Renting Flat to Daughter

Rosa_Klebb

I have just paid off the mortgage on my small 2 bedroom apartment and will be buying a larger home with my partner. We are in the fortunate position not to have the sell the apartment to fund the larger home as we already have the deposit saved.

Unfortunately we are going to be hit with the extra stamp duty on the new home if we do keep the apartment but are aware that provided we sell the apartment within 3 years, this will be refunded.

As a higher rate tax payer I don't think it's worth renting the apartment out as BTL for just a couple of years before we need to advertise it for sale. Agency fees and tax would mean we would not have enough profit to make it worth the risk.

Therefore we though we would offer it to my daughter and her boyfriend for a couple of years, perhaps either at very low rent (allowing them to remove themselves from their current rental property and save a deposit for their own place), or should this involve too much hassle, just simply let them live there for free for a couple of years. She's very tidy and we know the place would be well looked after.

Not having done this before, what are the pitfalls of the above? What would we need to do legally to arrange this (flat is now mortgage free so no need to consult the building society)?

Is the above even legal?

theartfullodger

General advice is never rent to family of friends... There's sadly loads of threads outlining things going wrong, family breakups etc etc...


Another general rule: Only rent to someone you are happy to evict in the full glare of local papers, social media, Xmas dinner...

babyblade41

As above , I did it until a partner change and all hell broke loose. I did evict and had to get bailiffs.. It always has to be a LL tenant situation and all that applies...just DON'T . It invariably ends in tears

OscarFoxtrot

Rosa_Klebb wrote: »

I have just paid off the mortgage on my small 2 bedroom apartment and will be buying a larger home with my partner. We are in the fortunate position not to have the sell the apartment to fund the larger home as we already have the deposit saved.

Unfortunately we are going to be hit with the extra stamp duty on the new home if we do keep the apartment but are aware that provided we sell the apartment within 3 years, this will be refunded.

As a higher rate tax payer I don't think it's worth renting the apartment out as BTL for just a couple of years before we need to advertise it for sale. Agency fees and tax would mean we would not have enough profit to make it worth the risk.

Therefore we though we would offer it to my daughter and her boyfriend for a couple of years, perhaps either at very low rent (allowing them to remove themselves from their current rental property and save a deposit for their own place), or should this involve too much hassle, just simply let them live there for free for a couple of years. She's very tidy and we know the place would be well looked after.

Not having done this before, what are the pitfalls of the above? What would we need to do legally to arrange this (flat is now mortgage free so no need to consult the building society)?

Is the above even legal?

Well ofcourse it's legal, I mean that question alone means you probably shouldn't do this


You can let them live rent free and therefore they do not get tenants rights, not you landlord responsibilities.


Or you can charge rent, but would need to:


Provide how to rent guide
EPC
Gas safety certificate
Conduct a right to rent check
Declare the income
(secure any deposit in a scheme)

need_an_answer

All good until BF and daughter split up and BF decides not to move out.

Hopefully it wont happen but I know of at least one case where mum had to evict her grandchildren and sons partner after the long term(previously very amicable relationship) broke down.

DigForVictory

Rosa, I adore your handle, I think you are a wonderful loving mother & I have huge respect for anyone wanting to do the right thing for their family but checking it is safe/legal/financially prudent to do so first.

It's rarely a good idea to leave a property empty, so someone in makes sense but the really sticky bit comes getting them out. She's your daughter & a tidy soul & all, but when push come to shove it may all get a bit complicated.

Will you be asking her to have the place ready to show to vendors?
Who'll pay all the flats' utility bills?
Service charge?
What if you suddenly need a lump sum to get your new joint place sorted - an unexpected new roof or something?
What if rather than putting all the current rent into a saving account she & bf take up designer clothes & online poker?
Will a reference for a new flat from her mother count?
Some people get pregnant really easily even unintentionally - what would you do if she says um, you're going to be a granny?

And the what ifs go on.

