Shared house ownership, room rent dispute – What’s the logical solution?

kingylaw99

I hope you can help me understand the below dispute.

Here’s the scenario:

A 4 bedroom house has joint-ownership between two friends who needed to buy together to get onto the property ladder.
Of the 4 rooms, each owner/landlord obliviously lives in what you could call their agreed/chosen room. The two spare rooms are rented out to tenants and the rent is split 50/50.
Both landloards/owners keep up monthly payments to cover all bills, this is split 50/50.

The twist:
One landloard/owner wants to move out ( retain ½ ownership in the property by continuing the mortgagee/bill payments) but needs to rent the room that they’ve lived in from the beginning out to a tenant, in order to financially cover the cost of renting/living elsewhere. For example – they want to rent the room they’ve lived in for £300/month.
Assuming that the remaining landlord who remains in his/her own chosen room/owner accepts this change in ‘occupancy’ (absolute consideration and agreement by both parties is essentual here) the big question is:

Who should receive the rent from this room?

Should it go 100% to the owner who is moving out of the room that they have lived in since the start, as they are continuing to keep up all payments (mortgage/bills), with the other owner continuing to 100% occupy their chosen room.

Or should the rent be split between both home owners based on the fact that the house is owned equally by both of them, and although the owner who is moving out has lived in that room since the beginning, as it will no longer be seen as ‘their room,’ then any rent income should be split down the middle.

Unfortunetly, this scenerio wasn't covered/ aspects agreed when both tenents moved into the property.


Really interested in people’s opinions here!

Many Thanks

poppysarah

The person staying is now "outnumbered" in their own home. Not a situation perhaps they envisaged having.

Perhaps they should look at selling.

Orpheo

Any profit should be split.

BitterAndTwisted

In my opinion the additional rental-income should be split between the two parties equally. In a similar situation if I were the person remaining in the property I would want some additional consideration for being the one looking after the place and having to live with strangers.

One hopes that the income-tax on the rents being collected is being properly declared

Catblue

Difficult and messy, really.

If the owner/landlord who is leaving keeps all the rent from the two rooms (whilst paying the mortgage etc.) then he gets all of the income without any of the hassle of being the day-to-day landlord. The owner/landlord who is leaving will then presumably be in a situation where his own accommodation elsewhere is entirely of his own choosing, while forcing the other owner/landlord to share with 3 people that perhaps he didn't want to share with.

If the owner/landlord who is leaving keeps all the rent from 2 rooms then he gets all of the benefits and none of the drawbacks of the arrangement.

Also you mention that there are 2 existing tenants. People who share with a resident landlord (or landlords) are normally lodgers, not tenants so you need to clarify exactly what they are. Do these people have a tenancy agreement?

Also, if the remaining landlord is left with 3 lodgers (or tenants) then HMO legislation comes into force (if it is not applicable already to your situation) which could be expensive if you have to adapt the house.

kingylaw99

Bitter & Twisted - of course



Selling is always an option as is buying out. Out of the options, this is the first and preferred option, and by far the least complicated (financially). It's basically the a change in occupant... but still needs to be processed fairly and amicably

By spitting costs, could you argue that both owners will benefit then from split income from 3 tenents but the owner who stays would also benefit from living in and using entirely an addtional room, which would be of no benefit to the removed landloard/owner?

dorset_nurse

If it was me moving out I would think it was fair to take all the rent, and allow the other owner to choose this person as they would be living with them. The live-in landlord is benefitting from owning 2 rooms so the other landlord should.

If I was in the situation where the other owner was moving out I would choose the replacement and carry on. If I wasn't happy living in that situation I would have two choices; move out and let my room, or insist that we sell the property and move on.
I might suggest an agreement where I have some of the profit for "looking after the property", but in reality all financial repairs I would expect to split 50/50.

I agree BitterandTwisted, I hope the owners realise they have a buisness and should be declaring the income.

J_i_m

Technically due to 50/50 ownership any rent gained from that room should be split 50/50.

However, what you need to do is sit down and think it all through logically and come to an agreement.

Blacksheep1979

If the rent is to be split 50/50 then in effect the two owners should both be paying rent (as they're both living there/taking up a room). Now whilst they're both there that kind of cancels out and neither is up/down by them both paying or not.

Now if one moves out and is having to pay rent elsewhere and in effect rent on the house they own (mortgage payments) then the balance has shifted. Really the rent should go to the party moving out if there were no effort in being the landlord so I guess my answer depends on how much effort it is being the landlord?

Maybe the moving out party keeping the rent and paying a monthly 'management fee' would be the way forward as this recognises both that they are renting out 'their' room and so profiting from it but also the extra overheads of the other party and keeps both these factors separate.

taxsaver

I don't feel that it is fair to split the extra rent 50|50 as that would mean that the resident owner gains the benefit of 2.5 rooms and the absent owner gains benefit from only 1.5 rooms yet pays 50% of all mortgage and other costs..... how can that be fair?

I agree that the resident owner should certainly have input in choosing the lodger (assuming they behave in a reasonable manner and do not start to be unfairly obstructive) and if they really DO suffer any 'extra work' then maybe some other benefit could be worked out to compensate for that.

Mostly I hope that they can both sort this out amicably as it would be a shame for both of them to lose a good friendship.

PasturesNew

Should have thought of this before they bought.