Renting to Friends

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  • Renting to Friends

    Hi,

    I have a small dilema, I am about to rent my house as I will be overseas for a while and I have 2 options.

    1. Rent to a friend + girlfriend for £550 pm and I will leave all my furnishings in the house together with my 40" tv etc, this saves me putting stuff in storage and as I know him very well as a best friend, i could trust him. He would be getting a great bargain and i would have peace of mind.

    2. Rent through agency I will get an agent round, but I think i could get £650-700pm as it is now a 3 bed house where I converted a double garage into a living room. After 10% fees taken off the rent I would be left with £585-630. as you can see I would gain an extra £35-90pm more.

    I know there a pro's and cons in both and some people say it is always better to rent to friends, if i did rent to my friend then i would do it properly with contracts, solicitor holding the deposit etc.

    What are your opinions?

    ps: my plan is to relax on a greek island living off the rent.

    Paul.

  • #2
    Renting to friends: You would still need a proper AST contract (because they get one in law, so may as well have it written down so you both know the rules). You would need to supply an address in England/Wales for the service of documents, friends would have to pay a percentage of rent to the tax man (inconvenient) - unless you get exemption http://www.hmrc.gov.uk/cnr/nr_landlords.htm. You would still need a thorough inventory/condition report that would stand up in court. Deposits would not be lodged with a solicitor - you can use the free DPS at www.depositprotection.com

    Renting through an agent - they will do the above, and the increased rent should cover their fees. This way you don't lose friends if the thing goes bad - and it can do HOWEVER agents are unregulated - you could become one tommorrow even with your current level of knowledge. So get one who is recommended, and it is often better to get one who is a member of a trade association like ARLA, though it is no guarantee.

    I take it you are aware that you can't just tell the tenants that you want the house back? Make sure you know the processes and the timescales.

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    • #3
      thank you snorkerz, good advice.

      Comment


      • #4
        What about management? You need to consider how you are going to fulfill your legal repairing obligations whilst abroad, annual gas safety check, etc.

        Whilst your friend might say he is happy to organize this (assuming that's what you were planning), this wouldn't get you off the hook legally, so if, say, the friend decided he just didn't fancy the hassle of organizing repair of a broken boiler, or didn't have time to wait in for the contractor, you'd still be legally responsible for arranging the repair.

        Alternatively, the friend might decide to hire the world's most expensive boiler contractor (being ignorant of or indifferent to the average cost), or he might choose a dodgy contractor who tells him the boiler needs replacing, so friend agrees to pay £3K for a new one....etc

        Meanwhile, friend might ask for a rent reduction because of the lack of heating... All I am saying is that having a friend as tenant doesn't guarantee 'peace of mind' and if you value your friendship you should be aware that there is considerable scope for disputes to arise between T and LL.

        Comment


        • #5
          Thanks Westminster, but the house will be managed while I am away, so that any repairs or problems are dealt with within 24hrs, I am leaving a pot of money to cover any problems that may arrise.

          also i will be contactable daily.

          Comment


          • #6
            How long will you be travelling on that Greek beach?
            An AST is min fixed term 6 months and poss further delays if T decides not to vacate when requested.
            Choice 2 involves renting to unknown Ts thru unproven LA. This forum is full of poss complications
            Choice 1 If friend is reliable, poss best option but same risks as 1 can still apply
            Do you need to get permission from mortgage lender to rent out?
            If property is your only / main residence you may be able to rent a room and shared facilities to friend+gf as lodgers and avoid some AST pitfalls if you keep 1 bedroom for self.Thus you could return at any time without having to gain re-possession first.
            You may need to set ground rules in writing eg resp for C Tax, utility bills payment etc and get friend to sign. In effect a 'house-sitting' arrangement with all costs, inc mort covered.
            I leave the legal ramifications for this last suggestion for others to discuss.

            Comment


            • #7
              Originally posted by Snorkerz View Post
              You would need to supply an address in England/Wales for the service of documents, .
              I didn't make clear the reason why this is important - without such an address (which can be the agent) then no rent is collectible.

