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Thread: OT: Letting out a flat off the books

  1. #1

    OT: Letting out a flat off the books

    Currently looking at the possibility of taking a year out of work to do some travelling and so would like to offer my flat for rent but the issue I have is that I used the Welsh government 'help to buy scheme' to purchase the flat and this restricts me from letting it out. So was thinking of offering it a reduced rate, maybe just to friends via social media and people at work to begin with, just to cover costs of the mortgage etc while I'm away.

    If I was to rent it out to a close friend then obviously I wouldn't be so bothered about issues such as a contract or security deposit etc but if it was to someone else, maybe a friend of a friend or somone who works in my office, then I'd want an official agreement on such things.

    I know I could get into trouble with help to buy and the mortgage lender for doing so but can anyone advise me here? Would I still be able to get a contract drafted up to cover the length of the rental agreement and deposit etc?

  2. #2

    Re: OT: Letting out a flat off the books

    Iffy ground these days, plus friends become enemies sometimes.

  3. #3

    Re: OT: Letting out a flat off the books

    Whether or not you break the rules is up to you as long as you are prepared to accept the consequences whatever these may be. If you want a legal agreement a model shorthold tenancy agreement is available from the Post Office and I believe Staples, or whatever it is now called. Personally I would only let in the circumstances you describe to someone you really know but I would still insist on a formal tenancy agreement but I would also study carefully the insurance and other arrangements you have with the flat's freeholder who might insist you seek their agreement before renting. You might also wish to consider the taxation implications as rental income is taxable. Basically a private arrangement with a friend would be easier and safer from your standpoint but you still need to consider numerous issues to ensure that you can regain possession when you return home.

  4. #4

    Re: OT: Letting out a flat off the books

    Quote Originally Posted by Vindec View Post
    Whether or not you break the rules is up to you as long as you are prepared to accept the consequences whatever these may be. If you want a legal agreement a model shorthold tenancy agreement is available from the Post Office and I believe Staples, or whatever it is now called. Personally I would only let in the circumstances you describe to someone you really know but I would still insist on a formal tenancy agreement but I would also study carefully the insurance and other arrangements you have with the flat's freeholder who might insist you seek their agreement before renting. You might also wish to consider the taxation implications as rental income is taxable. Basically a private arrangement with a friend would be easier and safer from your standpoint but you still need to consider numerous issues to ensure that you can regain possession when you return home.

    Exactly what I said, but I only used 9 words

  5. #5

    Re: OT: Letting out a flat off the books

    I wouldn't worry too much about the help to buy restrictions on letting, they are made to discourage wealthy people taking advantage of the deal to build their property portfolio, I can not imagine them coming down hard or even concerning themselves with your circumstance.

    Obviously that is just my opinion and I have no solid knowledge behind me.

    I would still draft up a very basic contract yourself, I would do this even for my family or best friend. I also wouldn't let anyone know you have restrictions and let it out at market price, like usual. Really only you should (really) know about your restrictions, and then you can plead ignorance.

    what ever happens do not let technicalities like this stop you doing what you want to, live is too short to follow the rules.

  6. #6

    Re: OT: Letting out a flat off the books

    Quote Originally Posted by Vindec View Post
    Whether or not you break the rules is up to you as long as you are prepared to accept the consequences whatever these may be. If you want a legal agreement a model shorthold tenancy agreement is available from the Post Office and I believe Staples, or whatever it is now called. Personally I would only let in the circumstances you describe to someone you really know but I would still insist on a formal tenancy agreement but I would also study carefully the insurance and other arrangements you have with the flat's freeholder who might insist you seek their agreement before renting. You might also wish to consider the taxation implications as rental income is taxable. Basically a private arrangement with a friend would be easier and safer from your standpoint but you still need to consider numerous issues to ensure that you can regain possession when you return home.
    Thanks very much for the info! Didn't realise a ready made contract template like that would be available. Just did a Google though and found one on the govuk website. If I did speak to the freeholder would they possibly want to check over my agreements with the mortgage lender and help to buy and cause problems there?

    As far as tax, would that only apply if I was actually making a profit? I.e. if I charged enough to just cover the mortgage and bills would that not apply?

    Like you say, I think I'd only be comfortable doing this if it was someone I knew well enough. If not then I may look at listing it on airbnb instead to try and cover some of the mortgage and just put money aside to cover it just in case.

  7. #7

    Re: OT: Letting out a flat off the books

    Quote Originally Posted by chris lee View Post
    I wouldn't worry too much about the help to buy restrictions on letting, they are made to discourage wealthy people taking advantage of the deal to build their property portfolio, I can not imagine them coming down hard or even concerning themselves with your circumstance.

    Obviously that is just my opinion and I have no solid knowledge behind me.

