Remotely renting out property with other owner as a live-in-landlord

RogueBeef

Hey guys, first post here. I'm rather inexperienced with homeowning and other house-legal matters so please excuse the length of my blabbering.

I've looked at a few previous threads but none seem to mirror my exact situation so thought to start my own post. I'll start off with a bit of context and then pose my main concerns, hopefully some of you can relate to the situation.

 

18 months ago I bought with a close friend (we are tenants in common) which seemed like a great idea at the time, one large bedroom and two very small bedrooms. My friend took the large room and I the smaller ones as I have a lot of hobbies and could make use of the other room. 

 

Skip forward to present and I find myself in a situation where I don’t think I could stand another 6 months living with him so am going to find a place to rent with my girlfriend. 

 

My friend wants to stay there and that is fine by me as I'd like to keep the property as an investment. He is not ready to have the whole house rented out privately so we are looking to rent my two rooms out to an individual (he doesn't want two people living there).

 

Obviously I have a mortgage to pay and a lot of other house related expenses (including putting money aside in case anything unexpected happens) which I'd need the rent to at least cover so I'm not putting my hand in my pocket each month. Currently I'm finding it difficult to balance the incoming and outgoing monies due mainly to the fact that there isn't much interest in two small rooms for a single person. 

 

The situation I believe I find myself in is a live-in landlord (or resident landlord), only that I'm not the landlord who is there day-to-day. My immediate thought is that this gives me a lot less control on the situation and I'll essentially be collecting monies from someone month to month which I'll depend upon in order to pay the mortgage. Because of this, I'll be looking to handle the whole thing officially i.e. draw out contracts even if we rent to a friend (which I hear is a big no-no). I know I can't rely or put the onus on my friend whom I bought the place with to enforce the collection of rent or find tenants. 

 

I will be living on the over side of London for one year before I plan to work over in Asia for a couple of years and so I need the situation to be one in which I have a lot of control. 

 

Currently I see this whole thing as a big risk and is making me think about just selling the whole thing or forcing him to also move out so we can rent the whole place privately (something which we've discussed but he is not happy to do). 

 

Has anyone been in a similar situation before or can offer advice on what to do in this situation. 

 

Thanks  

oldbikebloke

your "belief" is utterly wrong, pretty obviously you are NOT a live in /resident LL when the reality is you live elsewhere.
they are NOT YOUR ROOMS. You own the entire property, not 2 rooms in it. You have no more right to let those rooms than the other person does. What happens is by agreement between the owners.
You do have a right to a share of any income produced by the property in accordance with whatever % you and the other person agreed under the tenancy in common. As you are not married to the other person, you do have the added flexibility to choose to what actual share of the rent you receive, it could be 100% or it could be 0%. If you let the other person take it all (obviously in doing that you would negotiate with them that they pay a correspondingly larger share of any bills) that is actually quite common where there is a resident Ll and a non resident co-owner, because the resident LL can treat an occupant as a lodger (not a tenant) and claim the rent a room allowance so they get £7,500 tax free.
You as a non resident LL cannot have a lodger in the property, nor get the tax free allowance. Instead you would have a tenant, and pay tax on your income less your share of any expenses. Therefore, as a non resident LL, you will pay more tax than the other person who is a resident LL.

Unless you want to spend a lot of money on a court case you cannot "force" the other person to do anything, you choice of words is very poor if that is what you think.

[Deleted User]

As oldbikebloke says, to be a resident landlord you actually need to be resident which you won't be. 

However you look at it you don't have a lot of control in this situation and you'll have even less when you move overseas. If you find you can't live with your friend do you think other people would have the same problem? 

The property sounds more like a millstone around your neck rather than an investment. If your friend, the one who is resident, took in a lodger and the rent was enough to cover your share of the mortgage and bills what money are you actually making from this investment? What does the Deed of Trust say about one party wanting out? 

[Deleted User]

RogueBeef said:

Hey guys, first post here. I'm rather inexperienced with homeowning and other house-legal matters so please excuse the length of my blabbering.

I've looked at a few previous threads but none seem to mirror my exact situation so thought to start my own post. I'll start off with a bit of context and then pose my main concerns, hopefully some of you can relate to the situation.

 

18 months ago I bought with a close friend (we are tenants in common) which seemed like a great idea at the time, one large bedroom and two very small bedrooms. My friend took the large room and I the smaller ones as I have a lot of hobbies and could make use of the other room. 

 

Skip forward to present and I find myself in a situation where I don’t think I could stand another 6 months living with him so am going to find a place to rent with my girlfriend. 

 

My friend wants to stay there and that is fine by me as I'd like to keep the property as an investment. He is not ready to have the whole house rented out privately so we are looking to rent my two rooms out to an individual (he doesn't want two people living there).

 

Obviously I have a mortgage to pay and a lot of other house related expenses (including putting money aside in case anything unexpected happens) which I'd need the rent to at least cover so I'm not putting my hand in my pocket each month. Currently I'm finding it difficult to balance the incoming and outgoing monies due mainly to the fact that there isn't much interest in two small rooms for a single person. 

