Thinking of letting your property?
3 minute read
Letting a room in your flat or house can be a good way to offset living costs, and even prevent loneliness by helping out a friend or work colleague looking for accommodation at a reasonable price.
However, although the extra income may be welcome, letting also carries risks:
- It could invalidate your mortgage terms;
- Insurance is unlikely to cover any damage caused by tenants, whether to the property or furnishings;
- Rental income must be declared to HM Revenue & Customs for tax purposes although at the time of writing certain limits apply where tax may not be payable .
Consequently, a homeowner should inform their mortgage and insurance providers, and possibly consult a specialist tax accountant.
Whilst Airbnb has its own terms and conditions on its website, if you are letting a room privately it is essential to get the tenant’s written agreement to your own conditions, to avoid any confusion before handing over the keys.
You may think you know someone well socially, but living with them can be challenging if they don’t stick to certain rules: paying their rent on time every month has to be the main priority, but does this include an allowance for insurance, broadband and TV downloads, heating and other utilities?
Respectful behaviour is important. So, keeping the property clean, sharing the food shop, use of the kitchen and appliances, doing the washing up(!) and communal use of the living space (and garden) all need to be addressed; does the tenant require permission to invite guests round and is there sufficient parking for a tenant’s car or bike without a separate charge? Have an exit strategy from the agreement, in case you wish to stop letting or sell.
Always protect your own security and be extra vigilant if letting to a stranger. If in doubt, don’t even let to a friend.
The popularity of Airbnb has also alerted homeowners to the extra income potential when letting a room, or even the whole property if the owner is away for a few weeks. However, some local authorities have restrictive policies on the length of time a property can be let on Airbnb because it can be disruptive to neighbourhoods.
There is also a legal requirement to check the immigration status of a tenant; check fire safety regulations and other issues, including Planning, which may apply, with your local council.
Houses in Multiple Occupation (HMO) are subject to specific management regulations, including fire, gas and electrical safety; local authorities have responsibility for licencing and can issue penalty notices for non-compliance, with fines of up to £30,000 per offence. Referrals to a Magistrates Court could result in unlimited fines.
If you plan to let space in your home to make the purchase affordable – or if you are a landlord concerned about your tenants sub-letting, or you are considering letting a property to several tenants – our specialists at Just Mortgage Brokers are on hand.