Advice on renting out property

jennifernil

Looking for some advice, or where to find advice, to pass on re renting out property.

Background info.....

Rural property, newly purchased, with family home, separate self-contained fully furnished cottage, outbuildings and approx 20 acres of land. Mortgaged. In Scotland.

Owners wish to rent out cottage to a person who is coming to work locally on a temporary basis. This person will only be there during the week, so presumably has a property elsewhere.

The cottage has previously been rented out to this person, and before that let as a holiday cottage on a weekly basis. It is presently assessed for business rates, with small business rates relief, so very little is being paid.

Owners know about requirement for landlord registration in Scotland. There is no gas supply to the property.

Most of the land will also probably be rented out to local farmers.

So......

1. Are there any regulations owners need to be aware of?

2. (found the answer to this)

3. Tax.....should they both register as self employed, partnership or what? Both are also in employment. Would extra NI be due.

4. Is it correct that they pay business rates on the cottage rather than council tax?

5. Do they need consent to let from their lender?

6. Insurance......does the cottage need separate or special buildings and contents insurance?

Sure there must be more they need to know.....all advice much appreciated!

BitterAndTwisted

jennifernil wrote: »

1. Are there any regulations owners need to be aware of? There are thousands, so the best thing would be to join a landlords association

2. (found the answer to this) Presumably this question related to the need to be registered with the Local Authority if the property is in Scotland....

3. Tax.....should they both register as self employed, partnership or what? Both are also in employment. Would extra NI be due. Income should be declared on the tax-return

4. Is it correct that they pay business rates on the cottage rather than council tax? If a business isn't being run from the property then Council Tax should be paid by the tenant. I'm assuming the business rates were inherited when the property was run as a holiday let.

5. Do they need consent to let from their lender? Yes, they do.

6. Insurance......does the cottage need separate or special buildings and contents insurance? It will need separate buildings insurance. The responsibility for contents insurance lies with the tenant.

Sure there must be more they need to know.....all advice much appreciated!

There's an awful lot more to becoming a landlord than drawing up a tenancy agreement and declaring the income on a tax-return and this is why it is absolutely VITAL to join a landlords association. The cost can be offset against income and there is a lot of practical and legal advice to be had.

G_M

6. the insurer needs to know is tenanted, and specialist insurance is advisable to include eg malicious damage by tenants

As well as joining RLA / NLA / similar, read landlordzone and residential lettings.

jennifernil

Thanks for replies so far. I will tell them to join the Landlords Association.

The previous owners ran a sheep breeding business, plus they rented out the cottage. Initially it was a holiday let, but latterly they had this guy living there on a semi-permanent basis as he was working locally.

He has not been there for several months, but now wishes to resume the rental.

There were some 40 acres of land, but 20 acres was sold to neighbouring farmers, and the owners plan to rent out the rest (another 20 acres that they purchased) to these neighbours.,

This is our son and DIL, they are totally clueless about this sort of thing, so I am just trying to keep them informed and legal.

Do they both need to register as self employed? Is it a partnership?

HELP!!!

G_M

jennifernil wrote: »

Thanks for replies so far. I will tell them to join the Landlords Association.

The previous owners ran a sheep breeding business, plus they rented out the cottage. Initially it was a holiday let, but latterly they had this guy living there on a semi-permanent basis as he was working locally.

He has not been there for several months, but now wishes to resume the rental.

There were some 40 acres of land, but 20 acres was sold to neighbouring farmers, and the owners plan to rent out the rest (another 20 acres that they purchased) to these neighbours.,

This is our son and DIL, they are totally clueless about this sort of thing, so I am just trying to keep them informed and legal.

Do they both need to register as self employed? Is it a partnership?

HELP!!!

Depends what your son/DIL are doing? Continuing the " sheep breeding business"? The Holiday Let business sems to have ended, so no business there. Renting the cottage for domestic use is not a business that needs registering - except with the LA in Scotland as they are landlords. They simply add the rent to their other annual income and declare it to HMRC for income tax purposes.

jennifernil

Thanks, that is what I thought.

No, they are not continuing the sheep breeding, the sheep are still there (by agreement) but will be removed soon, then they plan to rent out the fields to a neighbouring farmer. They themselves do not even like gardening!! They have bought this place purely to give their children space/a better life, and to get away from close neighbours.

And of course to get a bigger house that is less expensive due to moving further out of town.

They have registered as landlords, and of course do intend to declare the income for tax, I was just wondering how they should do that.

The main thing worrying me was the "small business rates relief" that the previous owners seem to have had. My son tells me they have had notification from the council that they should pay £66, presumably that is for up to April.

Are they actually entitled to this? And what about the renting out of the fields?

They want to be legal, and pay the tax due, but are really floundering here.

tbs624

Jennifernil - this proposed tenant - will he be working for your DIL/S or for someone else? If for your S, would the accommodation be available to the T if he took up work elsewhere or would the property be needed for another employee?

Or is it to be let on a stnadard SAT, with him working elsewhere?

They need to make sure that they are au fait with the Repairing Standard, especially on things such as the provision of smoke alarms, which are obligatory in Scotland.

SAL (Scottish Assoc of LLs) is probably their best bet

Talk to the local Council about the business rates issue

They should seek advice from HMRC because there are specific rules about setting off of losses for rental, if part is from property and part is from agricultural land.

LL association or local Farmers Union rep may be also able to offer some advice, or suggest a local accountant with appropriate experience: http://www.nfus.org.uk/

jennifernil

Thanks, like I thought, it is pretty complicated. They really do not have a clue about anything I reckon.

There are smoke alarms.

The tennant will be working on wind turbines, so nothing to do with son/DIL.

There are quite a lot of repairs needed to the cottage, the rendering all needs redone, plus other stuff, the cost will be over £3k. Can they set this against the rental? Rental is £450 per month.

The business rates are the thing that is worrying me most.

Really grateful for the help, will send them the info and links.

Jolaaled

Def try :

Landlordzone.com

Absolutely brilliant site, with downloadable documents, and informative forum.

jennifernil

Pretty sure....no 110% certain....that they have not got permission from their lender to rent out.

Also that they just have standard buildings/contents insurance.

They are saying the guy just wants to rent "informally" for 3 months at a time. Is that OK?

tbs624

jennifernil wrote: »

There are quite a lot of repairs needed to the cottage, the rendering all needs redone, plus other stuff, the cost will be over £3k. Can they set this against the rental? Rental is £450 per month.

They should Google the "Repairing Standard" then, so that they can be sure they are complying with it. Ts can report a LL to PRHP (Private Rented Housing Panel) if there are issues that have not been addressed by the LL . The Standard is pretty basic however. (edit - see http://www.prhpscotland.gov.uk/prhp/137.26.33.html)

On tax - google HMRC and PIM (Property Income Manual) which explains what can set down against rental income.

Membership fees for joining a LL association plus accountant/bookkeeper etc fees are bonafide expenses ( LL assoc membership should also get them discount on LL insurance policies too)