Question on renting a room under a joint ownership scenario

sunnysideup2016

Hi all

Me and my brother purchased a flat under a 50/50 arrangement which we have both lived in for a while. I am moving out soon to live with my girlfriend but we have decided to keep the flat as an investment and rent the room that I occupied, my brother will remain in the property.

We are trying to work out how we would allocate the rental income received and whether (a) all rent payable should go to me given that it is my room being rented or (b) the rental income should be split in the 50/50 ratio based on ownership. I am only talking about rental income here and not taking into account any bills. We can both see a side for either argument and want to make sure what we decide to do will be fair on both – am looking for peoples opinions on the matter!

Thanks in advance.

Kynthia

As an owner lives in the property then the person will be a lodger rather than a tenant. To make sure of that, and have no ambiguity I'd personally prefer that the resident owner definitely be on the lodger agreement so that the HMRC are clear that it's a lodger for tax purposes and so that the lodger is clear that the one having to live with them can tell them when their behaviour is unacceptable. Obviously that doesn't mean the rent money has to go to them, even in part, but you don't want the lodger thinking they can play one person off against the other or that the owner they live with has no say over their contract.

Personally I would argue that the either the excess rent is split 50:50 after the non-resident's mortgage share is deducted, or it all goes to the resident owner who has to live with this person but then they pay the whole mortgage with the non-resident only paying during voids. The important thing is that the resident owner gets a say on who they live with. There's no one right answer though as it's up to you to find a solution you are both happy with.

getmore4less

The easiest way to think of it is to separate the ownership from the occupation(on paper).

As owners you rent to occupiers.

You own 50:50 rental profit is split 50:50

The rental you can do a couple of ways
easiest to think about might be

Brother rents off the owners and sublets to a lodger.

The rent comes to you both as owners to cover the things a landlord would cover maintenance, mortgage, buildings insurance etc. you split the money left over/under 50:50.

The occupiers cover the council tax and running costs etc.

It is then up to your brother to decide how to charge the lodger for rent/bills on an inclusive or shared basis.

In practice you crunch the numbers and restructure the cash flow to make sure you keep the tax situation low/zero.

silvercar

If he rented your room off you and then rented it out to a lodger, both payments could be tax free. Your payment would be your contribution to the costs of running a home you own, the lodger's payment would fall under the rent-a-room scheme.

sunnysideup2016

Thanks for all the replies on this really appreciated.

So if I understand correctly in all the advice given, there would be no scenario whereby I would be expected to divide the rental income without first meeting my costs. It would just be any excess profit that I would reasonably need to consider splitting.

silvercar

sunnysideup2016 wrote: »

Thanks for all the replies on this really appreciated.

So if I understand correctly in all the advice given, there would be no scenario whereby I would be expected to divide the rental income without first meeting my costs. It would just be any excess profit that I would reasonably need to consider splitting.

I would say its all up for negotiation.

When couples split up and one moves out, I've heard of both these scenarios:

a) the remainer pays notional rent to the leaver based on half of what the property would rent for on the open market and then takes a lodger to subsidise their costs.
b) the leaver receives all the rent from a lodger and uses that to pay their share of the mortgage and property maintenance.