What type of tenancy agreement to use
Usually, if you rent out a property which you do not live in then you will be able to use an assured shorthold tenancy agreement (AST). This is the standard type of agreement which is used by OpenRent in Rent Now.
There are, however, certain situations in which an AST may not be appropriate.
If you are renting a room in the house in which you live and the renter does not have exclusive access to their room, then it is likely that you will need to use a Lodger Agreement or Licence. You can read more about lodger agreements here.
An AST will also not be appropriate if you have converted your property into two self contained flats, with you living in one flat and your tenant living in the other, or where you are planning to let out a self contained rental annexe/granny flat. In these cases you will need to use a non-assured tenancy agreement (common law tenancy agreement). Note that this does not include the situation where the landlord owns two or more flats in a purpose built block of flats and lives in one and rents out the other(s). In this situation an AST will be appropriate.
Non-assured tenancy agreements differ from assured shorthold tenancies (ASTs) in a number of important ways. For example:
- the deposit does not need to be protected in a government scheme
- repossession will usually start by serving a notice to quit instead of a Section 21 or Section 8 notice
- the tenant fee ban does not apply
Unlike a lodger's agreement, these tenancies do grant tenants protection from eviction and the Landlord will need a court order to remove the tenants if they do not leave after a notice is served. Unfortunately, Rent Now cannot accommodate a non-assured tenancy agreement at this time.
Multiple Dwelling Relief
If you buy a property that includes an annexe then you may be entitled to some reduction in the amount of Stamp Duty Land Tax (SDLT) paid under multiple dwellings relief (MDR).
To be eligible for this reduction the annexe will need to satisfy the definition of a "dwelling".
To satisfy this definition the annexe must be a separate self-contained living unit. While the assessment will depend on the precise facts and circumstances of each case, a separate dwelling is generally expected to have its own:
- lockable entrance
- kitchen area
- living area
- sleeping area and bathroom (although one or more of these areas may be combined)
- It also expected to have privacy and security from other dwellings.
For more information on eligibility please head to the government website.
The future application of MDR to annexes may be affected by HMRC's ongoing consultation on amendments to the MDR rule and changes to the SDLT regime.
Council Tax
If you have a self-contained annexe which is considered a separate dwelling (see above) then you’ll have to pay Council Tax for it as well as your main house. Each self-contained unit will have its own Council Tax band. You can find out what your Council Tax band is by visiting the Valuation Office Agency website.
An annexe may be exempt from the Council Tax charge if it is occupied as the main residence of a dependent relative of a person who lives in the main dwelling (e.g. if your elderly parent lives there full time). In this instance a ‘dependent relative’ is:
- a person aged 65 years or more
- a person with a severe mental impairment
- a person who is substantially and permanently disabled.
Evidence of age and/or disability will be required in support of any application for this exemption.
Relatives who are not ‘dependent’ upon the charge payer at the main dwelling may also be entitled to a 50% reduction. And finally, an annexe may also be exempt from Council Tax if it is unoccupied or if it is occupied by students or people under the age of 18.
Information on this site is by way of general guidance only and may not apply in your particular circumstances. You should not act or refrain from acting upon information on this site without seeking independent legal advice.