rent free house for friend

Kerry Way

We are moving abroad and want to let our close friend and their new young family stay in our house while they save for a mortgage. Our house needs some work done to it which they are happy to do so we are happy to forego any rent but wondering if there’s any tax implications for this on us and them? we will have to change the schedule insurance on the house but would we better off getting a nominal amount and a lease drawn up ? My understanding is benefit in kind only applies to employer situations or family and they aren’t related ? Thank you

Pawwed Rig

Tax

They could be assessed for CAT as with current rent prices they would soon exhaust the small gift and group c thresholds however it would be very unlikely that Revenue would pursue it in my experience. You would need to register with RTB though which may put you on Revenue's radar and you may receive a NOA for income tax which you would them have to explain the arrangement.

Non tax

All I can say is I hope you know them well and that they will not screw you over. You might want to look at a limit to the time you let them stay. If they are still saving in 10 years what will you do?

Insurance would be another issue. If they have an accident while doing your repairs what level of insurance will you have?

Personally I think this is a very bad idea

JamBur

Better to draw up an agreement. Friendships can be strained by such arrangements. Remember you will be abroad and there is an element of out of sight, out of mind. The internet is littered with tales of people regretting lending/loaning to former friends.

suvigirl

I lived rent free in two.different properties over the years, I never paid tax, pretty sure the owner didn't have anything to pay either.

I was like a house minder, lived there in exchange for looking after the place etc.

Mrs OBumble

You might want to investigate a caretaker agreement, where you retain them to provide security for the house.

Get proper legal advise on this.

Pawwed Rig

https://www.boards.ie/discussion/comment/120900178#Comment_120900178

Just because you didn't pay tax doesn't mean you weren't meant to pay tax

suvigirl

https://www.boards.ie/discussion/comment/120900785#Comment_120900785

It was a job basically. A caretaker. Looking after the house. Why would I need to pay tax?

Confused11811

https://www.boards.ie/discussion/comment/120900193#Comment_120900193

OP - this is solid advice.

Look into this before you commit to anything.

SupaCat95

https://www.boards.ie/discussion/comment/120900178#Comment_120900178

You do know you could have applied for squatters rights ? Once you have a squatter and they are not paying rent and dont recognise you as owner, You have VERY serious problems. Every day they are in the house and dont recognise you they gain ownership?

Sure Bring in a caretaker and get a legal agreement and make them pay a minuscule rent but have it in writing if things go sour. Things are looking very likely with big shifts in money coming up. Another bank failed in the states to day I heard and there in a conference on a new gold backed currency in Johannesburg next month

suvigirl

https://www.boards.ie/discussion/comment/120900866#Comment_120900866

No, I could not have. In order to claim adverse possession you cannot have permission by the owner.

You do not know the law, you really shouldn't be giving advice.

SupaCat95

"A person may be deemed to be in adverse possession of property when he/she in sole exclusive occupation thereof without acknowledgement to the legal owner(s) and his occupation is inconsistent with the title of the true owner. Whether adverse possession can be deemed to exist depends on an examination of the facts and circumstances of each case."

So if you are not paying rent or have a written agreement with the owner you have grounds for squatters rights. There is no proof of recognising the owner without either. That is why landlords go mad if rent isn't paid, it's disrespecting the title holder which is grounds for adverse possession. Btw I am in the process of gaining possession of land this way.

Donald Trump

https://www.boards.ie/discussion/comment/120901632#Comment_120901632

It isn't too difficult for the owner to assert their rights within the prescribed period, in which case it resets. suvigirl is perfectly correct in saying that it cannot be claimed if permission is granted (the clue is in the name - "adverse")

I think there was even a case (I can't remember the name of it) where the owner - just before the 12 years was about to expire - sent a licence agreement to the squatter - in order to prevent a potential claim. The squatter did not have to sign the agreement for it to be held valid.

There was another case where the act of an owner stopping his jeep at the gate of a plot of land and looking across a gate into it was deemed a sufficient assertion of rights to prevent a claim of adverse possession.

You appear to be of the opinion that not paying your rent for a month means you could claim the title of a property you were renting. I don't think it would be possible to be further off the mark.

Ginger83

The strength of your friendship will be the true test when you want your property back.

Remember it will no longer be your home, it will be your friend's home!

SupaCat95

No I never said not paying for a month would be a full adverse possession but adverse possession is incremental over a 10 year period (12 years if it is the government).

