Inadvertent buy-to-let

Inadvertent buy-to-let

18:28 PM, 14th July 2014, About 9 years ago 7

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I’ve just bought a new property which we would like to make our personal residence but in the interim requires a large amount of work. As a result we are living elsewhere whilst the works are carried out.  Inadvertant Buy to Let

During the works it is likely that we will rent out a portion of the house, and therefore it has inadvertently become a buy to let, albeit this is an informal situation.

In this type of scenario could I account for this property in the same way as a buy-to-let and therefore claim the losses even though in a years time it will become my principal residence?

Furthermore could I claim some off the work as costs (subject to the usual limitations on this)?


Ab Shome

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Mark Alexander - Founder of Property118

18:35 PM, 14th July 2014, About 9 years ago

Hi Ab

You've got me stumped on this one. I can't decide whether the person you will be renting to will be a lodger (hence the Rent A Room Scheme tax regime being applicable) or whether the occupier will be a tenant.

Can you tell us some more about the arrangement please?

If this a particularly large house for example?

Will it be the workmen who are living there?

Will rent be payable?

Will this be the sole place of residence for the occupiers of the property or do they have a principal private residence elsewhere?

With this additional information, and more if at all possible, I may be in a better position to provide you with further guidance. In the meantime I suggest you consider obtaining professional and insured tax and legal advice. This is the firm I would use >>>

Ab Shome

22:07 PM, 14th July 2014, About 9 years ago

Hi Mark

the situation is as follows. I currently have a property rental business which is making a small profit. In addition I currently live in a flat and have bought a large house. The intention was too carry out work on the house whilst I lived in the flat and then move to the house and let out the flat.

The work on the house is due to take some time - say 9 - 12 months but the house is habitable. As such I would like to let the house out to my brother during the period of the works. He could easily move around within the house whilst works are being carried out and would be responsible for paying rent and bills on the property. This would be his sole residence. As a result he wouldn't be a lodger, he would be a tenant ( in my opinion).

Once the work is complete I would propose to move in to the house and he would move out. The house would then be a purely "residential" property in the sense that it would be my home. My contention would therefore be that the house would in essence be part of my property business during this period of work "and being let" and that because I would be making a loss (the rent would not be sufficient to cover mortgage interest), I could carry forward this loss and offset against the rest of my rental business that makes a profit.

Does that provide more detail?

Mark Alexander - Founder of Property118

7:59 AM, 15th July 2014, About 9 years ago

Reply to the comment left by "Ab Shome" at "14/07/2014 - 22:07":

Hi Ab

You might just get away with that, providing you charge your brother the market rent and have a proper AST though.

Please take professional advice.

Sometimes arrangements like this go wrong if the family member refuses to move out. Yes it happens! This is another reason for making sure that you have an AST. When family members fall out it can be much worse than landlord/tenant disputes or arguments between friends. Make sure you get your paperwork right.

For belt and braces security you should also satisfy yourself that if you have a mortgage on the property, that you will not be in breach of the mortgage terms with this arrangement. Lots of people take a flyer on this and never get caught - some do get caught though!

Ab Shome

11:42 AM, 15th July 2014, About 9 years ago

Reply to the comment left by "Mark Alexander" at "15/07/2014 - 07:59":

Thanks Mark - useful points. I will look in to this further.

Romain Garcin

14:31 PM, 15th July 2014, About 9 years ago

Since the 'tenant' would be moving around within the house, and, I presume, access would be needed at all times by yourself and your contractors you might be able to grant a license instead of a tenancy.
The difference is that you will not be granting the person exclusive possession of any part of the house.

This is basically what these 'property guardian' schemes do.

You'd want to advice from a lawyer in any case, I think.

Jeremy Smith

16:10 PM, 15th July 2014, About 9 years ago

Reply to the comment left by "Romain " at "15/07/2014 - 14:31":

Does the granting of a licence not require also the home owner to be living at the property, not just non-exclusive use of any part ?
I seem to recall in another thread that someone was granting a licence to lodgers, but since he didn't actually live at the property, it was said that a court would deem the arrangement to be a tenancy. Admittedly, it probably referred to giving that lodger their own room.

Romain Garcin

9:02 AM, 16th July 2014, About 9 years ago

Reply to the comment left by "Jeremy Smith" at "15/07/2014 - 16:10":

No, it is not required. In the same way that you can grant a tenancy while still living at the property.

That said, I think that you probably need to be very careful in residential situations if you are not a live-in landlord.
I'm interested in these 'property guardian' schemes for that reason, to see if they'll end up facing issues.

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