Renting out my house

Supernova11

I’m going to be renting out my house because my mum has Alzheimer’s and she needs someone to look after her. However I’ve seen some interesting potential problems and wondered how they would work. Obviously I will be living at my mums and the tennants will live in my house so my place of residency needs to be my mums and council tax will be at my mums and post will go to my mums.

But what if in the future I need to make applications for example to borrow money or anything financial related? When I complete the form and give my mums address but say I don’t own the house, it’s going to give the impression I’m not a homeowner. However, if I give my house address, they might start sending correspondence there, which the tennants would receive. Even more confusing, what happens if I move in with my mum but eventually, as will happen, move back into my house. When making applications, it will look like I was a homeowner, then I wasn’t, then I bought my old house back?!

Anyone been in a similar situation? I’m guessing I just have to declare where I live at the time and that’s it?

Thanks all

Green_hopeful

I rented out a few rooms to lodgers but kept my own space in my house. I actually kept a downstairs room as my space. I continued to use the address but diverted my post to where I was staying. The advantage of lodgers over letting the whole house is that you remain in occupation and they are just licensees. You can serve notice on them much easier. You get the rent a room tax benefit as well.  You can earn £7500 per year before you have to pay tax. You need to notify your insurer and mortgage company but I think they generally let you have some time with lodgers. The disadvantage is that you remain responsible for the bills. In some areas you need a licence for an HMO. I stayed under the limits so didn’t need to get a licence. When I did it I got some CGT reliefs as well as I eventually sold. There used to be an exception for CGT if you were living somewhere else on a licence eg looking after an elderly relative which my mum used but that might have changed. 

Bookworm105

Green_hopeful said:

I rented out a few rooms to lodgers but kept my own space in my house. I actually kept a downstairs room as my space. I continued to use the address but diverted my post to where I was staying. The advantage of lodgers over letting the whole house is that you remain in occupation and they are just licensees. You can serve notice on them much easier. You get the rent a room tax benefit as well.  You can earn £7500 per year before you have to pay tax. You need to notify your insurer and mortgage company but I think they generally let you have some time with lodgers. The disadvantage is that you remain responsible for the bills. In some areas you need a licence for an HMO. I stayed under the limits so didn’t need to get a licence. When I did it I got some CGT reliefs as well as I eventually sold. There used to be an exception for CGT if you were living somewhere else on a licence eg looking after an elderly relative which my mum used but that might have changed. 

and if HMRC had challenged you I'd bet you would need a lot more evidence than that to prove it remained your main residence for tax law. Looks like your experience is more one of : I got away with this scenario... whilst I was in fact living somewhere else in real terms  

housing law, ie HMO status also requires that the property is your main residence

There is loads of case law setting out the "matters of fact" used in deciding if a property remains the main residence in practice, ie not just because you have a room in it.

RAS

Green_hopeful said:

I rented out a few rooms to lodgers but kept my own space in my house. I actually kept a downstairs room as my space. I continued to use the address but diverted my post to where I was staying. The advantage of lodgers over letting the whole house is that you remain in occupation and they are just licensees. You can serve notice on them much easier. You get the rent a room tax benefit as well.  You can earn £7500 per year before you have to pay tax. You need to notify your insurer and mortgage company but I think they generally let you have some time with lodgers. The disadvantage is that you remain responsible for the bills. In some areas you need a licence for an HMO. I stayed under the limits so didn’t need to get a licence. When I did it I got some CGT reliefs as well as I eventually sold. There used to be an exception for CGT if you were living somewhere else on a licence eg looking after an elderly relative which my mum used but that might have changed. 

The fact that you call the other people living in your house lodgers does not mean that they are not tenants, meaning that you need to comply with all the rules affecting landlords unless you are genuinely resident, as in sleeping there most nights each week, eating there routinely etc.

If challenged, the cost to you could be considerable. As in penalties up to 3x£the deposit, HMRC penalties for failure to declare rental income and pay CGT, and fines for not having the require certificates.

elsien

Do you have a mortgage and do you have agreement from the lender to rent your property out?

