# Rent of home to a family member



## What the (15 Jun 2022)

We are planning to move out of the city during the summer. My sister who also lives in Dublin was told she would be evicted by her landlord as the house is up for sale. Given the shortage of available properties and the cost of any reasonable property she has asked to rent my home. While I have no issue with this and she would not be able to afford the market rate.
This is my issue. I would be happy to give it to her for less than the going rate but she is about to start building a house and will only need my place for 2 years she maintains.  The house is in a rent pressure zone and if for example I only charge her €1,000 I could only increase the next lodgers rent to €1,080 when market rent would be as much as twice that. Is there any exemption for a preferential rate such as this or would I be snookered once she moved out?

A second question is if I have lived in this house as my PPR for the majority of this year could I claim the rent tax free under the rent a room scheme this year to save on tax?


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## Horatio (16 Jun 2022)

This has the makings of a messy situation at the expense of your finances & your relationship with your sister.
I'd avoid mixing business & family if at all possible. I assume you have a mortgage on this proprty & your new property that both needs to be serviced. You must look after your own family's interests first before you can help anyone else - like the oxygen masks on the plane.

What percentage of the market rate can She afford? 80%, 50% less? If you do decide to go down the path of renting to your sister, I'd have the contracts drawn up (don't be sloppy here just because She's your sister - get them done) with rental set at the full market rate. Your sisters pays what you agree & you pay tax on what rental income you receive.

If at the end of 2 years she actually moves out (may not necesserarily happen for a plethora of reasons) then you have benn charging market rates & can continue as usual on the open market.

Take note- there are an infinite number of reasons why she may not have a place to go to after the 2 years has expired & then she will still be living on your dime & tension will arise. House not finished. Relationship broken up. Someone gets sick. Is there a partner & or children & or animals in the picture now or in the 2 year future?

Be careful here.

Why not support her by helping to find her affodable alternatives or even with a few quid to get her going in an interim place picked from the open market. 2 years of her living suboptimally may prevent a life time of strife between you.


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## NoRegretsCoyote (16 Jun 2022)

What the said:


> A second question is if I have lived in this house as my PPR for the majority of this year could I claim the rent tax free under the rent a room scheme this year to save on tax?


No, as it would no longer be your PPR.



What the said:


> The house is in a rent pressure zone and if for example I only charge her €1,000 I could only increase the next lodgers rent to €1,080 when market rent would be as much as twice that.


I think you need to draw up a contract at market rates and register as such with the RTB. This will protect you if you want to put it on the market at a future point.

You can (for example) give anyone a €3,000 gift every year without any CAT implications.


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## T McGibney (16 Jun 2022)

NoRegretsCoyote said:


> I think you need to draw up a contract at market rates and register as such with the RTB.


The OP should seek good legal advice before committing to doing so.


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## cremeegg (16 Jun 2022)

I am not aware of any tax or legal reason why you cannot let your sister live in your house. Lots of people live in houses that belong to their relatives.

I would echo all the potential personal issues that may arise.


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## NoRegretsCoyote (16 Jun 2022)

cremeegg said:


> I am not aware of any tax or legal reason why you cannot let your sister live in your house.


Of course you can! There are approx 20,000 households who live in properties rent free.


The issue (correctly identified by OP) is that any below-market tenancy arrangement would make it difficult to let it on the open market and to get the full price in due course.


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## What the (17 Jun 2022)

Horatio said:


> Why not support her by helping to find her affodable alternatives or even with a few quid to get her going in an interim place picked from the open market. 2 years of her living suboptimally may prevent a life time of strife between you


Problem here is that there are no alternatives available not to mind an affordable one in the current climate. there are literally hundreds of people applying for every place which makes getting a place difficult. She is looking as she would prefer to stay in the area she now lives in but its not that simple to find a place.

As for mortgage its not an issue here but getting full market rent when she moves out is the thing I want to be able to achieve when she goes.


