Letting to family - need a tenancy agreement?

Katiejo42

We have been given the opportunity to live where my husband works, probably for the next 10 -15 years :j

This is great, but we have only just bought a house! :eek:

Luckily my sister and her family have agreed to rent it off us. The mortgage lender says this should be fine and have given us permission to let, but not to make a profit.

This is fine by me, as we won't be paying any rent where we are, so as long as they cover the mortgage we will still be much better off than letting the house sit empty, and it means that my sister will be paying under market value (approximately 50%) so she will get out of debt faster and be able to save up and buy her own house quicker :beer:

My question is, do we still need a tenancy agreement?

There's no profit involved (don't know if that makes a difference) and we are not taking any deposit.

Anybody got any experience with this kind of thing? I don't really want to join one of those landlords organisations for advice, as they cost money, which is something we don't have a lot of at the moment!:o

sammyjammy

I would say yes, it would be a sensible thing to do, particularly from a point of view if your sister found herself in end of housing benefit, it would make the porcess a lot simpler and more likely of a positive outcome.

jjlandlord

Katiejo42 wrote: »

The mortgage lender says this should be fine and have given us permission to let, but not to make a profit.

Right... wink, wink

Katiejo42 wrote: »

My question is, do we still need a tenancy agreement?

I'll assume the property is in England or Wales.
You'll be granting an Assured Shorthold Tenancy, if the agreed fixed term does not exceed 3 years such tenancy need not be in writing.
So, no, you do not require a written agreement.

That said, it is advisable to have one as a written proof of the agreed conditions and rent details.

You can download templates online quite cheaply.

sooz

Katiejo42 wrote: »

We have been given the opportunity to live where my husband works, probably for the next 10 -15 years :j

This is great, but we have only just bought a house! :eek:

Luckily my sister and her family have agreed to rent it off us. The mortgage lender says this should be fine and have given us permission to let, but not to make a profit.

This is fine by me, as we won't be paying any rent where we are, so as long as they cover the mortgage we will still be much better off than letting the house sit empty, and it means that my sister will be paying under market value (approximately 50%) so she will get out of debt faster and be able to save up and buy her own house quicker :beer:

My question is, do we still need a tenancy agreement?

There's no profit involved (don't know if that makes a difference) and we are not taking any deposit.

Anybody got any experience with this kind of thing? I don't really want to join one of those landlords organisations for advice, as they cost money, which is something we don't have a lot of at the moment!:o

But you WILL be a landlord.

So you should join a LL association, as you need to know your obligations to your tenant (whether they are family or not)

Why on earth have the mortgage co said ok to let, but not to make a profit?

I wouldn't let to family under such circumstances. It WILL cause problems, fall outs & resentment.

You say your sister has debts. Will you credit check her? And what if she doesn't pay. Would you evict her?

Let it properly, at full market value, and give your sister some of your profit if you want.

G_M

You do not legally need a written tenancy agreement.
However you would be most unwise not to have one.
The mortgage lender denying you the right to profit is absurd. Either you have permission to let or not. And anyway, what is ‘profit’? Rent greater than mortgage payments? Rent greater than mortgage + agents fees? Or including other LL expenses? The condition is meaningless and unenforcible!
If you hand over your property, and receive rent in return (profitable or otherwise) you will be a landlord, with legal responsibilities.
You will have to declare the rent as income to HMRC for tax purposes, even if no ‘profit’ exists and no tax is payable.
You wil have to ….. 101 other things.

Read here.

edit: what will you do if your sister loses her job, has trouble with the rent and you can't pay the mortgage? Evict her or be compassionate? You need to consider all scenarios.

paddy's_mum

If you are currently short of money, why would you let your sister have the house at half the going rate? Wouldn't that money be better in your pockets than hers?

If you are currently short of money, how are you going to pay for all those things you'll need such as a properly drawn up tenancy agreement, a gas safety check, landlord's insurance, an energy performance certificate etc?

I'm not so sure that 'luckily' is the right way to be looking at all this. You might well be entering a minefield blindfold .. especially as you seem to have almost no idea of what could go so badly wrong.

Look to safeguarding your own interests and security before going all generous over someone else's This is MSE after all!

tyllwyd

I agree that it would be safest to have a tenancy agreement in place - things can and do go wrong within families, so it can't hurt to have everything clear from the start.

And apart from the rent, you need to have a think about things like repairs, redecoration etc - if your sister is only paying enough to cover the mortgage, will she be expecting you to act like a landlord and pay out to fix the boiler, unblock the toilet, mend a broken window and all the rest of it?

JanCee

You need to have a long hard think about this. The advice from your mortgage lender about not making a profit is ridiculous. Once you have permission to let you decide what rent to charge.

You will need an annual gas safety check and you will also have to take out LL's insurance on the property, as ordinary home insurance will not be adequate. You will be responsible for all repairs during the tenancy.

I would definately get a proper tenancy agreement signed. You need to think about what would happen if you needed the property back i.e. if your husband lost his job and you had nowhere to live.

You say you don't intend to take any deposit. What would you do if they caused damage to what was once your home?

You clearly have good intentions and will be helping your family out, which is admirable, but you have to be aware of unforseen problems which might arise.

Although you say you will not be making a profit, I assume that your sister will be paying your mortgage amount, only the interest part of your mortgage is allowable against the rental income for tax purposes.

Deepfatfriar

I agree with JanC in the last post.

You must get an agreement drawn up.

You need tp specify who is responsible for what in terms of utility bills, rates.

Contents insurance might be a problem if you are letting it furnished.

You don't want any subletting.

What about general maintainance if something gets broken.

Keeping the place tidy etc, garden etc.

Without an agreement you could have responsibilty for two houses.

Worst of all as far as I know without an agreement it is one hell of a job to get someone evicted.

I know a family member who has done what you intend to do, all they have had so far are maintenance bills and have not seen their portion of the rent.