Co-owners/room rental

lyverbird1

I have a situation in relation to a house co-owned by two people. The house was purchased by the two friends (not partners) who have now lived there for about four years. One of the persons is now going abroad to study for the year and would like to rent out their room while they are gone. I just wanted to get a straw poll here on how any such rental income should be divided. There is a difference of opinion between the two of them and I'd hate to see the issue ruin a great friendship although I guess there is nothing like money to rip apart good friendships!

coylemj

If the property is owned by A and B and B lets out his half of the house while he temporarily moves out then B should be entitled to keep all of the rental paid by the tenant who replaces him, assuming that A and the tenant enjoy relatively equal use of the property.

Say they set up a company, the company owns the house and they each own a 50% share in the company. As tenants of the company they each pay 100 euros rent per month but as 50% shareholders each of them is entitled to draw half the gross rent as income from the property, in this case they each pay 100 euros a month and draw 100 euros a month as income so it cancels out.

Now if B leaves temporarily, he doesn't have to pay any rent since he doesn't live there any more. Say the tenant who moves in pays 100 euros per month, in that case A continues to pay 100 p.m. and draw the same but B is still entitled to draw his 50% share of the gross rental but he doesn'y pay any rent since he doesn't live there. So the equation means that B gets a net income of 100 euros p.m. while A continues to have his rental cancelled out by his income. In summary, B keeps all of the rental income paid by the tenant who replaces him.

If not, why should A benefit financially when B moves out and his (A's) enjoyment of the property is not affected?

Victor

There is a greater cost to ownership than just paying the mortgage. Bills, insurance, maintenance, etc. need to be paid for and chores need to be done.

The remaining owner will need to deal with both their co-owner and the licencee (not tenant) and is put at some disadvantage by the arrangement.

The person staying should get to decide who the licencee is, as they have to live with them, but the non-resident needs to pay for advertising, extra insurance, etc. Appropriate checks need to be made on the licencee, so as to not prejudice, the co-owners finances.

They need to investigate if the Rent-a-Room Scheme with the Revenue Commissioners applies in this case, as one owner is not resident.

coylemj

The only issue the OP is raising is who gets the rental income, I think it's reasonable for the rest of us to assume that the person taking the place of the co-owner is paying his/her fair share of the incidentals and is doing their share of the housework as this doesn't appear to be a concern.

Victor

coylemj wrote: »

The only issue the OP is raising is who gets the rental income, I think it's reasonable for the rest of us to assume that the person taking the place of the co-owner is paying his/her fair share of the incidentals and is doing their share of the housework as this doesn't appear to be a concern.

Expecting a tenant in such a situation to cut the grass, re-plant the flower beds or clean the gutters might be expecting a bit much.

coylemj

Victor wrote: »

Expecting a tenant in such a situation to cut the grass, re-plant the flower beds or clean the gutters might be expecting a bit much.

I thought he was a licensee, not a tenant?

I think you're expanding the remit of the query unnecessarily, also known as over egging the cake, all the OP is asking about is who gets the rent.

Victor

source

In a perfect world an agreement could be reached where A continued to pay his share of mortgage while C pays B's mortgage contribution. B no longer makes payment because he will not be resident, but still retains ownership rights with A.

lyverbird1

Thanks everyone for your advice. The two concerned co-own and pay the mortgage equally. The person going abroad seems to think simply 'It's my room, it should be all my money', but the friend remaining is thinking that it's a little more complicated than that, the tenant is using the entire house, not just one room and that they are taking care of the house and the utilities and even collecting the rent while their co-owner is away.I think that even as a gesture of goodwill towards each other, they should agree on a 70/30 or a 80/20 divide in favour of the departing house member - I really hope they can reach such a compromise as it would be a shame for them to fall out.

lyverbird1

Oh, and I should add that the person going abroad to study is being sent by their job and will still be on a full wage while away, therefore essentially, the mortgage is still covered by pay and any rental income could be therefore considered extra income?

Victor

lyverbird1 wrote: »

70/30 or a 80/20 divide

It needs to be done properly. Find out what the actual costs of the household are and divide them based on responsibility.

Whatever about 70/30, something like 80/20 seems totally disproportionate.

lyverbird1 wrote: »

Oh, and I should add that the person going abroad to study is being sent by their job and will still be on a full wage while away, therefore essentially, the mortgage is still covered by pay and any rental income could be therefore considered extra income?

That is none of the business of the person. Presumably they will also have to live somewhere when they are away?