# Renting property to friend without formal contract?



## ButtermilkJa (17 Jul 2008)

I'll be renting my apt short term to my friends sister. I know the family well and will not be making her sign a lease/contract etc. The only thing I will do is have both of us sign an inventory stating what's in the apt and the condition it's in so if she does damage anything then she will repair/replace. Also, I will be asking her to give me a months notice if she is going to leave. I will be asking for one months rent upfront, but no deposit.

She has mentioned leaving the bills (Gas/ESB/TV/Phone/BB) in my name and just paying them as they come in. Now, ordinarily I understand the dangers of this. In particular, someone running up huge bills and then doing a runner. But in this case, as I said, she is the sister of one of my best friends and I know her and the family and she is not going to do a runner. 

So my question is, are there any other obvious pitfalls to leaving bills in my name apart from the above mentioned.

I know many of you seasoned investors will frown on such a 'loose' arrangement but I want this be as informal as possible. Any other suggestions that would cover both of us without being too formal?


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## ClubMan (17 Jul 2008)

ButtermilkJa said:


> I'll be renting my apt short term to my friends sister. I know the family well and will not be making her sign a lease/contract etc.


Are you not obliged to register your landlord status and the tenancy with the _PRTB_? Not least of all in order to be allowed set mortgage interest against rental income?


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## webtax (17 Jul 2008)

ButtermilkJa said:


> I want this be as informal as possible.


 
While you might want to keep it informal, you are becoming a landlord and need to be aware of what this entails. 
As clubman says, you will have to register your tenancy with the prtb and you should search this site for information on the tax implications of renting out your apartment (stamp duty clawback, cgt, income tax).


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## ClubMan (17 Jul 2008)

I presume that by "informal" you don't mean "illegal"?


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## ButtermilkJa (17 Jul 2008)

ClubMan said:


> Are you not obliged to register your landlord status and the tenancy with the _PRTB_? Not least of all in order to be allowed set mortgage interest against rental income?


Can I not do this and still keep things informal? Even when I am registered with PRTB, can I not decide myself what type of contract, if any, I issue? The letting will be short term and the tenant is happy to keep things informal for the few months. We will agree to reviewing the situation if things change and it looks like becoming a long-term arrangement in the future, but for now we are both happy with the informal approach.


webtax said:


> While you might want to keep it informal, you are becoming a landlord and need to be aware of what this entails.
> As clubman says, you will have to register your tenancy with the prtb and you should search this site for information on the tax implications of renting out your apartment (stamp duty clawback, cgt, income tax).


I am self-employed so have run through all the tax implications with my accountant already so there are no surprises there. I own the property for nearly 4 years so there will be no SD claw-back based on recent changes.


ClubMan said:


> I presume that by "informal" you don't mean "illegal"?


No I don't mean illegal. Not at all. I'm not that type of person. It's just that I want to keep things informal but at the same time protect both of us. Just looking for a heads-up on any issues that should be thought through first, without the need for a formal contract as such.


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## ClubMan (17 Jul 2008)

ButtermilkJa said:


> Can I not do this and still keep things informal? Even when I am registered with PRTB, can I not decide myself what type of contract, if any, I issue?


Have you checked the _PRTB _website and rules?


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## DavyJones (17 Jul 2008)

Why not just have a rolling contract month by month?


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## ButtermilkJa (17 Jul 2008)

ClubMan said:


> Have you checked the _PRTB _website and rules?


No. I suppose it would be a good place to start 


DavyJones said:


> Why not just have a rolling contract month by month?


Well, this is exactly what it will be i suppose. The only difference is it will not be as formal as regular tenancies in so far as I will not be changing over the bills into her name and I will not not asking her to sign a 12month lease.

The original queries were just looking for a heads-up on anything that should definitely be covered, whether informal or otherwise.

EDIT: I should give some extra background on my situation to make things a little clearer as to my intentions. I currently have the property on the market to sell. However, in the current climate this may not happen. In the meantime the opportunity has come to let the property short-term while it is on the market.

Also, I believe (from speaking with my accountant and searching AAM) that there is a rule about being able to let your PPR for up to 12 months initially without any consequences regarding SD, CGT, etc so I'm just trying to keep things as flexible as possible for now in case the property sells in the next few months. Hope this clears up my thinking


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## ClubMan (17 Jul 2008)

ButtermilkJa said:


> Also, I believe (from speaking with my accountant and searching AAM) that there is a rule about being able to let your PPR for up to 12 months initially without any consequences regarding SD


Well this is totally incorrect anyway. The 12 month issue is irrelevant to the _SD _clawback issue. The _SD _clawback is triggered if you rent the property out within 2 (was 5 up to December 2007) years of purchase as an owner occupier. It doesn't matter if the rental period in in the 12 months between vacating it as a _PPR _and selling it on.


