Best way to structure three sharers contact?

by Readers Question

13:03 PM, 8th December 2014
About 4 years ago

Best way to structure three sharers contact?

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Best way to structure three sharers contact?

I have just refurbished my first 3 bed house bought on BTL mortgage. The property is, in Croydon (Article 4 area) a prospective tenant has just approach me wanting to rent it with 2 other friends.

Best way to structure three sharers contact

Do I sign AST just with him, or joint AST with 3 people.

As an “inexperienced” landlord, renting a property on room by room basis would breach the terms of my BTL mortgage.

If I don’t let it out to one family as a single let, what are my options?

Do I need to inform my council, if there are 3 unrelated people (they will be sharing the bills,) living in my property? Croydon council is very restrictive!

Do I need to inform the insurance company?

It is my first rental property and hearing about the nightmares people had, signing guaranteed rent contracts with the agents, I don’t want to choose that route.

Thank you in advance for all constructive feed back.

Regards

Iwona



Comments

Mark Alexander

13:04 PM, 8th December 2014
About 4 years ago

Hi Iwona

Start by discussing your dilemma with the Council and your insurance company and see what they say. Then report back please.
.

Colin Dartnell

19:01 PM, 8th December 2014
About 4 years ago

I would be tempted to wait and see if you could find a family, it would save you a lot of hassle. You may have extra work later on when one friend decides to leave and the others don't want to pay all the rent etc.

Romain Garcin

19:19 PM, 8th December 2014
About 4 years ago

Note also that giving a separate AST to each of them would make you liable for council tax.

Joe Bloggs

0:05 AM, 9th December 2014
About 4 years ago

i think what you are saying is that croydon have introduced an article 4 direction which requires planning permission for small hmo's. if so then you either need to obtain planning permission for a small hmo or prove an established use as a small hmo to house 3 - 6 unrelated sharers. for the latter the use has to be continuous and so seems this is unlikely in view of the refurb you have undertaken. the sales market for houses seems to have not yet woken up to the impact of such legislation; prices should be discounted as its no longer often possible anymore to charge the better rents that sharers pay.

Jill Coyne

1:24 AM, 9th December 2014
About 4 years ago

Iona, I'd always had all unrelated or married tenants individually named on the contract. I believe that makes then jointly responsible for the rent being paid- so if one were to abscond the others would have responsibility to pay the rent. Will Croydon give planning permission for a small HMO?

Jill Coyne

1:27 AM, 9th December 2014
About 4 years ago

Reply to the comment left by "Romain " at "08/12/2014 - 19:19":

Romain- just wondering- how would giving them separate ASTs make the landlord responsible for paying the council tax? Thought that was just for short lets? And why not one AST with several people jointly named as tenants?

Romain Garcin

9:02 AM, 9th December 2014
About 4 years ago

Reply to the comment left by "Jill Coyne" at "09/12/2014 - 01:27":

Hi Jill,

That's the 'beauty' of the Council Tax regulations: As long a property is not let as a whole the landlord is liable for council tax.

Iwona Kowalska

10:27 AM, 9th December 2014
About 4 years ago

Reply to the comment left by "Jill Coyne" at "09/12/2014 - 01:27":

Thank you Jill. I have since spoken to Croydon Council and was advised joint AST is fine, and as you say they are all jointly responsible for all bills and Council Tax.
However I'm still unable to find out whether, as they are 3 unrelated adults I will need a licence. They have referred me to the website - under licences , but it is not clear

Iwona Kowalska

10:30 AM, 9th December 2014
About 4 years ago

Reply to the comment left by "Mark Alexander" at "08/12/2014 - 13:04":

Thank you Mark.

Jill Coyne

11:59 AM, 9th December 2014
About 4 years ago

Reply to the comment left by "Iwona Kowalska" at "09/12/2014 - 10:27":

Why don't you find out from the licensing dept? I think the introduction of the article 4 direction means you now have to get planning permission for change of use from residential to a small HMO, Which suggests you should have a license. It's worth finding out if you could get planning permission, or if it's ever been granted- & if not there's no point in paying for a small HMO license that will only be revoked eventually, then you'd have to pay again for a Selective License for a family or only 2non related individuals. but was/is your property previously licensed / let and was that to a family or 3 or more unrelated people? As someone said, if it's proven to have been let for 10 yrs continually to 3 or more unrelated people as a small HMO you're allowed to continue.

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