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## Brendan Burgess (17 Jun 2022)

Let's be quite clear here.

There are potential issues in letting your home to your sister.   But there are potential issues in letting your home to anyone. 

So, of course, you should support your sister in her hour of need as you can well afford to.  You should not let a potential small  problem for you stop you from solving an actual and immediate main problem for your sister. 

You both need to recognise the potential problems and take steps to mitigate them. 

Brendan


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## Brendan Burgess (17 Jun 2022)

What the said:


> I would be happy to give it to her for less than the going rate but she is about to start building a house and will only need my place for 2 years she maintains. The house is in a rent pressure zone and if for example I only charge her €1,000 I could only increase the next lodgers rent to €1,080 when market rent would be as much as twice that.



This is my understanding of the tax implications.

You pay tax on the rent received and *not *on the rent set out in the lease. 

The maximum rent you can charge has nothing to do with the market rent. It is the existing rent + something. 

So do up a formal lease with a rent well above the market rent.  For example, if the market rent is €2,000, then set the lease for €2,500 and register it with the RTB. 

Your sister just pays you €1,000. 
You pay tax on the €1,000 received. 

As many landlords do, you just write off the unpaid rent.  You don't include it in your tax return. 

If you still want to let out the house after your sister leaves, then you are working from a base of €2,500 and not €1,000. 

Brendan


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## sadie (17 Jun 2022)

You could write into the Contract that it is maximum two year Contract. 
At the end of two years, you will ask her to move out or at the very least, another discussion will take place. 
But you have an option to ask her to leave at that point.
At least you would have that set in stone for both of you. Rather than a nebulous 'as long as you need it, sure it's grand' sort of thing. 
Also, who will be liable for repairs? The washing machine breaking down, the boiler needing a new circulation pump, the shower upstairs leaking? 
That needs to be put in writing too.


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## Sconeandjam (19 Jun 2022)

sadie said:


> You could write into the Contract that it is maximum two year Contract.
> At the end of two years, you will ask her to move out or at the very least, another discussion will take place.
> But you have an option to ask her to leave at that point.
> At least you would have that set in stone for both of you. Rather than a nebulous 'as long as you need it, sure it's grand' sort of thing.
> ...


Don’t forget indefinite tenancies were put into law this year where after 6 months a tenant can stay indefinitely unless cancelled under certain grounds. Moving back in and sale(at the moment).


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## T McGibney (20 Jun 2022)

Brendan Burgess said:


> *You pay tax on the rent received and not on the rent set out in the lease.*


I have seen Revenue argue the precise opposite, Brendan.  And their stance makes sense, otherwise they might find themselves encouraging arrangements where part or all of the stipulated rent is paid under the counter as it were. They are generally happy to allow for genuine bad debt situations but this isn't a bad debt situation.


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## NoRegretsCoyote (20 Jun 2022)

Could the OP do the following:

Put a rental contract in place specifying that it's a below market rent due to the right of the OP to come and go and use a room from time to time. I've heard that a 30% discount is acceptable in Revenue's eyes for this purpose.
Seek to let the house in future at market rates. If there is any issue with the RTB the OP can make clear that the contract with the sister was not at market rates anyway so was not relevant.


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## T McGibney (20 Jun 2022)

NoRegretsCoyote said:


> Could the OP do the following:
> 
> Put a rental contract in place specifying that it's a below market rent due to the right of the OP to come and go and use a room from time to time. I've heard that a 30% discount is acceptable in Revenue's eyes for this purpose.
> Seek to let the house in future at market rates. If there is any issue with the RTB the OP can make clear that the contract with the sister was not at market rates anyway so was not relevant.


As I said above, they need legal advice that should come up with this or a similar arrangement eg a licence to which the RTB rules would not be applicable. It's too subtle and nuanced a question for the well-intentioned amateurs here and the stakes are high if they get it wrong.


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