Legal Side of Renting to a Family Member (not HB related)

Lefs

If I were to inherit a house from a family member (mortgage free) so I completely owned that house, and then would like to allow another family member to live there rent free or reduced rent, what legal things would I need to do?

Do I have to prove that I'm getting no rental income from it, and if I do, how would I go about it?

What implications are there for renting a house under it's rental value for me?

Is it easier to let them live there informally than to formally rent it out, and if so, how would that work with things like utility bills?

Much thanks in advance - have had a look on the internet but can only really finnd housing benefit related stuff, or problems to do with family members and buy to let mortgages.

superfran_uk

Lefs wrote: »

If I were to inherit a house from a family member (mortgage free) so I completely owned that house, and then would like to allow another family member to live there rent free or reduced rent, what legal things would I need to do?

Do I have to prove that I'm getting no rental income from it, and if I do, how would I go about it?

What implications are there for renting a house under it's rental value for me?

Is it easier to let them live there informally than to formally rent it out, and if so, how would that work with things like utility bills?

Much thanks in advance - have had a look on the internet but can only really finnd housing benefit related stuff, or problems to do with family members and buy to let mortgages.

You can get up to £4250 (I think?) per year in rental income tax-free, as long as you're living there. Don't think the fact that they're family should make any difference to that. If they're living there FOC and paying bills themselves then can't see any problems with that either.

Fire_Fox

You may find you are legally classed as a landlord, with all the associated repair and safety responsibilities, even if you allow the family member to live there rent free. The occupier is legally responsible for covering the council tax and any new telecoms contracts they take out, the responsibility for utility bills would need clarifying - it's best to protect both parties with some form of legal agreement.

Lefs

superfran_uk wrote: »

You can get up to £4250 (I think?) per year in rental income tax-free, as long as you're living there.

I wouldn't be living there though. I already have a property so does the tax free allowance still apply?

HOWMUCH

You are not renting the house out if you do not receive any payment. We are currently allowing our daughter to live in her Grandfather's house rent free. She pays the council tax and all the bills herself and has done since she returned back to the area after six years at university in August. All the utility bills are now in her name, this is whilst she saves for a deposit to buy her own property.

HOWMUCH

Lefs wrote: »

I wouldn't be living there though. I already have a property so does the tax free allowance still apply?

No this is what is known as Lodger Allowance, where you rent a room out in your own home to someone.

Lefs

HOWMUCH wrote: »

You are not renting the house out if you do not receive any payment. We are currently allowing our daughter to live in her Grandfather's house rent free. She pays the council tax and all the bills herself and has done since she returned back to the area after six years at university in August. All the utility bills are now in her name, this is whilst she saves for a deposit to buy her own property.

Thanks - this is pretty much the same situation. So there's not much I have to do? I had visions of the tax man asking me to prove I was getting no rental income because the house is in my name but the utilities are in someone elses.

Fire_Fox

HOWMUCH wrote: »

You are not renting the house out if you do not receive any payment. We are currently allowing our daughter to live in her Grandfather's house rent free. She pays the council tax and all the bills herself and has done since she returned back to the area after six years at university in August. All the utility bills are now in her name, this is whilst she saves for a deposit to buy her own property.

There is such a thing as a rent-free tenancy, tho I am certainly no expert in this field. An employer who provides housing rent-free to his employee, is still a landlord so you *may* find there are more responsibilities than you think.

HOWMUCH

The tax man has no reason to know as the property does not generate any income thus no tax liability this is what our solicitor told us. My FIL died in September 2004 and we took out time renovating the property ready for our daughter returning back home so to speak, she will hopefully be in the property for approx 4 years whilst she gets fully qualified, she puts the money into an ISA ready for a nice healthy deposit. Grandfather knew this was our intention, the NHS may not have allocated her back up here last year and she not get to stay in this area in 2 years time either so why buy only to have to sell and then have to resell again.

HOWMUCH

Fire_Fox wrote: »

There is such a thing as a rent-free tenancy, tho I am certainly no expert in this field. An employer who provides housing rent-free to his employee, is still a landlord so you *may* find there are more responsibilities than you think.

Yes we are not employer's though so that it something completely different to what is getting covered here. We are allowing a relative to use the property. We could charge a peppercorn rent but we have chosen not too.

DVardysShadow

HOWMUCH wrote: »

We could charge a peppercorn rent but we have chosen not too.

It could be wiser to have a peppercorn rent, because this allows you to have a contract put in place which will define responsibilities etc. Otherwise you need a deed. I do suggest you have some agreement in place which defines the terms on which you are allowing the relative to live there, as without it you could find the place becomes a moonie commune and you are powerless.