Lokolo_2

Supernova11 said:

I’m going to be renting out my house because my mum has Alzheimer’s and she needs someone to look after her. However I’ve seen some interesting potential problems and wondered how they would work. Obviously I will be living at my mums and the tennants will live in my house so my place of residency needs to be my mums and council tax will be at my mums and post will go to my mums.

But what if in the future I need to make applications for example to borrow money or anything financial related? When I complete the form and give my mums address but say I don’t own the house, it’s going to give the impression I’m not a homeowner. However, if I give my house address, they might start sending correspondence there, which the tennants would receive. Even more confusing, what happens if I move in with my mum but eventually, as will happen, move back into my house. When making applications, it will look like I was a homeowner, then I wasn’t, then I bought my old house back?!

Anyone been in a similar situation? I’m guessing I just have to declare where I live at the time and that’s it?

Thanks all

I wouldn't worry about the changing addresses, for most financial products they care more about your credit rating over what you own anyway. 

My main concern, as others have said, would be to make sure you handle things correctly with renting out the house. Definitely vet the prospective tenants properly and if it's your first time being a landlord you might want to use a lettings agent to handle it all as there's a lot of paperwork and legal things you need to do to comply with as a Landlord! I got bitten with a rogue tenant who was a family friend, ended up stopping paying me rent and refused to move out, that can happen with any tenant but less likely if they are vetted properly!

ian1246

This sounds like a terrible idea. Being a landlord is a business - not a means to get a paying house sitter.

Your house could be severely damaged by tenants with you having no recourse/come back to recover the costs to put right. You could end up loosing access to your house for a number of years due to the eviction process.

Do an awful lot of research and only go into it as a business decision. 

saajan_12

Re borrowing money, just answer any questions honestly at the time.. they'd see anyway whether you have a mortgage etc. Its not too rare to live with family while having a rental, so don't worry about causing confusion. 

As a separate suggestion, is there any mileage in having mum live with you, and selling her property? If it'll need to be sold anyway at some point and saves the hassle of tenants. Of course there's other considerations eg would mum prefer / need to be somewhere familiar, space in your house, etc. 

saajan_12

Green_hopeful said:

I rented out a few rooms to lodgers but kept my own space in my house. I actually kept a downstairs room as my space. I continued to use the address but diverted my post to where I was staying. The advantage of lodgers over letting the whole house is that you remain in occupation and they are just licensees. You can serve notice on them much easier. You get the rent a room tax benefit as well.  You can earn £7500 per year before you have to pay tax. You need to notify your insurer and mortgage company but I think they generally let you have some time with lodgers. The disadvantage is that you remain responsible for the bills. In some areas you need a licence for an HMO. I stayed under the limits so didn’t need to get a licence. When I did it I got some CGT reliefs as well as I eventually sold. There used to be an exception for CGT if you were living somewhere else on a licence eg looking after an elderly relative which my mum used but that might have changed. 

Uh no, not how it works. The rent a room scheme requires you to actually live there, so would be tax evasion. Hopefully you didn't actually come across eviction, but the lodger tenant could easily argue they have a tenancy baesd on the facts, regardless of what the paperwork says, and not move until you go through the court process. 
As for disadvantages, not only are bills usually on the landlord, you also can't claim any tax relief for mortgage interest or expenses for other costs eg repairs, insurance, etc. So that often eats up a good part of the 7.5k anyway. 

FlorayG

If you have an unsecured loan then they will treat you like anyone else, look at your credit score etc. If you want a loan secured on the property then you have to say that it's rented out. I don't think not living in the house you own will make any difference to your credit score

Supernova11

elsien said:

Do you have a mortgage and do you have agreement from the lender to rent your property out?

Yes I’ve got a mortgage and I’ve contacted them about changing it which isn’t going to be a problem per se if I decide to stay with them (Nationwide). They will add .5% onto my mortgage for however long I fix with them. The problem is after my fix ends, I will go onto the standard rate and as long as the tennants are in there, I can’t get another deal with nationwide. Apparently different mortgage companies do it different ways. For example, some mortgage companies work like Nationwide, others charge you an annual fee. I’m not sure what to do right now. My letting agent has advised me to come in and talk to their broker but I’m worried about being blinded with financial wizardry so not sure what to do yet.