards the mortgage, rather than it sit empty til he can sell.
He seems to think that in these circs he won't need to inform lender but I'm wary of going down this path just incase.
Is there a tiny chance he could do this without speaking to lender first and not get into trouble?

sooz

If he is planning on letting it for a couple of years - No.
Firstly, how will he deal with his mail, especially that from the mortgage lender?
Letting a property isn't a convenience for the owner. There are lots of reponsibilites, & if already he is saying the rent won't cover the mortgage, how does he plan to pay for urgent repairs?
How has he chosen the level of rent? Has he had some valuations from letting agents, or just plucked a figure out of the air?

tbs624

Anyone letting a property out should notify their lender, not least to afford a measure of protection for their potential tenant. Your partner will also need to notify his buildings insurance provider that the property will be let.

Fire_Fox

XXJULESXX wrote: »

Hi

We were quite niave initially about letting it, as after much research there is loads of regulations to take into account, aswell as negotiating the terms of mortgage with lender.
However,as it is a workmate who will move in, the rent he will charge him will barely cover the mortgage - it's more of a convenience thing that aslong as someone's in it the CTax and utilities will be getting paid as well as something towards the mortgage, rather than it sit empty til he can sell.
He seems to think that in these circs he won't need to inform lender but I'm wary of going down this path just incase.
Is there a tiny chance he could do this without speaking to lender first and not get into trouble?

You must inform your buildings insurance provider and, if it's a leasehold flat, obtain the permission of the freeholder/ management company. Also the mortgage may need to be converted to a BTL rate, and finally speak to the taxman as any income is subject to income tax and when the flat finally sells it isn't his main home so there may be capital gains tax to pay. Any deviation from this puts you at risk of losing the flat - either to the bank or to the freeholder - or being in a lot of trouble with the tax office.

Even if it's a workmate you should have a proper tenancy agreement in place, so that everyone is clear who is paying for what and when. The damage deposit must be kept in a separate bank account.

sooz

Fire_Fox wrote: »

The damage deposit must be kept in a separate bank account.

No, it must be registered with a deposit scheme. It can either be sent to the custodial scheme, or an insurance policy bought for it. If the latter, there is no obligation to put it into a separate bank account.

angrypirate

You should also need to speak to you LHA to find out if the change in status affects the entitlement to the place you are renting.

tbs624

sooz wrote: »

No, it must be registered with a deposit scheme. It can either be sent to the custodial scheme, or an insurance policy bought for it. If the latter, there is no obligation to put it into a separate bank account.

I think perhaps Fire Fox has confused this becuase of the requirement for LAs to keep deposit money in a client account in order to comply with codes of conduct under ARLA etc?

theartfullodger

Sigh!

Re. deposits (Assuming it is England & Wales)...

see..
http://www.direct.gov.uk/en/TenancyDeposit/index.htm

In particular note that if the deposit is not correctly lodged in a scheme the Landlord (yes, Landlord, not Letting Agent) can be fined 3xdeposit with fine going to the tenant I believe).

So, check where the deposit is lodged!

Cheers!

Lodger

inmypocketnottheirs

tbs624 wrote: »

Your partner will also need to notify his buildings insurance provider that the property will be let.

As the property is a flat, if it is in England or Wales then it will be a leasehold property. If this is the case the freeholder arranges the insurance.

XXJULESXX

Hi
Thanks for all the feedback.
First off, the property is in Scotland. I've read alot about rent deposit schemes which initially I thought was universal, but I'm wondering if it is just an England and Wales thing?
Also, the Energy Performance cert that's required here - is it exactly the same thing as the one required when selling your property - the full £300 job?

In reply to an earlier post re:amount of rent charged - my partner is thinking along the lines of, as the rent his work mate will be paying will pay most of the (current) monthly mortgage - and thats CTax & utilities taken care of - he will have that extra money he can use for things like major repairs.
He totally understands that he will need to organise a proper tenancy agreement, but he is not trying to make any profit from renting, he's just moving in with me as our baby's due in the summer and needed to do something with the flat - it's not a leasehold or anything like that.

He contacted Northernrock last week to ask about his mortgage if he were to let out the property and they said they were sending him out a 'pack' - but not received this yet.

tbs624

Scotland does not have tenancy deposit regs in place yet.

EPC cert will have been within HIP if property purchased fairly recently.