Flexible or fractional rental covers a huge range of ways in which long
term flexible or fractional rental agreements can be set up to share an
asset. Below are some examples based on property to give you some ideas,
but the principles can be applied to boats, mobile homes, aircraft and
just about any valuable asset.
- Let a room during the week only or Monday to Friday
so you have your house to yourself at weekends.
- Let your property to weekday lodgers because you are working away from home all week.
- Rent a property for the weekends only
because you have to spend every weekend visiting parents, children, for example.
- Let a room on an occasional basis
to a regular visitor, say 50-100 days
a year. You receive some income and have the house to yourself
most of the time..
- You have a second home which you have no intention of letting for
holiday use because you want all your furniture and possessions just
how you like it and you also use it during the peak season. But the
property is still left unused for most of the year. What if you could
find someone like yourself, that you could get to know and trust first,
who can use your property when you aren't there. For example, if you
only use your weekend cottage every other
weekend, can you find someone to use it on the weekends in
between? Find the right person and set up a long term fractional rental
share agreement in return for a monthly income. You will probably
accept less than the going rate for holiday rental because it's convenient
and you don't want to let the property for holiday lets anyway, so
any income is a bonus. The person renting flexibly gets a better deal
than buying or renting. It is a classic win-win!
- Or let for alternate weeks rather
than weekends, possibly mid week to mid week to give both sharers
the flexibility to take long weekends.
- Or in the example above, the owner could share with two people,
so the owner and the two tenants have use of the property (say) every
third weekend (or week).
- If the property is abroad, so you may prefer two
week, or four or maybe six week periods of time, depending
upon how far away the property is from the sharers.
- If one or all of the sharers want the property for specific
periods: for example, the whole of February, August and November.
If you find someone is happy to use the property at the other times
then you have potential sharing arrangement.
- If you are happy for someone to use your property for (say) twelve
weeks a year and to arrange the actual dates each year. You will need
some rules about how many weeks are in each of the high, medium and
low seasons.
Here is more detailed guidance about setting up sharing agreements in:
What issues need to be covered in fractional rental sharing agreement
(all types of asset)?
The information on this page, and the whole of the yours2share website,
is based upon the laws in England
and Wales only. However the law in Scotland and Northern Ireland is similar.
The laws on joint ownership and renting, both of property (buildings and
land) and possessions (chattels or personal property) vary from country
to country. If the asset is based outside England and Wales, you need
to get independent advice on both
legal and financial aspects specific to that country.
You need to make sure that there is a legal and financial framework for
the sharing agreement you are contemplating that protects you properly.
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| Flexible or fractional
renting of property: lease or a licence? top
|
Briefly, you would choose a lease if you wanted
to stay in tight control of a cohesive group of one or more other people,
like a family unit, and a license if you wanted a less formal arrangement
whereby the licensee (who does not own the property) has few rights. The
key point of a licence is to make quite sure no person can take up residence
in the property and so acquire tenancy rights which were not intended.
Lease or license of personal property (or anything else): there is little
difference. A lease may be best if you plan to make an arrangement for
a fixed term; a licence is more usually terminated on short notice or
no notice.
There is a
full information article on this subject on the Net Lawman site.
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| Flat shares top
|
yours2share is designed for people who are looking for partners to share
any valuable asset, property, boats, aircraft etc on a fractional or time
basis.
For property, fractional renting includes Monday to Friday or weekday only lets
and any other repeating fractional use of the asset.
If you are looking for a full time lodger to share your flat or home,
we recommend flatshare experts Spareroom.co.uk
Here are template contracts for a flat shares or
a fractional rental shares.
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| Is this rental income taxed? top
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If you receive a total rent of less than £4,250 in
a tax year, you are not liable for tax on that income.
If you receive rental income of more than £4,250, it is your decisionas
to whether you pay tax on the profit you make from letting the room (the
rental income less any expenses incurred) or pay tax on the amount of
rent over £4,250.
If the income is from flexible or fractional rental of other assets such
as boats or mobile homes, then this is probably taxable income and is
entered under "Other taxable income" on your tax return. You
should consult your tax adviser.
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| If I offer extra services such as meals or laundry, are these also taxed? top
|
If the total income you receive from letting and
additional services is more than £4,250 (even if the rent is less), then
you have to pay tax.
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| Do I need different household insurance? top
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Probably. Inform your insurance company that you
are letting a bedroom and ask them what additional cover you need, for
example:
- Public and occupier liabilities
- Loss of rental and the cost of re-housing your lodger in the case of fire or flood
- Emergency repairs
- Costs of evicting a bad lodger
- General legal costs
The tenant is responsible for insuring their own personal possessions. This is
often covered by the household insurance on their permanent residence
or can usually be easily extended to cover this.
