Insurance dilemma on house “rented” to our sons

bargainmad41

We have a property our 2 sons live in rent free as they are both saving for flats as we plan to sell the house late next year.  It’s owned outright, mortgage free.

Buildings insurance is landlord with AXA Homeprotect which states on the schedule 2 sons living rent free, no tenancy agreement.   

They want to have some friends staying with them on a short term basis whilst one of them is on a 4 - 6 week holiday, possibly longer.

It would be under the rent a room scheme.

One of the friends may want to rent a room longer term, there would never be more than 3 in the property at one time. Under Manchester rules it’s not a HMO and I have looked into selective licensing etc.

Does anyone know if AXA can just amend, or will we need a totally different policy?

Was also thinking would it now be best to draw up a £1 tenancy agreement for our sons which states they can sub-let?  Is this a way round what we want to do, which would satisfy insurance requirements.

Any advice would be greatly appreciated on the best and cheapest way to do this, ensuring we are adequately covered for all eventualities. 

The lodgers would absolutely in no way want to get involved in tenancy agreements as it’s rent a room with a week’s notice if they want to move out.

Albermarle

Was also thinking would it now be best to draw up a £1 tenancy agreement for our sons which states they can sub-let? 

The lodgers would absolutely in no way want to get involved in tenancy agreements as it’s rent a room with a week’s notice if they want to move out.

AIUI, sub letting means having a proper tenant, with a tenancy agreement, who would rent a specific part of the property. Although facilities can be shared, they would be able to lock their door and have tenants rights.

Lodgers are not tenants, so I do not think a sub letting clause would be relevant ?

Slinky

Who is receiving the money? You or your sons?

silvercar

The new people would be lodgers of your sons. They can keep the rent tax free under the rent a room scheme, up to £3,750 each, £7,500 in total a year. Any reason they can’t take out contents insurance themselves ?

bargainmad41

I’m talking about buildings insurance, not contents.  Yes, they would lodgers of my sons technically. 

There would be 3 in the property at any one time which probably turns it into a HMO. The current policy is with AXA so will see what they say. 

hazyjo

silvercar said:

The new people would be lodgers of your sons. They can keep the rent tax free under the rent a room scheme, up to £7,500 each a year. Any reason they can’t take out contents insurance themselves ?

Might be misunderstanding, but that 'each' should come out. £7,500 per property. (prob just a typo)

******

OP - there are still legal responsibilities with lodgers.

I'd not go with the £1 tenancy idea. Once your sons are officially tenants, there are over 170 laws and legal responsibilities that a landlord must follow. No such thing as an informal tenancy, and penalties can be harsh. As mentioned, it's not 'subletting' if they take in lodgers.

As the brothers aren't owners, I believe it would become an HMO. A license may not be needed, but I'm sure it would be an HMO.

theartfullodger

Be completely open and honest with insurers.  Tell them everything.  The risk of not doing so then finding cover void, not in place, could be VERY VERY expensive 

silvercar

hazyjo said:

silvercar said:

The new people would be lodgers of your sons. They can keep the rent tax free under the rent a room scheme, up to £7,500 each a year. Any reason they can’t take out contents insurance themselves ?

Might be misunderstanding, but that 'each' should come out. £7,500 per property. (prob just a typo)

******

OP - there are still legal responsibilities with lodgers.

I'd not go with the £1 tenancy idea. Once your sons are officially tenants, there are over 170 laws and legal responsibilities that a landlord must follow. No such thing as an informal tenancy, and penalties can be harsh. As mentioned, it's not 'subletting' if they take in lodgers.

As the brothers aren't owners, I believe it would become an HMO. A license may not be needed, but I'm sure it would be an HMO.

The brothers would be a single unit as they are related, the lodger the second unit (in HMO terms), as there are only 2 units it is unlikely to need registering.