    I would still draft up a very basic contract yourself, I would do this even for my family or best friend. I also wouldn't let anyone know you have restrictions and let it out at market price, like usual. Really only you should (really) know about your restrictions, and then you can plead ignorance.

    what ever happens do not let technicalities like this stop you doing what you want to, live is too short to follow the rules.
    Cheers for the advice mate! Yeah, wouldn't have thought it's anything Help to Buy will concern themselves about or ever check up on so hopefully should be fine and like you say, wouldn't mention it to any potential tenants eitherway. HTB do actually allow people to rent properties under special circumstances but from what I've read they only include things such as being forced to move away for work or redundancy etc. Doubt they would see 'going for a year long jolly around the world' as a suitable circumstance but not sure if it would be worth asking anyway or maybe this might be a bit of a give away regarding my plans!

  8. #8

    Re: OT: Letting out a flat off the books

    you pay tax on all income over the allowance threshold, if you are taking a year off from work then unless you are charging over 10K for rent (£833 month) you will not pay any income tax
    assuming you have no other income coming in.
    As for informing the freeholder, it is the mortgage company that you need to contact for advise, not the freeholder, unless they are one and the same

  9. #9

    Re: OT: Letting out a flat off the books

    Quote Originally Posted by Igovernor View Post
    you pay tax on all income over the allowance threshold, if you are taking a year off from work then unless you are charging over 10K for rent (£833 month) you will not pay any income tax
    assuming you have no other income coming in.
    As for informing the freeholder, it is the mortgage company that you need to contact for advise, not the freeholder, unless they are one and the same
    You may laugh but the going rate for the same flat as mine in the building seems to be around £1k+ a month, which is crazy to me but people do pay it. That's why I'd be happy to let it go for less than market rates if it meant a quick deal was there to be made! Would the costs of running the flat, i.e. mortgage, bills etc not be tax deductable? Apologies for any daft questions but I've never had to manage my own taxes before.

    When I last spoke to the mortgage company they just told me that I wasn't able to rent the flat because it was on a help to buy scheme, so not sure if going to them for advice would help?

  10. #10
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    Re: OT: Letting out a flat off the books

    When are you thinking of going?

  11. #11

    Re: OT: Letting out a flat off the books

    From next tax year any mortgage interest relief will be split 50/50 between being deductible against the income and as a tax relief restricted to basic rate.
    In effect if you have no other income you only get 50% of mortgage interest as a deductible, but you may not have a tax liability anyway (depending on the rent and cost of your mortgage).

  12. #12

    Re: OT: Letting out a flat off the books

    Quote Originally Posted by Igovernor View Post
    you pay tax on all income over the allowance threshold, if you are taking a year off from work then unless you are charging over 10K for rent (£833 month) you will not pay any income tax
    assuming you have no other income coming in.
    As for informing the freeholder, it is the mortgage company that you need to contact for advise, not the freeholder, unless they are one and the same
    That depends on the point in the tax year you stop working. If you stop working in say December and earn up to that point your taxable allowance any income from property between January and March would be liable for tax. In flats there is an agreement between the freeholder and leaseholder and those in say Cardiff Bay (with which I have rented out a flat) require the freeholders permission to rent the flat out as that is a requirement of the insurance for the structure of the building which forms part of the management charge. My guess is though that many people ignore this requirement and I am unsure if you let out the flat by private arrangement to a mate for example and not commercially then tax might not be such an issue. Of course if you time your departure appropriately then tax will not be an issue at all. It all depends when you are proposing to leave.

    Above all don't let any complications stop you from travelling as all the issues mentioned can be overcome.

  13. #13

    Re: OT: Letting out a flat off the books

    Quote Originally Posted by Mrs Steve R View Post
    When are you thinking of going?
    Leaving date form work would be end of Feb, would most likely start my travels a few weeks after that!

    Quote Originally Posted by Vindec View Post
    That depends on the point in the tax year you stop working. If you stop working in say December and earn up to that point your taxable allowance any income from property between January and March would be liable for tax. In flats there is an agreement between the freeholder and leaseholder and those in say Cardiff Bay (with which I have rented out a flat) require the freeholders permission to rent the flat out as that is a requirement of the insurance for the structure of the building which forms part of the management charge. My guess is though that many people ignore this requirement and I am unsure if you let out the flat by private arrangement to a mate for example and not commercially then tax might not be such an issue. Of course if you time your departure appropriately then tax will not be an issue at all. It all depends when you are proposing to leave.

    Above all don't let any complications stop you from travelling as all the issues mentioned can be overcome.
    Would most likely go in March so I guess only that months income from the rent would be taxable and then I'd have a clean slate in terms of earnings from April 1st.

    I live in Prospect Place near Morrisons down the Bay and I believe the leaseholder is now the residents association as I seem to remeber it being trasnferred recently from either the developer or the management company.

    Certainly wouldn't let it stop me from going, have been away on 'extended holidays', mostly to Africa a couple of times in the last few years now and fully have the travel bug so intent on going now at my age before I'm settled down with other responsibilities!

    I'm applying for a paid leavers scheme from work in order to get the year off and also the funds to travel so in the worst case scenario where I couldn't rent it out then I would put aside enough money from the leavers scheme payment to cover the mortgage for a year and then try and recoup as much as possible through airbnb rentals.