> etc


What *precisely *do you mean by "etc." here?


> so I'm just trying to keep things as flexible as possible for now in case the property sells in the next few months.


If you rent it out other than under the owner occupier rent a room scheme then you are a landlord and the usual rules, rights and responsibilities apply.


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## ButtermilkJa (17 Jul 2008)

ClubMan said:


> Well this is totally incorrect anyway. The 12 month issue is irrelevant to the _SD _clawback issue. The _SD _clawback is triggered if you rent the property out within 2 (was 5 up to December 2007) years of purchase as an owner occupier. It doesn't matter if the rental period in in the 12 months between vacating it as a _PPR _and selling it on.


Sorry, typed that too fast, didn't mean to include SD. As already stated, I'm outside of the 2-year claw-back period.


ClubMan said:


> What *precisely *do you mean by "etc." here?


I didn't mean anything specific here. I was just trying to bring up the point about the 12 month renting period regarding CGT without going into specifics.


ClubMan said:


> If you rent it out other than under the owner occupier rent a room scheme then you are a landlord and the usual rules, rights and responsibilities apply.


I understand this. I'm not trying to dodge my responsibilities. As already stated, my only concern is how to protect both myself and tenant without the need for a full, regular, 12 month lease with all the bells and whistles.

As mentioned, it's a short-term arrangement but I want to satisfy myself that I'm not leaving anything to chance, but without going to too much effort as it may not last that long.


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## Persius (17 Jul 2008)

If the tenant stays longer than 6 months, then "Part IV" protection kicks in - irrespective of whether she has a lease or not. Now if you wish to sell your apartment, then this overrides some parts of Part IV - in particular, you can ask her to leave the apartment, once you give the minimum notice. Though there could be other aspects that also apply. Best really to check out all aspects on prtb.ie first, and perhaps also threshold.


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## ClubMan (17 Jul 2008)

Would it not be possible, simpler all round, and more tax advantageous to just remain an owner occupier and rent a room while the property is on the market? If you are worried about securing a quick sale and it looks like it's taking time then reduce the price!


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## Brianne (18 Jul 2008)

Sorry to rain on your parade but my advise is to NOT do as you suggest. Yes, I can see what you're talking about and it sounds as if you don't want to be too tied in especially as you are trying to sell. However as easy as it sounds, you have to consider that you may by trying to simplify things be setting up a lot of trouble for yourself.
We let friends stay in our house for a few months , years ago. There was no rent involved as we were in the process of doing up the house. Talk about nightmare.......now these were people we knew  very well.
They were dirty , that's being polite  and that was the least of it and by the time they left, and at one stage , they threatened they wouldn't go, there was no such thing as friendship left. To this day , I wouldn't go into a business situation with anyone without a proper business contract . Truth is you don't know anyone until you do business with them or live with them.
Our situation turned so nasty that it affected me for a long time.....broken trust and sheer badness.
If you want flexibility , do as Clubman suggests, otherwise it's fairer on all concerned(tax relief for tenant, bills etc),to do it formally.


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## ButtermilkJa (18 Jul 2008)

I appreciate your concern (and I don't have a crystal ball ) but I seriously doubt that this girl will turn into the nightmare tenant you describe. In fact, the only reason why I'm even thinking about this whole situation is because I know her, and her family, and am very confident that there will be no issues.

If I was just renting it out to just anybody on a short-term lease while on the market, I would definitely make sure that there was a full and complete contract involved.

I may end up eating my words but I seriously don't think (hope!) so


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## ButtermilkJa (18 Jul 2008)

ClubMan said:


> Would it not be possible, simpler all round, and more tax advantageous to just remain an owner occupier and rent a room while the property is on the market? If you are worried about securing a quick sale and it looks like it's taking time then reduce the price!


No, this is not an option unfortunately. She wants to rent her own place somewhere so I don't think she'd go for it if I was still living there.

To be honest I'm not worried about selling it at all. I only placed it on the market to see if it would move, as I intend to move out elsewhere myself. If it doesn't sell then I'd rather take it off the market and rent it out than let it go for a much reduced price. I don't need to sell it.


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## ClubMan (18 Jul 2008)

ButtermilkJa said:


> No, this is not an option unfortunately.


OK - so this means that the "official" _PRTB _etc. route is your only option if you want to rent. It's always possible that the costs, hassle, tax issues etc. could make it work considering just leaving the property vacant while selling it.


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## ButtermilkJa (18 Jul 2008)

Yes I agree. To be honest I think that in the end I will take it off the market as I really can't see any good offers coming in over the next 2 or 3 months. Hopefully I'm proved wrong, but if that's the case, it would make sense to get the rent coming in now if the option is there.

Next port of call is prtb.ie


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