1st time letting house. Help needed. Plz

Misteek

My sister wants to let her house out as she's struggling atm.

She's got 2 options. A) she lives with the Tennant as house share as the house has 3 big bedrooms. she moves out with one of our siblings and let's the whole house to her friend which sill be the tennant.

Now I understand the house will need elec and gas certificates. Once this is done do these need to be registered to some sort of letting authority ? Etc..

Secondly, the friend that needs to rent is on universal credit as she has long term health issues ie disabilities . So her rent is probably covered by housing benefit. Are the checks more vigorous as she will be getting  benefit to cover it?

Also what will my sister need to do in terms of paperwork? Is it costly to make a tenancy agreement. 

Also as my sister works , when will she need to pay the tax for the rental income ? How does that work? Is it a self assessment and does that have a deadline?

Thanks for any help.

tacpot12

If she is to rent the whole house out, she will need:

• an Energy Performance Certificate (EPC) and will need to make impovement is the property is rated at less than band E (although some exemptions are available).
• a Gas Safety Certificate covering any gas appliances and have any faults fixed.
• an Electrical Installation Condition Report (EICR) on the electrics in the property and will need to have anything that is dangerous or potentially dangerous (C1 & C2) repaired.
• any soft furniture she is leaving in the property to have fire safety labels. 
• provide smoke alarms and Carbon Monoxide Alarms.
• have any (portable) electrical appliances she is leaving in the property (including extension cords) tested as Portable Appliances. (fixed items such as boilers don't need testing). 
• provide the tenant with manuals for any appliances she is leaving in the property (these are generally available on line as PDF files)
• protect any security deposit she takes from the tenant in a Government Tenancy Deposit Protection Scheme
• review the risk of Legionella in the property 
• review the safety of the property using the Housing Health and Safety Rating System (HHSRS)
• provide the tenant with the Government's How to Rent booklet

Certificates generally only need to be provided to the local council if the house is being rented as a HMO (House of Multiple Occupation), i.e. it's being rented to more than one household.

In some areas, she may also need a licence to rent her home. If she has a mortgage, she will need her lender's permission to rent. She will need insurance for certain risks and obligations she has as a landlord. She may want to have an inventory of the items she is leaving in the property created - it is virtually impossible to make deductions from security deposits if there isn't an inventory that records the state of the property before the tenancy commenced. 

The checks are not more rigourous because the tenant is receiving help with their housing costs from Universal Credit, but the fact that the tenant is disabled means that your sister may need to make (reasonable) adjustments to how she runs the tenancy. See the link on Rights of Tenants with a disability. 

She will need to register for Self-Assessment to pay tax on any profit she makes. She will need to keep accounting records of her income (a record of the rent paid) and her expenses, including copies of all receipts. The deadline is that she has to report her profit in the tax year that it is earned, so the deadline is the deadline to submit a Self-Assement Return (31st October for paper returns and 31st Jan the following year for online return. There is also a deadline to pay any tax due (31st Jan of the following year). 

She will need to check with her bank if they will allow her to use her current bank account to receive rent payments. Most won't and she will need to open a business account.  

These links will help, but she needs to read them all and do everything they say is mandatory.

Domestic private rented property: minimum energy efficiency standard - landlord guidance - GOV.UK
Landlords' responsibility for gas safety - HSE
Guide for landlords: electrical safety standards in the private rented sector - GOV.UK
The complete fire safety guide for landlords | NRLA
Tenancy deposit protection: Overview - GOV.UK
Legionnaires' disease - Legionella and landlords' responsibilities
Housing health and safety rating system (HHSRS): guidance for landlords and property-related professionals - GOV.UK
How to rent - GOV.UK
Housing Law: the rights of tenants with a disability
Keeping your pay and tax records: Rental income - GOV.UK

She should probably look at joining a landlord association, such as the National Residential Landlords Association, as they can advise on most aspects of being a landlord. 

All that said, renting your house to friends is generally a bad idea. Such rentals seem to go wrong much more often than rentals to strangers. 

Renting a room in the house she lives in is much more straightforward. There is guidance here: Rent a room in your home: Becoming a resident landlord - GOV.UK

Some of the safety requirements such as Gas Safety Certificates and Smoke/Carbon Monoxide Alarms remain, but many fall away.

RAS

She also needs to appreciate:

That the house becomes the tenant's home and she cannot just expect the tenant to leave when she'd like them to. If the tenant doesn't leave when she'd like, pretty much guaranteed if the tenant is seeking local authority help to move on, she'll have to take the friend to court, get bailiffs, evict, pretty much guaranteed if the tenant wants to get LA housing. 

Consequently, your sister could find herself homeless whilst trying to evict the tenant, ineligible for any support.

Can your sister afford the mortgage and repair costs if the tenant stops paying or trashes the place?

poppy12345

Does your sister claim any means tested benefits? These will be affected if you own a property you do not live in. With capital of more than £16,000 entitlement to means tested benefits will end. 

elsien

She needs to a) understand the huge difference between a tenant and a lodger. 
Personally, if she's going to be sharing with someone anyway whether friend of family, I'd go down the lodger route. Less onerous in terms of obligations and far simpler to get someone out.

b) If she is going to rent out the whole house then she needs to properly do her own research about what it involves as getting it wrong can be very expensive.

If she is looking at renting her whole house out to a single friend, the friend needs to check how much rent they can get. The single person rate is very unlikely to cover a whole house. 

Flugelhorn

Agree - far better if she goes down the lodger route - more affordable for both of them and less onerous

Bookworm105

is she used to sharing personal space with someone? having a friend as a lodger is not the bed of roses it seems as until you live with someone you do not know them 

i second that she needs to do her own research as being fed second hand info can lead to misunderstanding. Get her to sign up on here and ask her own questions - she could also start by reading the pinned post at the top of the board that covers the basic facts of letting (in England/Wales)

Stubod

..generally a bad move on so many levels. I would not recommend becoming a landlord, and would certainly not "rent to a friend". 

Simplest and best option by far is to go the "lodger" route...IMHO....

Green_hopeful

When I got divorced I let my spare rooms to lodgers. I started with two but ended up with three. It was mostly quite fun. I did have a messy tenant which was a bit stressful. But I managed to pay off lots of divorce related debt. It’s a relatively easy way to make money if you have spare space in your house. The first £7500 per year is tax free so I didn’t pay much tax. I then moved out and got four replacement tenants. It was harder because I wasn’t there all the time. But perhaps those tenants were more demanding. There are capital gains tax implications if you let out the whole house or more than one room. I got an accountant to do my tax and it was worth it for me because it was complicated and I saved money because he knew how to do it properly. 

theartfullodger

Only 2 n's in tenant.

Don't become a landlord unless you can afford the emotional and financial costs of a terrible tenant/lodger (or agent). Whilst paying all costs, for saying 7 months.

Most years I make money as a landlord - but not always.

Get educated as a landlord 1st.

Misteek

Hi Thanks for ghe absolutely great advice all of you!! Honestly appreciate it.