    Biggest factor to overcome at the moment is wiating to find out if I can get the paid leavers scheme from work but doing research on things like this before applying.

  14. #14

    Re: OT: Letting out a flat off the books

    Have you considered letting it out commercially? I had a flat near Morrisons where the management agent was Peverel. I used the agent below who were superb:

    www.peterwood.co.uk/

    The problem with using airbnb is that you need someone to organise letting, collect rent and cleaning with no knowledge of the people to whom you are renting. If you rent commercially the above agent will get you a decent rent, deal with all the legal formalities, vet prospective renters by examining references with guarantors, collect rent and inspect the place while you are away. In the 7 years I rented the property out the agent gave me superb service.

  15. #15

    Re: OT: Letting out a flat off the books

    Quote Originally Posted by Vindec View Post
    Have you considered letting it out commercially? I had a flat near Morrisons where the management agent was Peverel. I used the agent below who were superb:

    www.peterwood.co.uk/

    The problem with using airbnb is that you need someone to organise letting, collect rent and cleaning with no knowledge of the people to whom you are renting. If you rent commercially the above agent will get you a decent rent, deal with all the legal formalities, vet prospective renters by examining references with guarantors, collect rent and inspect the place while you are away. In the 7 years I rented the property out the agent gave me superb service.
    Would the issues with help to buy and the mortagage company not be a problem if I did it through an agent like that though? If it was all done officially then I would guess those 2 parties would be more likely to be aware of it and then potentially fine me or something for breaking terms of the agreements with them.

    As for airbnb, its wouldn't an ideal way of doing it because of the fuss with change overs etc but my parents, who are both recently retired, have said they'd be happy to manage it all and they live only 40 mins up the road (Rhondda)

  16. #16

    Re: OT: Letting out a flat off the books

    have a word with anthony parris of mrhomes and huge city fan... may have some words of wisdom for you

  17. #17

    Re: OT: Letting out a flat off the books

    If you are thinking of doing it legit dont forget you are legally obliged to register as a landlord with the council. (Rent Smart Wales).

  18. #18

    Re: OT: Letting out a flat off the books

    What is a
    paid leavers scheme
    ?
    I want a job that will pay me to go on an extrnded holiday

  19. #19

    Re: OT: Letting out a flat off the books

    Quote Originally Posted by jnc90 View Post
    Would the issues with help to buy and the mortagage company not be a problem if I did it through an agent like that though? If it was all done officially then I would guess those 2 parties would be more likely to be aware of it and then potentially fine me or something for breaking terms of the agreements with them.

    As for airbnb, its wouldn't an ideal way of doing it because of the fuss with change overs etc but my parents, who are both recently retired, have said they'd be happy to manage it all and they live only 40 mins up the road (Rhondda)
    There is no connection between the agent with anyone but yourself at least there wasn't when I rented a property out although I always prefer to go down the legit route. Information about the implications of renting will be available from the agent. Why not telephone them for an informal chat but first read your agreement with the freeholder as that might not be an issue now you have changed management companies.

  20. #20
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    Re: OT: Letting out a flat off the books

    Don't listen to the experts on here.

    If you rent out a room in your main residence you are entitled to rent a room relief - which is a currently £7500 per annum. Thats £625 rent tax free each month on top of your personal allowance

  21. #21

    Re: OT: Letting out a flat off the books

    Quote Originally Posted by TISS View Post
    Don't listen to the experts on here.

    If you rent out a room in your main residence you are entitled to rent a room relief - which is a currently £7500 per annum. Thats £625 rent tax free each month on top of your personal allowance
    Doh! He's not renting out a room but the entire property.

  22. #22
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    Re: OT: Letting out a flat off the books

    Quote Originally Posted by Vindec View Post
    Doh! He's not renting out a room but the entire property.
    You're not listening. He can't rent out the property due to restrictions. He can take in a lodger though (which is what rent a room relief is for).

    No agreements needed, no tax issues arising.

  23. #23

    Re: OT: Letting out a flat off the books

    Quote Originally Posted by TISS View Post
    Don't listen to the experts on here.

    If you rent out a room in your main residence you are entitled to rent a room relief - which is a currently £7500 per annum. Thats £625 rent tax free each month on top of your personal allowance

  24. #24

    Re: OT: Letting out a flat off the books

    Quote Originally Posted by TISS View Post
    You're not listening. He can't rent out the property due to restrictions. He can take in a lodger though (which is what rent a room relief is for).

    No agreements needed, no tax issues arising.
    Clever Contract the agreement as a lodger (with full access to the property) avoids all taxes and rules

  25. #25

    Re: OT: Letting out a flat off the books

    Quote Originally Posted by TISS View Post
    You're not listening. He can't rent out the property due to restrictions. He can take in a lodger though (which is what rent a room relief is for).

    No agreements needed, no tax issues arising.
    The "landlord" has to be resident for rent a room to apply:

    https://www.gov.uk/rent-room-in-your...-a-room-scheme

    And we have already established that tax is not an issue.

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