Second home - rent out a room and stay there weekends

firely2327

Hi All
Following on from a thread I posted early last year I've another question. I'm moving from Wales to England in a few months to a permanent job, where I'll be buying a property which will be my primary residence. I am considering my options and one of which is to keep my current property as a second home and come here for some weekends/holidays. It's a three-bed so if I'm keeping it I'd be renting out one or possibly two rooms, depending on my number-crunching results. I've checked with the mortgage lender and I can change the mortgage here to a rent to buy and take out another mortgage in England without much ado (though finding a suitable property there is proving difficult!).


I can't find much in the way of information about this scenario though. As I'll be staying in the property a few nights each month on average, am I considered resident in any way for e.g. council tax, insurance etc? Am I crazy even considering this option or should I just sell the current place?


I know the 3% tax on a second home is refundable if one sells the property within three years, so my thoughts are to try it out for a year or so and if it doesn't work out then sell the Wales home. Without a crystal ball it's difficult to know what's the best option of course.


And before anyone asks why I'm even considering keeping this house the answer is simple: I'm near Snowdonia and about a half hour from at least a dozen pretty beaches, and moving somewhere where the tallest things are buildings, it's far from the sea, noisy and trees are few and far between. Moving for work and so staying in Wales is not an option unfortunately.


Thanks for any input folks

AnotherJoe

Being a remote landlord can be a royal pita.

Who would rent rooms in your house ? It's a very limited market as you describe your plans. Is there much employment nearby ? In short, is there even a market for rentals there? Could it be a holiday let ?(though that has its own issues of management)

Are you really struck on this house or could you sell it and then easily buy another if England didn't work out?

booksurr

Council tax - as you will continue to use it yourself but along with having another person also use it as their residence, it will thus be classed as a Council Tax Home in Multiple Occupation. Note that is a specific definition applied in tax law. It is totally separate to the HMO rules operated by your council over fire safety and possible licensing. As a CT HMO you, the landlord, are the ONLY person who is legally liable to pay council tax. Therefore you need to make your tenancy agreement (*) explicitly clear on whether the rental amount includes or excludes CT. If it excludes it you will then need an explicit clause which covers how you will collect a contribution towards CT on top of the rent and how you will increase that each year as the council puts the tax up (or down if you are really lucky)

income tax - your main residence will be in England. That is immutable fact, so you cannot claim the rent a room allowance and must use the normal method to work out you rental profit, ie income - expenses. The advantage of a CT HMO is that your CT bill is then an allowable expense (it is not if it were not a CT HMO). naturally you will need to deal with how you split all other costs to reflect your own ("non business") usage and that of your tenant ("business use") so that you deduct only business use when working out your profit. There is no set method, you must use a "reasonable" method on a consistent basis

* your rent payer cannot be a lodger as it is not your main residence, they will therefore legally be a full blown tenant. Your tenancy agreement should therefore be the usual AST but it must be carefully worded to ensure you retain a right to access common parts of the building and whatever rooms you want for yourself. In reality therefore you are also creating a "normal" shared property situation where the agreement is for the rent of a nominated bedroom and access to common parts. As such the tenant has absolute right of quiet enjoyment of their bedroom (you need to give notice if you want to enter it) but you have absolute right to enter the rest of the building as and when you wish. as an AST you will be unable to serve a Section 21 notice during the first 6 months even if you and the tenant agree a shorter fixed period for the initial agreement.

Please do not make the mistake of thinking they can be treated like a lodger, they cannot, they have full tenants rights

HMO licence - please double check with your council whether they will actually define you as an HMO for licensing purposes. That is very important because I note Gwyneddd enforce a £140 fee for all HMOs, https://www.gwynedd.llyw.cymru/en/Businesses/Licences-and-permits/Housing-and-residential-licences/House-in-Multiple-Occupancy-licence-(HMO).aspx

of course if you are on Anglesey or the non Gwynedd bit of Snowdonia you can look up those councils yourself.

firely2327

AnotherJoe wrote: »

Being a remote landlord can be a royal pita.

Who would rent rooms in your house ? It's a very limited market as you describe your plans. Is there much employment nearby ? In short, is there even a market for rentals there? Could it be a holiday let ?(though that has its own issues of management)

Are you really struck on this house or could you sell it and then easily buy another if England didn't work out?

The rental market here is decent and as the house was relatively cheap. I think it would make sense to hang onto this if I have any intention of coming back here as finding something else in the price range would be difficult.

firely2327

booksurr wrote: »

Council tax - as you will continue to use it yourself but along with having another person also use it as their residence, it will thus be classed as a Council Tax Home in Multiple Occupation.

as an AST you will be unable to serve a Section 21 notice during the first 6 months even if you and the tenant agree a shorter fixed period for the initial agreement.