 

The situation I believe I find myself in is a live-in landlord (or resident landlord), only that I'm not the landlord who is there day-to-day. My immediate thought is that this gives me a lot less control on the situation and I'll essentially be collecting monies from someone month to month which I'll depend upon in order to pay the mortgage. Because of this, I'll be looking to handle the whole thing officially i.e. draw out contracts even if we rent to a friend (which I hear is a big no-no). I know I can't rely or put the onus on my friend whom I bought the place with to enforce the collection of rent or find tenants. 

 

I will be living on the over side of London for one year before I plan to work over in Asia for a couple of years and so I need the situation to be one in which I have a lot of control. 

 

Currently I see this whole thing as a big risk and is making me think about just selling the whole thing or forcing him to also move out so we can rent the whole place privately (something which we've discussed but he is not happy to do). 

 

Has anyone been in a similar situation before or can offer advice on what to do in this situation. 

 

Thanks  

xylophone

Can he afford to buy you out?

notrouble

There are only 2 sensible options:

1) sell your share to your friend. He then becomes sole owner and gets 1 or 2 lodgers (if he chooses)

2) sell the property on the open market and split the proceeds as per your Deed

Presumably when you purchased you discussed and agreed what would happen if this kind of scenario (or any other future scenario) arose?

Do not get involved with a complex legal letting arrangement, potential problems over maintenance costs, dealing with problem tenants/lodgers, tax, etc. It's a nightmare in the making.

Break the property connection but maintain the friendship!

NewShadow

oldbikebloke said:

You as a non resident LL cannot have a lodger in the property, nor get the tax free allowance. Instead you would have a tenant, and pay tax on your income less your share of any expenses. Therefore, as a non resident LL, you will pay more tax than the other person who is a resident LL.

The only addition I'd make to this post would be to add the stamp duty and capital gains tax implications of retaining a beneficial interest in a property which is not your main residence.

If you/your partner decide to purchase a home together before selling your share of the current property you may be liable for an additional rate of stamp duty. We also do not know the value, or potential increase in value, of your jointly owned property but - given you are not married to the resident co-owner - should you delay selling the property for a number of years you may be liable for GCT on your share when you come to sell. 

[Deleted User]

If you can't live with your friend why would you expect someone else to? I think you'd be better off selling.  Does the difference you have with your friend involve how they look after the place or play music etc?  This could affect the value of your house.  How can you have control over the house if you are in Asia? It could be trashed and you wouldn't know.

I am just trying to make you think about how possible this idea is.

RogueBeef

Thanks for all the input everyone, my concerns over having little control seem to be the reality and the beautiful idea of making a profit out of the whole sceme is rose tinting my vision. I think the only two realistic options are to either rent the whole place out or sell the property on the market.

In response to some of the questions posed:

@deannatrois ; Why can I no loger live with him -  he is not too noisy or messy, there are a few reasons but the main one being that I'm just fed up of living with someone who complains and moans 24/7 without a desire to take any action. When I knew him before I lived with him, he would be on good form when we pet in person, now I see the side of him that perhaps his mum does, and am fed up of offering advice or a solution and see him do the opposite, then return for advice. I enjoyed the first year (the honeymoon period if you will) and believe someone else would as well.

@Lover_of_Lycra ; Milestone or Investment - There is a £1.7Bn shopping centre being developed 100m away which we thought a great investment to buy near, the project has unfortunately been delayed. I do agree with your second point though, what is the point of me having it if I'm not enjoying it or making any money from it, high risk no return.

@notrouble @Lover_of_Lycra ; What was drawn up in the deed of trust? - We decided do draw up an informal deed of trust which stated that if someone wants to sell before 3 years, they pay the other person a pro-rata share of their stamp duty cost (which would be £1000).

@xylophone - No he cannot afford to buy me out unfortunately.

Thanks again for all the input with special thanks to @oldbikebloke for the frank response.

notrouble

RogueBeef said:

@notrouble @Lover_of_Lycra ; What was drawn up in the deed of trust? - We decided do draw up an informal deed of trust which stated that if someone wants to sell before 3 years, they pay the other person a pro-rata share of their stamp duty cost (which would be £1000).

Fine but what was agreed about the right to sell? Did you agree that if one wants to sell, the other must agree? If not, might he refuse to sell because either he'd like to continue living there or he believes in the investment benefit of keeping the property?

Using the courts to force a sale on a reluctant joint owner is slow, expensive and stressful.

For the benefit of others considering entering into a similar property arrangement, that's why discussing/agreeing all sorts of scenarios is important at the start:

* one wants to move a partner in (the other may not like the partner!)

* one wants to sell/move out (as here)

* one wnts to make improvements or repairs - the other can't afford, or just does not want to spend the money

* one loses their job and can't afford the mortgage

et etc

xylophone

When I knew him before I lived with him, he would be on good form when we pet in person,

TMI (as the young people say now)?