Is a Family member renting my apartment a tenant?

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dovest

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My daughter is going back to part-time education as a mature student. She wants to stay in a rental apartment that I own. As she is still employed part-time, she will be paying me a very low rent. Is she considered to be a tenant and do I have to register the tenancy with the RTB? I'm worried that I will be setting the rent level very low for the future and that I won't be able to return to a market rent when her course is over and she moves out.
 
Personally I'd rent the apartment to a regular tenant & give her financial support from the rental income.

Family members can view the investment property as 'theirs' after they've been in occupation for an extended time.
 
Children live in parents' property all the time. There is next-to-zero chance that the RTB will accidentally learn about your child occupying an apartment you own unless you tell them.


You may still have tax obligations on the income. Also, if it is below market rate she is using up a lifetime CAT allowance from a parent.
 
NoRegretsCoyote said:
You may still have tax obligations on the income.
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Well, the rental profits would definitely be taxable and you can't claim a deduction for mortgage interest (if relevant) where the tenancy is not registered with the RTB.

If I was in the OP's shoes, I would simply give the daughter the use of the apartment for free or, alternatively, rent the apartment to somebody else and subsidise the daughter to live elsewhere.
 
Sarenco said:
Well, the rental profits would definitely be taxable and you can't claim a deduction for mortgage interest (if relevant) where the tenancy is not registered with the RTB.
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Unless the rental income is below €5,000 and it is the OP's only source of non-PAYE income I think. In that case they are not a chargeable person, right?

This wouldn't remove any legal obligation to register the tenancy with the RTB of course.
 
Thirsty said:
Personally I'd rent the apartment to a regular tenant & give her financial support from the rental income.

Family members can view the investment property as 'theirs' after they've been in occupation for an extended time.
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i'd say you are popular amongst your relations!!!! You have an apartment and your advise is not to let the OP's daughter stay in the apartment?!!!

What are you trying to build up wealth etc if not to help your children. Let her stay there rent free. Nobody will be a blind bit interested in it.
 
your advise is not to let the OP's daughter stay in the apartment
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Correct.

Though you appear to have missed the second part of my post.

give her financial support from the rental income.
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I'd also point out that the OPs off-spring is an adult, is studying part-time and will continue to work part-time; I applaud both the offspring for going back to education and the OP for supporting it. But I don't believe giving up an investment property is the way to do it.

How many years is this educational programme going to last? What happens if offspring fails a year / has to repeat exams? When the programme is completed will they leave the rental property or pay the full market rent at that time?

Too many pitfalls for families to fall out over. Easier to give a defined financial support for x number of months/ years (or a lump sum if you can do that).
 
Thirsty said:
Easier to give a defined financial support for x number of months/ years (or a lump sum if you can do that).
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One big flaw with that idea. Tax. If the OP's daughter needs to rent an apartment, and the OP is providing the financial support, then that comes out of after-tax income.

On the other hand, if the OP allows her to stay in the apartment, then the cost comes out of pre-tax income.

To take an example: assume the rent is €10,000 on both apartments, and the OP is a higher rate taxpayer. Nett income would be €4800 after tax, PRSI and USC at 40+4+8=52%.

Option A: Daughter stays in family apartment. OP foregoes 10k rental income. Cost to OP is €4800.

Option B: OP rents out apartment to 3rd party. OP gives daughter €10k to rent. another apartment. Cost to OP is €10,000.
 
You need to add two elements to the 'cost' side:

1. OPs concern was that if it was rented at below market value, they might have an issue when it comes to returning to market rent.
2. Potentially falling out with offspring over property (not worth any money).
 
Point 1 becomes irrelevant if the OP's daughter is not paying rent. OP is probably better off in the long run with no rent than with a small rent.

Point 2, yeah, it's possible, but if there's a clear, adult understanding from the start, then a saving of that magnitude should sort things out, leaving both parties better off than they otherwise would.
 
Leo said:
Unless they are living in it themselves, it would not qualify under the rent a room allowances.
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I don't think @anntionette was referring to the scheme but rather that the daughter does not have to be the sole occupant of the property.

Although the rent-a-room scheme could be an option for the OP's daughter. She can rent the property at market rent and sub let a room. For example, market rent could be €1500/month and the daughter could sublet a room for €1000/month. As long as the apartment is her sole residence, she is entitled to claim rent-a-room relief as long as there is a provision to allow her to sub-let

The OP maintains market rent and income. The daughter gets a discount, effectively costing her €500/m. The only downside is that the daughter will have full tenancy rights and can't be expected to move on when the time comes.
 

Perhaps not, but the suggestion was worded as letting only a room to the daughter instead of the entire apartment, so I assumed this was either to avoid tenancy obligations, to avail of the rent a room relief or both when neither are a runner.

Renting to the daughter and then the daughter sub-letting involves all the headaches of a registered tenancy with the added complication of a sub-let.
 
dovest said:
she will be paying me a very low rent.
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How low are we talking, roughly ? Just wondering if it would be worthwhile coming to an agreement that she can stay rent free, but she is responsible for all maintenance, new white goods, any painting, flooring etc
Might work out about the same for you over the few years, but you have a well maintained and nicely presented apartment to rent when she's done. As others have said, you know your daughter better than us and whether this would basically mean she does nothing and puts no money into the apartment. Also, not 100% sure if there are any tax implications of this
 
Thanks everybody, for your analysis & suggestions. Which ever way I go, it will become quite complicated, so I think I will rent my apartment on the open market and ask her to try to find an apartment of her own to rent, then I will and give her a few quid each month towards her rent. Once I stay below €3000 per year (or €6k if my spouse contributes too), there should be no tax issues.
 
dovest said:
so I think I will rent my apartment on the open market and ask her to try to find an apartment of her own to rent, then I will and give her a few quid each month towards her rent.
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It's hard to advise without knowing a) the market value of the apartment; b) the discount you would be giving her; c) your marginal rate.

But if you are on the higher marginal rate you are vaporising half of the gross rent in tax before you give her any.

In your shoes I would let her live rent free and let her pay the management charges, insurance, utilities, etc. Maybe she could replace furniture or the like too. When she leaves you have no issue re-setting rent to market rates.
 
NoRegretsCoyote said:
But if you are on the higher marginal rate you are vaporising half of the gross rent in tax before you give her any.
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That's it in a nutshell. You're using after tax income to subsidize her living in another apartment.
NoRegretsCoyote said:
In your shoes I would let her live rent free and let her pay the management charges, insurance, utilities, etc. Maybe she could replace furniture or the like too. When she leaves you have no issue re-setting rent to market rates.
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Yes, and she'll probably take better care of it than a random tenant would.
 
No registration with RTB for a child of the owner so no tenancy agreement or RTA regulations apply.
 
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