Property with student daughter and lodgers question

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    Property with student daughter and lodgers question

    I am buying a flat in Edinburgh to house my daughter and her two siblings (who are still at school) to stay in whilst at University. I looked into shared ownership and having my daughter on the title but it was just too complicated from a mortgage perspective plus I did not want to remove her first time buyer status for my own benefit. Furthermore, achieving a buy to let mortgage where you intend to place a child in the property is also impossible as there are very few lenders that allow this for a BTL mortgage. In the end, I have managed to secure a second home mortgage and my wife and I will be on the title, notably my daughter will not be due to the aforementioned first time buyer status.

    I have advised the lender that the primary purpose of the purchase is for my children to live in the property whilst at university and to a) take in up to two lodgers from time to time and b) that I will rent the property out over July / August for the Edinburgh festival. I will rarely stay in the property if at all, probably during June or the odd weekend so it will not be classed as my “main residence”. It will be the main residence of my daughter. The lender has no issues with these points.

    Given this, I am unclear from an income perspective during the period where my daughter and her lodgers are in the property if the income is attributable to my daughter or to my wife and I. On the face of it, my daughter is the landlord to the two live in friends but she is not formally on the title so can she be classed as the live in landlord? My wife and I are on the title but the property is not our main residence and as mentioned we will not be staying there.

    Any guidance appreciated.


    Sounds like-

    you will be the leaseholder.
    your daughter will be your tenant. You have responsibilities to your tenants.
    she will have sub-tenants. She has responsibilities. She has responsibilities to her tenants.

    Festival? Depends how the various agreements a drawn up. And Scottish rental law.

    You living there, guest of your daughter?

    Prepared to be corrected on any of that.


      thanks nukecad for the response.

      even although my second home mortgage allows me to rent the property for 90 days at a time and possibly for longer should I ask permission, generally I am not allowed to have a standard tenancy agreement in place. For simplicity it's worth just assuming I will not stay there at anytime as it's most likely the case. The complexity I think comes from the fact that she is not on the title but is the "primary" resident of the property.

      There is lots of advise based on the live in landlord being the owner of the property i.e. on the title. It's likely in this scenario there would be no dispute she is a "live in landlord" and the lodgers would be hers. I would probably then draw up a declaration of trust and attribute all the rental from the lodgers to her. However, with her not being on the title but being the the "main occupier" of the property, it's not clear if she can assume the role as "live in landlord" if she is not on the title nor do I have a tenancy agreement with her in place.



        You should seek advice from tax professionals in Edinburgh .

        If you buy the property under your own name and wife's name to get a mortgage as a second home , the property must be legally owned by yourself + wife. Any income you receive from summer letting must be reported in your tax return.

        What is the point of pretending it belongs to your daughter ? You say you don't want her to lose her first time buyer status ?


          Hi Gordon999, thanks for the response. I'm not looking to pretend that it's owned by my daughter in anyway. I guess on reflection my question is both about the correct legal arrangement to support the living circumstances and how in turn this impacts income tax. I'm quite resigned to the fact that once it all unravels the income tax will be attributable to my wife and I but I'm just not clear on the specifics of the legal arrangement especially when the conditions of the mortgage are considered:

          - wife and I own the property, daughter as a family member / dependant is the main resident of the property but not on title

          - wife and myself's main property is not this flat but our current home

          - as a family member living in a second property there is no intent to have a tenancy agreement with my daughter plus the mortgage is not a BTL so a tenancy agreement is not normally allowed

          I'm not sure my wife and I can be classed as "live in landlords" as the property is not our main residence, equally, can my daughter be the live in landlord but not be on the title? If my daughter can be classed as the live in landlord but has no tenancy arrangement in place with my wife and I, is this a problem or do we just show the income on our tax returns as normal, let my daughter live in the property and any lodgers just pay rent to her and she just passes it onto us?

          Finally yes, adding her to the title now even with 1% ownership would remove her first time buyer status and any eligibility to stamp duty reductions in the future when she buys her own property, as I understand it.



            1.Have you seen the rate charged for 5 year mortgages offered by Clydesdale bank ?

            First time buyer - 95 % max loan to value, Arrgt fee = Nil , int rate = 4.19% .

            New Customer - 75% max loan to value , Arrgt fee =£499, int rate = 2.49%

            It seems the benefit ( of lower deposit ) for first time buyer is cancelled out by paying higher interest rate.


            2. The extra 3% sdlt applies if the buyer is already registered for one property. But if buyer is buying a new home and not yet sold existing home, the buyer can reclaim the 3% within 3 years after old home is sold. But I don't know if this applies in Scotland after Brexit.

            3. Owner occupiers can claim tax exemption to the capital gain tax for the residence period plus up 18 months after moving away. You + wife should consider temporarily moving your main residence to Edinburgh for one year or bit longer to gain the PPR tax relief or you will be paying 28% rate on the entire capital gain..


              I guess this would be counterbalanced by the fact that as a first time buyer she would be exempt from stamp duty on the first £300,000 of the value of a new home.So if she was lucky enough to be able to buy a property for £300,000 she would save £4,600 with first time buyer status irrespective of what deposit she had. This saving would go someway to help towards that deposit and possibly a better rate. Whilst the benefit of other schemes open to first time buyers are debatable, first time buyer status will give access to the help to buy scheme, help to buy ISA, shared equity etc. In short, I could probably have added her to the title and made my life easier in some respects given the current challenge and she wouldn't have complained, but didn't feel it was really the right step given what it removes for her in the future.


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