              Comment


              • #8
                Mariner,

                your last comment is very interesting, it may suit both my friend/girlfriend and me as they could house sit for me and rent the house while I am away and i could keep a room for when i am back, the only problem is i would want to not pay council tax or electric etc.

                would it be possible for the house to be rented out with me as a live in landlord (keep one room) and all the utility bills to be transferred?

                Comment


                • #9
                  Originally posted by danjou View Post
                  Mariner,

                  your last comment is very interesting, it may suit both my friend/girlfriend and me as they could house sit for me and rent the house while I am away and i could keep a room for when i am back, the only problem is i would want to not pay council tax or electric etc.

                  would it be possible for the house to be rented out with me as a live in landlord (keep one room) and all the utility bills to be transferred?
                  The friend/GF would not be 'house sitters' if they paid you rent.

                  How long are you planning to be away, because if it's for several months/a year +, then it's highly unlikely you would qualify as a resident (live-in) landlord so that, regardless of the contract agreed with the friend/GF, they would have an assured shorthold tenancy by default.

                  If you want to explore alternative possibilities I would strongly advise you to take specialist legal advice as landlord & tenant law is complex and you could easily create a legal mess if you don't.

                  Re management; in your first post you seem to be saying the alternative is rent to friends OR via an agency, so who is going to be doing the management, if not an agency?

                  Comment


                  • #10
                    Originally posted by westminster View Post
                    The friend/GF would not be 'house sitters' if they paid you rent.

                    How long are you planning to be away, because if it's for several months/a year +, then it's highly unlikely you would qualify as a resident (live-in) landlord so that, regardless of the contract agreed with the friend/GF, they would have an assured shorthold tenancy by default.

                    If you want to explore alternative possibilities I would strongly advise you to take specialist legal advice as landlord & tenant law is complex and you could easily create a legal mess if you don't.

                    Re management; in your first post you seem to be saying the alternative is rent to friends OR via an agency, so who is going to be doing the management, if not an agency?
                    Thank you for your help, it looks like i will use an agency and not rent to my friend, they will manage the property for me, i will be overseas for no longer then 6 months and i will have a registered uk address.

                    Comment


                    • #11
                      Also worth remembering even with the help of an agency, there is no guarantee that Tenants will be willing to move out when the contract term is over, to allow you to move back in! Will you have a contingency plan if you return to the UK and find yourself temporarily homeless, whilst you apply for court order to reclaim possession?

                      Comment


                      • #12
                        thanks, I forgot to mention that I do not plan on returning to the property in the near future, for the past 5 years I have travelled around the world rock climbing for 6 months of the year during the winter and work in uk in the summer. Last year i did not rent house and had to pay mortage, the year before I rented it our through an agency.

                        My mortagage will be pretty much paid off by september just before I go, so i will use some of the rent as an income, but i will not rely on it.

                        When i return next year I do not want to return to my house, i want to rent down the coast instead, i have mainey in bank to keep me going if i have no tenants.

                        my initial concern and question to all of you was should I take less rent by renting to a friend who i know will look after house or should i go through an agency where i would get more money, as i said if i go through my friend then i will treat it like a business transaction and will give him notice if he is in arrears on the rent. I understand it would take min 2 months or more to evict them after i have given written notice.

                        Comment


                        • #13
                          No one can answer your question for you. It sounds like you are pretty clued up on the potential pitfalls and that it is what you would prefer to do. The most you can hope for is that you both go into it with your eyes open, both act reasonably and be reasonable about expectations. Not sure I would immediately pass on all the savings from not using an agent but would instead use the savings to allow me to be a little more relaxed about condition etc.. at the end of the tenancy, or more responsive than you might normally need to be in the event of a problem.

                          At the end of the day, if it is a friend who would be prepared to wreck or squat your property at the end of the agreement then it would be no real loss if it soured the friendship.

                          Good luck!
                          Assume I know nothing.

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