renting out a flat in your basement

hollh

A little advice is needed!

We've created a self contained flat in our basement which we paid for by remortgaging our house. We now want to register it as a separate address with the council and rent it out using a letting agent. The tenants would share our gas, electricity and water, but pay their own council tax.

Do we need to tell our mortgage company about our plans? Are we doing anything wrong if we don't? And would they find out?

Any help greatly appreciated.

Thanks

theartfullodger

Can't read the terms of your mortgage from here but strongly suspect they require you to inform them: I'd do so just-in-case.

Insurance might be interesting.

You say you "want to register" it.. did it get building regs/planning permission??

Shared gas, leccy & water will be painful, I'd confidently predict. It's hardly "self contained" if you didn't self-contain the utilities.

As it was not purpose-built flat then the tenancy will not be an AST (cannot be, may not be, legally impossible to be) so deposit protection, s21 & s8 don't apply. Very likely council, tenants, agents and some solicitors won't understand.

Ever done any training in being a landlord?? You need some.

This is a good start but get on a course!!
https://forums.moneysavingexpert.com/discussion/5180214

Have you considered the CGT implications??

rtho782

Why would you want a seperate council tax bill? It's unlikely to reduce the banding on your property (as the flat is an upgrade/improvement anyway) and would just mean you'd have to pay two lots of council tax if the flat were ever empty.

Just call it "59a" if you are number 59, and have done with it.

It cannot be an AST but you can just rent it out to a lodger that does not have access to your main house. This saves you effort in case you ever need to evict someone. As you have shared utilities you'd be best to just advertise it inclusive of bills.

HappyMJ

Yes you must get building regulation approval before you start the work.

I wouldn't make it a separate address. You would need a separate title and basically it's too costly for just a basement flat.

You can get a lodger in and share something in the main house to make it joined to the main part of the house so it's just a bedroom with an ensuite with no living space. You may have put in a kitchenette so they can make a cup of tea without having to go upstairs to the main kitchen. That's fine. It doesn't have to be considered a separate property.

How is the property accessed? Do you have to enter the main house to get into it? Or have you got external access to it?

You can have lodgers with most mortgage agreements but you've got to make sure it's not going to be a tenancy...just a lodger agreement. They can't have a lockable front door with no access to the main house. You could put in the agreement that you will vacuum the carpet on a weekly basis and require access at all times to the room.

As far as gas, electricity, heating and water is concerned you should get separate supplies to the room with a meter for each as you can figure out that's going to be very costly.

I would not be interested in sharing utility bills with the main house. As a lodger I would want one weekly cost to have the room and that's it to include council tax, gas, electricity, water etc...

theartfullodger

rtho782 wrote: »

....It cannot be an AST but you can just rent it out to a lodger that does not have access to your main house. This saves you effort in case you ever need to evict someone. ......

Errr,no, he's not what most people would consider a lodger, he's an "occupier with basic protection" and eviction still requires court action and similar amount of effort - see
http://england.shelter.org.uk/get_advice/sharing_and_subletting/occupiers_with_basic_protection

HappyMJ

rtho782 wrote: »

Why would you want a seperate council tax bill? It's unlikely to reduce the banding on your property (as the flat is an upgrade/improvement anyway) and would just mean you'd have to pay two lots of council tax if the flat were ever empty.

Just call it "59a" if you are number 59, and have done with it.

It cannot be an AST but you can just rent it out to a lodger that does not have access to your main house. This saves you effort in case you ever need to evict someone. As you have shared utilities you'd be best to just advertise it inclusive of bills.

Lodger would have to have access to main house such as kitchen, living room, bathroom and utility room to be considered a lodger. There could be house rules stating the ensuite is to be used exclusively by the lodger and in turn the bathroom is to be used by the owners of the property and any guests can only visit on a weekend during daylight hours with prior agreement.

Post office won't know where 59A is unless it's registered with council. They would have to share a mailbox.

hollh

Thanks for all your swift replies. The flat has planning permission, and has building regs. The Building Inspector from the council has signed it off.

Regarding our shared utilities we intend to rent it out inclusive of bills.

The flat is completely separate, with no link between the two properties, its's own front and back door and sharing only a garden, so it sounds like we can't get away with just getting a 'lodger'.

You say it can't be an AST but it seems to fulfill all the requirements on the Government website:

"Assured shorthold tenancies (ASTs)
The most common form of tenancy is an AST. Most new tenancies are automatically this type.

A tenancy can be an AST if all of the following apply:

the property you rent is private
your tenancy started on or after 15 January 1989
the property is your main accommodation
your landlord doesn’t live in the property
A tenancy can’t be an AST if:

it began or was agreed before 15 January 1989
the rent is more than £100,000 a year
the rent is less than £250 a year (less than £1,000 in London)
it’s a business tenancy or tenancy of licensed premises
the property is a holiday let
your landlord is a local council"

Is there something else we need to fulfil?

booksurr

rtho782 wrote: »

Why would you want a seperate council tax bill? It's unlikely to reduce the banding on your property (as the flat is an upgrade/improvement anyway) and would just mean you'd have to pay two lots of council tax if the flat were ever empty.

Just call it "59a" if you are number 59, and have done with it.

why not add council tax fraud to the plan to commit mortgage fraud as well

it needs a separate CT bill because it is self contained and will be let on that basis

PasturesNew

So, you're doing it - and appear to have done it legally (planning permission & building regs).

Doing it as "bills inclusive, except council tax" is quite common. Just make sure, in writing, that this is understood by the agents and that their standard contract is amended to say this too. The details of that can become blurred, over time, so that agents no longer "remember" and tenants think that's what was said, but haven't registered for council tax and have checked the agreement which says something different. So just make sure the inclusive bills/exclusive of CT is clear and visible.

Re mortgage company. You must tell them. You'd be altering the terms of your mortgage. They might make you change your mortgage, they might not. They will tell you. But you must tell them.

Pitfalls of not telling them: Anybody, at any time, can simply take it upon themselves to "grass you up" - many people do this sort of thing if they think you're being smug and have cheated in some way. IF you didn't tell them and IF somebody grassed you up then they MIGHT demand immediate repayment of all your mortgage amount.... and you'd then be sitting, requiring immediate remortgaging, with a mark of "mortgage fraud" against your name.

agrinnall

"Inclusive of bills" = potential for cannabis farm

pmlindyloo

just one other thing - check your planning permission. When we had a self contained granny annex our planning permission included a clause that said it must not be rented out to anyone other than a family member.