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| Is my council tax affected? top
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If you benefit from a "Single Person
Occupancy" option, then this should not be affected. However the implementation
of these rules varies from local council to local council. Check with
your local Council Tax office to find out how the rules are applied in
your area.
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| Does a TV in the tenants room require a separate TV licence? top
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Only one TV licence is required for each household.
If the owner has a TV licence, the TV in the tenant's room is covered,
regardless of whether it is owned by the tenant or the owner.
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| If
I flexibly or fractionally rent property or chattels, what are my health
and safety responsibilities? top
|
If you are flexibly or fractionally renting an asset,
then you need to ensure that the asset is safe
and that you comply with any regulations associated with renting this type of asset.
For property in particular you must consider fire safety, electrical safety,
gas safety (if applicable), chimneys, furniture and furnishings and the
general safety of the building (inside & outside).
- Fire: ask your local Building Inspector and Fire Prevention Officer
offer advice on fire safety such as emergency escape routes, smoke
alarms, fire extinguishers.
- Electrical: the electrical system and all appliances supplied must
be safe.
Keep appliances complete and in working order; keep receipts
Check secondhand items
Provide operating instructions and user warnings for all appliances.
Keep flexes in good order and attached to appliances/plugs.
Keep earth tags in place.
Ensure plugs are an approved type with sleeved and neutral pins.
Ensure plugs and sockets conform to BS1363 or BS1363/A for heavy duty
uses.
Ensure fuses are the correct type and rating.
Ensure lodgers know the location of and have access to the main consumer
unit, fuses and isolator switch.
Note all fuse ratings on the inventory.
Consult a qualified electrician if you have any questions.
Regularly Get supply and appliances checked by a qualified electrician.
Check all equipment on lodger change-over.
Keep records of all inspections.
- Landlords are required by law to ensure that all gas equipment
and appliances supplied are safe. The Health
and Safety Executive has a pdf version of their Gas Safety leaflet.
The Gas Safety Advice Line is 0800 300 363.
Maintain fittings and flues in a safe condition.
Carry out annual safety checks on all gas appliances and flues.
Check gas installations and appliances immediately before the start
of any new tenancy, even if a safety certificate is still current.
Use CORGI registered gas installers who are qualified to make installation,
maintenance and safety checks.
Keep records of safety checks (issued by CORGI installers) for 2 years.
Give copies of the CORGI installers safety check report to each lodger
within 28 days of the safety check, or to new lodger before occupation
- Sweep chimneys annually
- Ensure that the furniture complies with the 1993
amendments to The Furniture and Furnishings (Fire)(Safety) Regulations
1988.
These regulations apply to: beds, headboards, mattresses, sofa-beds,
futons and other convertibles, nursery furniture, garden furniture,
scatter cushions, seat pads, pillows, loose and stretch furniture
coverings and other replacement furniture to be used in a rental
property.
They must all have a permanent, non-detachable manufacturer’s label
stating that "Filling material(s) and covering fabric(s) meet the
requirements for resistance to cigarette and match ignition in the
1988 safety regulations".
All upholstered items must pass the "match resistance test" as prescribed.
All upholstered items must also pass the "cigarette test" as prescribed.
Bed bases & mattresses are not required to bear a permanent label,
but compliance is taken if the item has a label stating it meets
BS7177.
These regulations do not apply to: antique furniture and furniture
made prior to 1950, bed clothes and duvets, pillow cases, curtains,
carpets and sleeping bags
- Providing any appliance which is unsafe such
as a kettle with exposed wires is a criminal offence. Avoid really
hazardous items such as oil heaters altogether.
- yours2share recommends that you undertake an
annual Risk Assessment of your home to ensure its safety – documenting
this is evidence of "due diligence" on your part in the event of an
incident.
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| Who needs to be told if I rent a room in my property? top
|
As well insurance and tax, you need to ensure you
have any licences or permits required.
Inform your mortgage or loan company;
they may insist on certain conditions, such as a lettings’ policy. If
your property is leasehold, inform the leaseholder. If you are a lodger
yourself, inform the owner of the property.
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| Do I need to keep records? top
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Keep a careful note of the rents received and any
expenses incurred. You must keep these records, with receipts/invoices,
for six years after the tax year in question.
If letting a room (and additional services) provdies you with an income
of more than £4,250, you must declare this on your tax return.
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Version 2.0 January 2007 |