Please do not make the mistake of thinking they can be treated like a lodger, they cannot, they have full tenants rights

HMO licence - please double check with your council whether they will actually define you as an HMO for licensing purposes. That is very important because I note Gwyneddd enforce a £140 fee for all HMOs, https://www.gwynedd.llyw.cymru/en/Businesses/Licences-and-permits/Housing-and-residential-licences/House-in-Multiple-Occupancy-licence-(HMO).aspx

of course if you are on Anglesey or the non Gwynedd bit of Snowdonia you can look up those councils yourself.

Thanks, this is all getting complicated already! Not that I thought it was going to be a simple task to sort out!

CIS

firely2327 wrote: »

Thanks, this is all getting complicated already! Not that I thought it was going to be a simple task to sort out!

Just to clarify - the fact you intend to use the property occasionally makes no difference in respect of a council tax HMO determination. For a council tax HMO the landlord is always liable for the council tax charge, irrespective of whether they are resident in the property or not.

In any case you would not be resident in the property for council tax purposes as it's no your 'sole or main residence' - not that makes much difference in the council tax HMO determination.

If you were to rent the property as a whole then you could not , for example, leave a room off this tenancy so that you could continue to use it yourself. This would also make the property a council tax HMO for which the owner remains liable.

Craig

kunkj

firely2327 do you have enough of a buffer to keep your Wales home after you move without renting it out? In which case, why not rent in England first to give you flexibility on the England side too before committing to that? Then you have can see: how much you are actually able to visit Wales to use your place as a holiday home, whether you'd be able to be a landlord on top of that as well (it won't be much fun if every time you make it to your second home you have to spend it doing landlord chores), work out where in England you actually want to live (especially if you're currently having trouble finding a place to buy).

As AnotherJoe said being a landlord can be a massive hassle, especially long distance. Its definitely not straightforward, but there are a lot of good Landlord guides here that you can go through to help you figure out whether its something worth trying. I'd say if you can give yourself time before committing to anything, in Wales or England, and be realistic about how much of a commitment being a landlord is...


Also slightly off topic but could booksurr and CIS elaborate on what qualifies a house as an HMO for council tax purposes? I am aware of the criteria for what qualifies a house as an HMO for licensing purposes or for planning regs/usage class purposes but have never managed to find a good resource about the council tax criteria. Can this criteria vary from council to council and you have to contact your local authority directly to find out?

https://www.landlords.org.uk/news-campaigns/news/council-tax says "In a House in Multiple Occupation (HMO) containing bedsits or where tenants are paying rent for individual rooms on individual tenancy agreements, it is the landlord who is liable to pay Council Tax." but doesn't explain what makes a house an HMO for CT purposes. The only council I found that has a page on that is Brighton: http://www.brighton-hove.gov.uk/content/council-tax-and-benefits/council-tax/council-tax-and-houses-multiple-occupation-hmos Reading the Brighton page it seems like even if you have a lodger you are an HMO for council tax purposes.

booksurr

Council Tax HMO is defined in law and therefore cannot be varied at the discretion of individual councils - they are referred to as Class C dwellings
http://www.legislation.gov.uk/uksi/1992/551/made

Council Tax (liability for owners) Regulations 1992 section 2
Houses in multiple occupation, etc
Class C a dwelling inhabited by persons who do not constitute a single household, each of whom
either–
(a) is a tenant of, or has a licence to occupy, part only of the dwelling;
or
(b) has a licence to occupy but is not liable (whether alone or jointly with other persons) to pay rent or a licence fee in respect of the dwelling as a whole.

the point then being that "these Regulations specify classes of dwellings for which the person liable for the council tax is the owner rather than the occupier."

CIS

booksurr wrote: »

Council Tax HMO is defined in law and therefore cannot be varied at the discretion of individual councils - they are referred to as Class C dwellings
http://www.legislation.gov.uk/uksi/1992/551/made

Council Tax (liability for owners) Regulations 1992 section 2
Houses in multiple occupation, etc
Class C a dwelling inhabited by persons who do not constitute a single household, each of whom
either–
(a) is a tenant of, or has a licence to occupy, part only of the dwelling;
or
(b) has a licence to occupy but is not liable (whether alone or jointly with other persons) to pay rent or a licence fee in respect of the dwelling as a whole.

the point then being that "these Regulations specify classes of dwellings for which the person liable for the council tax is the owner rather than the occupier."

For HMO purposes the 1992 definition was replaced in 1993 and subsequently tweaked slightly. It now reads

“Houses in multiple occupation, etc

Class C a dwelling which

(a)was originally constructed or subsequently adapted for occupation by persons who do not constitute a single household;

or

(b)is inhabited by a person who, or by two or more persons each of whom either—

(i)is a tenant of, or has a licence to occupy, part only of the dwelling; or

(ii)has a licence to occupy, but is not liable (whether alone or jointly with other persons) to pay rent or a licence fee in respect of, the dwelling as a whole.”.

Can this criteria vary from council to council and you have to contact your local authority directly to find out?

The same applies across all local authorities in England and Wales.

Craig

Gigervamp

You would also need to register as a landlord. Wales brought this in last year. Do a search for Rent smart Wales.

newuser78

Depending on location, could you list your house on Airbnb? Am unsure of tax implications though!