Which is why while it seems wholly sensible & logical, it's actually safer for you all to take a small profit, rent it to a stranger & thank the assorted deities the law is wholly on your side & you need never have any of these gruesome discussions with your daughter. You could even give her the modest profit if you wanted but please, don't hand her the keys.

Hasbeen

Rosa_Klebb wrote: »

I have just paid off the mortgage on my small 2 bedroom apartment and will be buying a larger home with my partner. We are in the fortunate position not to have the sell the apartment to fund the larger home as we already have the deposit saved.

Unfortunately we are going to be hit with the extra stamp duty on the new home if we do keep the apartment but are aware that provided we sell the apartment within 3 years, this will be refunded.

As a higher rate tax payer I don't think it's worth renting the apartment out as BTL for just a couple of years before we need to advertise it for sale. Agency fees and tax would mean we would not have enough profit to make it worth the risk.

Therefore we though we would offer it to my daughter and her boyfriend for a couple of years, perhaps either at very low rent (allowing them to remove themselves from their current rental property and save a deposit for their own place), or should this involve too much hassle, just simply let them live there for free for a couple of years. She's very tidy and we know the place would be well looked after.

Not having done this before, what are the pitfalls of the above? What would we need to do legally to arrange this (flat is now mortgage free so no need to consult the building society)?

Is the above even legal?

It is legal.

My opinion is you still have to have smoke/carbon monoxide detectors. Gas safety certs. Buildings ins. Contents ins if you have anything there. Register in any council schemes. Give them a contract and any required paperwork. Tell HMRC.

You should basically treat them same as tenants with contract etc to protect them and yourself.

Rent could be charged at a minimum to cover your expenditure. Resulting in no or minimum tax

SmashedAvacado

I would totally ignore everyone that says don't rent it to family. Just rent it solely to your daughter. Agree with her a clear protocol about what will happen and when. Make sure you do the formalities properly (ie the gas and other mandatory things), and then keep her updated as to expectations - ie when you want it back. When you do want it back, make sure you are prepared to serve a notice.

This will put you in no worse position than if renting to a stranger - probably much better. yes there are isolated incidences of when things can go wrong - but its much more likely to go wrong with a stranger than with someone you know and trust.

Problems typically arise when people are not clear about the terms of the arrangement at the outset.

xylophone

Why not just sell the apartment and gift your daughter a deposit to buy a property of her own?

Make sure that she knows about tenants-in-common, declaration of trust etc if she buys the place with the boyfriend.

Mojisola

xylophone wrote: »

Why not just sell the apartment and gift your daughter a deposit to buy a property of her own?

Or, if you don't want to give away that much money, look into family offset mortgages or guarantor mortgages.

need_an_answer

SmashedAvacado wrote: »

I would totally ignore everyone that says don't rent it to family. Just rent it solely to your daughter.

This will put you in no worse position than if renting to a stranger - probably much better. yes there are isolated incidences of when things can go wrong - but its much more likely to go wrong with a stranger than with someone you know and trust.

Problems typically arise when people are not clear about the terms of the arrangement at the outset.

In essence I agree with what you say,however the OP hasn't actually said she will RENT...I read the post as if she will allow her daughter and partner to live there...this was a preferred option over rent

She does mention a lower rent however any rent will still attract the need to comply with regulations so whilst you will charge a lower amount the need to protect a deposit,comply with certifications and maintenance issues will still apply. A gas safety certificate costs the same for example if you charge £100 rent or £500 rent...its still a requirement.


Yes OP get it formalised with a proper agreement no different than you would if you were using an agency and unconnected tenants.

Whilst you could still face issues further down the line at least you followed the correct set up procedures.


Its also worth remembering when you come to sell the property that it can take 6 months from offer to completion if you have a slow management company or issues are flagged during the conveyancing process. The new owners will almost certainly want an assurance that your daughter will move out. So what potentially may seem a long timeframe of 3 years to get the stamp duty refund suddenly shrinks quite considerably when you hit the 2 year mark.