Letting to students in student sons' house

Furzil19

Hi,
We have bought a house for our twin sons whilst at uni. There are 2 spare rooms and we were thinking of taking in 2 lodgers to help fund it. (We are led to believe that having lodgers is better than having tenants in regards to rights, is it benefitial?) The mortgage company know about this and we have been advised that insurance will be no problem once we have people in and inform them of the situation.
We understand that there is a rent a room scheme, but are unclear if we can do this unless our sons are the ones registered on it and receiving the rent? Also, what do we do about a deposit, do we need to have it retained by a Government deposit holding scheme if it is for 'lodgers', not 'tenants'?
We are trying to arrange everything legally, the most cost effective way possible, but we don't seem to fit into a clear cut category to get answers online.
We're sure there are plenty of other pitfalls and benefits of working this either way and we would be very grateful for advice please.

picklepick

The rent a room scheme that allows you to take in lodgers, is only available for your only or main home. As this isn't the case, you will be a landlord with tenants with all the responsibility that entails.

00ec25

as above, unless you transfer the ownership into the names of your sons and cease to be owners yopurself, then you are the landlord since you own the property. You will not be resident therefore cannot take in a lodger, instead you can let to a tenant. You cannot use the rent a room scheme

as a LL you will be required to meet all the obligations of a LL
- deposit protected
- gas safety certificate if applic
- EPC in place before advertising for tenants
- registered with HMRC for rental income tax

and all the other things explained in GM's monumental post here
http://forums.moneysavingexpert.com/showpost.php?p=41160642&postcount=12


Note - your son could "sub let" in which case they would be HIS lodger but the income would be HIS alone. Your son would then have to meet the obligations of being a resident LL with a lodger. He could use the rent a room scheme provided he receives in total no more than £358 pcm - if he goes over that then the excess is taxable against him
Note if he pays any of it to you then it would be your taxable income and you would be back to being a LL as explained above

flora48

Students are not the most careful tenants. My friend had a student house on rent and was prepared to clean and decorate every summer holidays. Just allow for that in your scheme of things.

Furzil19

Thank you to everyone, We appreciate your advice. It has given us a lot to think about. We guessed that the boys would need to sub-let as the house becomes their main residence. This seems to be the easiest way, but does anyone know please what to do about a 'lodger's' deposit?
Again, many thanks for your help.

00ec25

if you go down the sub letting route then please understand and act on :

a) you are the owner, YOU are therefore the ultimate LL and MUST meet the requirements of a LL. Just because your son does not pay you rent does NOT mean you are not legally a LL, as your son is now your (rent free) tenant so, for starters, GSC and EPC in place!

b) your son is the person who has the contract (written or verbal) with the lodgers. You have nothing to do with it. Your son , not you, is therefore responsible for any deposit he takes. It is nothing to do with you. A lodgers deposit does not need to be protected so can be kept by your son in wherever he wants to hold it, but your son remains legally responsible for its return and/or making deductions from it

c) It is his main residence but he is not the owner so, as the owner, you, not your son, are liable for CGT when you sell it.

d) make sure the council is aware that all the occupants are students and thus exempt for council tax otherwise the CT liability could come back to bite the owner...

Annisele

If the OP does let the house to his sons, and the sons then sublet the rooms to lodgers, would that make the whole affair an HMO?

00ec25

Annisele wrote: »

If the OP does let the house to his sons, and the sons then sublet the rooms to lodgers, would that make the whole affair an HMO?

yes

The property will have 3 households so is an HMO but whether it needs to be licensed depends on the council and whether they have selective licensing in place ...

as far as council tax is concerned then the owners are liable because it is an HMO under the separate definition used for CT HMO purposes - hence the importance of making sure the exemptions are recorded

Furzil19

Thank you all. It's a minefield. We don't want to do anything illegal unknowingly, but equally don't want to pay out unnecessarily. Our boys are listed on the mortgage offer to show that the house was bought for dependants. They will have a free tenancy agreement & as we plan to have others there (& want to know the place is safe for our own children) we will ensure that all of the relevant certification is in place & fire pecautions.
We have spoken to the local council & are informed that we do not need an HMO lisence as there will be under 5 people. We will also let them know that they are students.
There are so many people now doing this to help their children because the uni fees of £9000 a year are already going to leave them starting adult life with horrendous debts, that you would think the government would look into making the process easier for parents. Good luck to everyone else in the same boat as us.

jennifernil

We bought a flat for our student daughter a few years back, but in her name so she was the owner, therefore no CGT for us to pay.

The mortgage was in her name with her Dad as guarantor.

She then had a student lodger in the spare room, which paid half of the mortgage.

So his rent was her income, so nothing for us to worry about. They shared the bills for gas, electricity, telephone, broadband and TV licence.

00ec25

jennifernil wrote: »

We bought a flat for our student daughter a few years back, but in her name so she was the owner, therefore no CGT for us to pay.

The mortgage was in her name with her Dad as guarantor.

She then had a student lodger in the spare room, which paid half of the mortgage.

So his rent was her income, so nothing for us to worry about. They shared the bills for gas, electricity, telephone, broadband and TV licence.

is by far the best solution all round