Renting out to friends short term - legalities?

cgfw201

Hi,
In the process of moving from our owned house in London to a rental property in the countryside.

Sounds like a weird way to do things, won't go into the detail but it does make sense.

Anyway, we were just on the brink of listing it for rent, notifying our mortgage lender and all the rest of it and accepting the +1% interest rate on the mortgage that would ensue after 3 months.

And then last week a couple of friends had a house purchase fall through, they have a young baby and it's left them totally stuck.

We've offered to let them have our place for up to 6 months at mates rates, with all bills remaining in our name for now until they find somewhere else to move to.

Question is - is this an issue? And if so, what would you recommend?

PS - do all mortgage rates go up when you switch to BTL? Assume they do, but haven't researched at all yet.

foxy-stoat

I wouldn't leave the utilities in your name, doesn't matter if its 6 months.

If you want to rent it at less than market rate theres nothing stopping you, as long as your lender is happy with the rent vs mortgage payment, you will still need to get them to sign a AST and protect the deposit if you take one.

My consent to let didnt attract additional interest rate, but that was a while ago and may be different lender.

Retired_Mortgage_Adviser

Won't go into the pluses and minuses of renting out property to friends as the risks boil down to te specifics of the individuals involved and your relationship with them.

As for consent to let surcharges, it differs from lender to lender. Some tack on a surcharge % (eg: Nationwide's used to be after 6 months of letting), some charge a one-time fee, some charge a periodic fee, etc. All this is to make up for the risk differential between a residential property vs one that's rented out.

cgfw201 wrote: »

PS - do all mortgage rates go up when you switch to BTL? Assume they do, but haven't researched at all yet.

[Deleted User]

cgfw201 wrote: »

PS - do all mortgage rates go up when you switch to BTL? Assume they do, but haven't researched at all yet.

You dont sound like you are switching to BTL. It sounds like you are switching to Permission to Let (or Consent to Let). This is a variation of a residential mortgage contract to allow you to rent it in the short term. This can generally have a hiked interest rate, administration charges, sometimes both, sometimes neither.

If you swithed to a 'proper' Buy to Let mortgage you would just have a buy to let mortgage and the interest rates are actually very decent at the moment.

Are you tied in to your residential deal I assume? Otherwise you would probably be best moving to a proper BTL mortgage

foxy-stoat

I would do more research before deciding to become a landlord.

gwynlas

There are a number of threads on here advising against letting to friends or family. However you will become a landlord with all the related legalities such as gas safety check etc. You will need to set up proper contracts for tenancy and manage the income professionally ie HMRC returns.
Read up on BTL on this site.

gj373

cgfw201 wrote: »

Hi,

Question is - is this an issue? And if so, what would you recommend?

Yes. There is no such thing as

cgfw201 wrote: »

Hi,
We've offered to let them have our place for up to 6 months at mates rates,

You will be letting your property and will require consent to let or buy to let mortgage, you will require all the necessary insurances, you will have to fulfil the legal obligations of a landlord, you will have to pay income tax on the income, your mates will become tenants, you will have to fix things that go wrong, the tenants might not leave when you want them to and you will have to take them to court etc etc etc

What would I recommend? Don't do it.