Joint mortgage, renting a room

Tessa37

I need advice on renting out my part of the flat to my sister with who I have a joint mortgage.

I moved out but my sister doesn't want a lodger (although, we agreed on this, before we even bought a flat together)  instead she would pay reminding rent to me for using a whole flat for herself.

We want to do it right and I am curious if we can set up standard rental agreement between each other, although she is co-owner of the flat. I would carry on paying my part of the mortgage from money she would pay to me. I can not afford to pay two rents ( in my new place + mortgage on our joint property). If she changes her mind again and refuse to pay me the rent. Do I have a right to put a lodger into our flat where I own more like 50%? 

Thank you for any help. 

zagubov

I'm not sure a co-owner of a house can also be a lodger of it, nor that a non-resident owner can have a lodger in the property they own, rather than a tenant.

greatcrested

so

* you jointly own the property with sister

* you don't live there

* she lives there alon

You can agree anything you like with regards to the mortgage payments and/or compensation for you ot being there whilst she is. There is no tenancy or lodger agreement invlved.

Bear in mind, if/when you sell, as it is not your main residence you will be liable for Capital Gains Tax on your 50%. Your sister will not as it's her main residence.

If you (not your sister) let your roon out, then

* the rent goes to you

* as you are a non resident landlord, the occupant will be a tenant (with full tenancy rights/protection)

* you will need to comply with all tenancy leglislation and tax liability (see links below)

If your sister lets out a room

* the rent goes to her

* the occupant will be a lodger (with limited rights)

* her tax will (probably) fall within the rent-a-room scheme

* any further financial arrangement between you and her is entirely a matter for the two of you.

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Tessa37

Thank you. I don't want to make money on my room. Any payments done by a lodger/ tenant would go directly to the bank as payments for my mortgage. I would still pay additional bills on our joint property.  Do I still have to pay tax if I don't make any profit on it? My sister can not really rent out the room, which she doesn't own. 
Also, if my sister starts to pay full mortgage without written agreement I could loose my percentage from future sale (change percentage of ownership as she would pay my part of the mortgage as well). I don't think this would be fair as she would benefit from having the flat for herself. She would have to pay same money anywhere else for two bedroom property. 
Thank you. 

FinallyStoppedLurking

IS there a reason she can't buy you out? Seems a more logical solution. 

[Deleted User]

Tessa37 said:

Thank you. I don't want to make money on my room. Any payments done by a lodger/ tenant would go directly to the bank as payments for my mortgage. I would still pay additional bills on our joint property.  Do I still have to pay tax if I don't make any profit on it? My sister can not really rent out the room, which she doesn't own. 
Also, if my sister starts to pay full mortgage without written agreement I could loose my percentage from future sale (change percentage of ownership as she would pay my part of the mortgage as well). I don't think this would be fair as she would benefit from having the flat for herself. She would have to pay same money anywhere else for two bedroom property. 
Thank you. 

Your sister does own the bedroom just as you do and if you let the room I suspect you will make a profit as the capital repayment portion of your mortgage payments is not an expense. 

Why would you lose a share of equity? Is the deed of trust written in such a way that you would? 

greatcrested

Tessa37 said:

Thank you. I don't want to make money on my room. Any payments done by a lodger/ tenant would go directly to the bank as payments for my mortgage. I would still pay additional bills on our joint property.  Do I still have to pay tax if I don't make any profit on it? My sister can not really rent out the room, which she doesn't own. 
Also, if my sister starts to pay full mortgage without written agreement I could loose my percentage from future sale (change percentage of ownership as she would pay my part of the mortgage as well). I don't think this would be fair as she would benefit from having the flat for herself. She would have to pay same money anywhere else for two bedroom property. 
Thank you. 

Whether the tenant pays you directly (eg cash) or indirectly (eg to your mortgage lender) is irreleant. It is still rent and needs to be declared to HMRC. You are making a profit from the rental in that you no longer have to pay the mortgage! Whether you have to pay tax depends on what allowances you can claim against the income etc. You need to read the tax rules.

As FSL says above, the best solution is to separate yourself financially from your sister eg by selling her your share of the property.

Comms69

Tessa37 said:

I need advice on renting out my part of the flat to my sister with who I have a joint mortgage.

I moved out but my sister doesn't want a lodger (although, we agreed on this, before we even bought a flat together)  instead she would pay reminding rent to me for using a whole flat for herself.

We want to do it right and I am curious if we can set up standard rental agreement between each other, although she is co-owner of the flat. I would carry on paying my part of the mortgage from money she would pay to me. I can not afford to pay two rents ( in my new place + mortgage on our joint property). If she changes her mind again and refuse to pay me the rent. Do I have a right to put a lodger into our flat where I own more like 50%? 

Thank you for any help. 

What for? She doesnt owe you anything. You cant create a tenancy with someone who owns the property. 

You have no right to put someone in there. And YOU certainly cant have a lodger at all. 

Tessa37

If I rent out the room I will not loose any percentage as my commitments will be covered by the tenant/ lodger. The problem is, my sister doesn't want a lodger/ tenant and she can not afford to buy my out. Unfortunately, we didn't sign deed of trust. 

I am afraid that I could loose my percentage if she starts to pay my part of the mortgage as well. That's why I think we should do written agreement. I would not make money on it, I am still happy to pay additional cost on our flat but if she wants to stay in our flat on her own I think it's fair she pays some share; similar to which lodger/ tenant would be signing (rental contract) as security of my share of the property.  My sister would actually pay less than anywhere else for two bedroom flat. 
If she refuses lodger/ tenant and if she refuses to pay for the rest of the flat I will have to carry on paying as I don't want to end up with bad credit score.

I was wondering about my rights. Can I still rent out the room even if she refuses it? If she stays there on her own and pay additional money directly to bank (my mortgage) without written agreement I could loose my percentage. I believe we don't have to sign any agreement if she starts paying additional money directly to me... like that I could pay my mortgage. Problem is, if she wants to pay full mortgage directly to the bank.
Thank you. 

Tessa37

I understand if we both move out and if we rent out our flat we would have to pay taxes and we would have to inform the bank about it.
By renting out our flat we would create profit as capital repayments but not from renting out one room. 

[Deleted User]

If you didn’t sign a deed of trust then you won’t lose equity. 

As has been explained several times now, you can’t have a lodger in a property where you are not resident and your sister, a joint owner of the property, cannot also be your tenant.