Renting Out a Jointly Owned Property: Essential Tips

Important Tips for Renting Out a Jointly Owned Property

The process of letting a co-owned property can be an effective way to earn extra income. It must be coordinated very well to avoid controversies and legal issues that may arise from the process. Here are some important tips that you should take into consideration.

1. Review the Type of Joint Ownership

Examining and understanding the nature of ownership is vital as it can affect decisions on rental income sharing, agreements, and liability. Joint tenants have an equal interest, division and rights in the property concerned. In common tenancy, if one of the owners dies, that owner’s share of the property will go to the other owner.

2. Ensure Agreement among All Owners

A written agreement between all owners is a must to manage a rental property owned jointly. The agreement ensures transparency among owners and helps to avoid conflicts. Your agreement must outline all vital terms including how rental income will be split, responsibilities for property maintenance, and decision-making processes.

3. Evaluate the Mortgage Terms

Evaluating mortgage terms is essential before renting out a property as some lenders don’t allow renting without permission. Engage with your lender and check whether you need consent to let, or if there is a need to switch to a buy-to-let mortgage. Therefore, taking your lender in confidence before letting a property is essential.

5. Comply with Safety and Legal Obligations

To avoid fines and legal complications, ensure the property meets all safety obligations. You have to ensure gas and electricity safety by complying with annual gas safety checks and certificates. Checking appliances and wiring every five years is also essential to get good ratings on the Energy Performance Certificate (EPC).

6. Tax Implications

For every owner, that share of the income has to be reported on that individual’s tax return. Each partner may offset their £1, 000 property income allowances if they qualify to do so. If the property is sold at any later time, you may have to pay capital gains tax on each further rise. The capital is going to be split proportionate to equity stakes and the proportionate distribution of the increase is subject to the ownership stake.

7. Draft a Clear Tenancy Agreement

It is important to draw up a tenancy agreement and make sure all co-owners agree to the drawn agreements to avert probable disputes. Utilise a “Standard Assured Shorthold Tenancy (AST),” this is the most common form of tenancy within UK regions. These should comprise of the tenant’s obligations for, payment of rent, utilities and any other maintenance costs. It will also have to contain issues like the duration of the tenancy and the process for handling the conflict.