What you are saying is could be true about those cases be that is about the invader taking the threat of physical or legal action and backing down. If an invader takes a foot hold and says they ain't shifting it could take two years legally to evict them. If they haven't paid rent in a year and another two years that is three years and it's more than a third of the value of the property. It's all in the favour of the invader if they know what they are doing. We had a similar situation with an uncle who was letting a farm, cash in hand, to a chancer. Luckily the invader responded to legal threats.

suvigirl

https://www.boards.ie/discussion/comment/120901632#Comment_120901632

No. As you have posted yourself, you must be there without the knowledge of the owner. If you are there in a caretaking role, created by the owner, you cannot claim 'squatters rights'

suvigirl

https://www.boards.ie/discussion/comment/120901945#Comment_120901945

12 years for private and council land. 30 years if it is state land.

You seem to be of the mistaken belief that it is easy to claim adverse possession, it really is not.

It wasnt me123

https://www.boards.ie/discussion/comment/120900193#Comment_120900193

Do this - and make it for 360 days - not a full year - you really should have a start and end date otherwise they could think they could stay forever and you need to focus them on an end date - regardless if you are back then or not.

I think this is an incredible generous thing you are doing, I wish I had friends like you BUT in the caretakers agreement, make them responsible for the general upkeep of the garden and house - so if they break it they either fix it or replace it. If a child draws on the wall, they get it off or paint it, removal of rubbish etc - nothing onerous but not a ‘do whatever you like’ kind of thing.

And if you have annual fees like rates etc, have them responsible for these - are you changing the utilities into their names? If not, include in the agreement that they are also responsible for these.

I don’t think tax would be an issue - benefit in kind is only in relation to employees - you aren’t getting any extra money and they aren’t paying rent - they are paying bills but that’s not rent.

And lastly, include a sentence in the agreement that this is a temporary arrangement, that both parties agree that this is not a handover of a house indefinitely etc, this will ensure that if there is an issue next year, they were on notice that this was a temporary arrangement. By the way, get your friend and spouse to sign, both singularly and jointly so if anything happens to their relationship, they know they are both responsible for the house, its upkeep and bills and both have to leave when requested.

I would get a solicitor to do a one page simple language document and make sure your friends sign it. All the best in your travels.

Peregrinus

https://www.boards.ie/discussion/comment/120900805#Comment_120900805

Why would you need to pay tax on the benefit-in-kind, in the form of free occupation of property, that you earned in your job? Gosh, that's a tough one, isn't it?

Peregrinus

https://www.boards.ie/discussion/2058306581/rent-free-house-for-friend

A few questions:

About how long will they be in occupation for?

About how much would the house rent for, if you were to rent it?

About how much would it cost to get the work done, if you were to pay someone to do it?

This isn't really a benefit-in-kind situation that might attract income tax, but it could be a gift situation that might attract capital acquisitions tax.

It wasnt me123

https://www.boards.ie/discussion/comment/120901989#Comment_120901989

It’s not a job, they are house sitting - they are not getting paid to house sit

Deub

For the OP, there was a similar thread (except the friend was paying rent) where the situation turned sour: https://www.boards.ie/discussion/2058252042/tenants-refusing-to-leave-even-though-we-are-homeless-help/p1

+1000 on getting proper legal advice. Being friends is not an insurance everything will be going well.

Peregrinus

https://www.boards.ie/discussion/comment/120901997#Comment_120901997

Suvigirl says, in as many words, that it was a job.

https://www.boards.ie/discussion/comment/120900805#Comment_120900805

Monetary payment isn't an essential element of a job — you can have a job in which you are wholly rewarded in kind, and that seems to be what suvigirl reckons she had. And if that is what she had then, yeah, she would liable to income tax on the value of the benefit she received.

Suvigirl could be right. "Caretaker" can be a job, e.g. if your duties include being at the property at stated times, carrying out regular maintenance, making sure the property is kept ready and available for other uses, etc. And if that's the case then the remuneration from the job, whether in cash or in kind, is taxable.

But more usually it isn't a job. Typically a caretaker is a licensee, entitled to use the property but not obliged to be there at any particular time; not entitled to exclusive possession; not expected to do much more than clean up after themselves and alert the owner to any issue with the property that needs addressing. The owner can also use the property, visit when he likes, store stuff in it, etc. That's not an employment, and therefore not assessable to income tax. But affording someone the free use of property in return for basic caretaking of this kind may be a gift, and may therefore attract CAT.

What the OP envisages is more than a caretaker situation, because the OP is expected to do work on the house. So we could see — and, more to the point, the Revenue could see — the free use of the property as payment for the work to be done in which case, in principle, it would be taxable as income.

Donald Trump

https://www.boards.ie/discussion/comment/120901988#Comment_120901988

I think this is an incredible generous thing you are doing

There are some people who would think they are being clever in trying to set up such an agreement for the purposes of evading tax - i.e. think they can set up such an arrangement on paper and receive cash under the table. Thy could end up in a world on pain though as it would leave them at the mercy of the "caretaker"

Not suggesting that the OP is one of those people

suvigirl

https://www.boards.ie/discussion/comment/120901989#Comment_120901989

It was a situation to suit both parties. They needed someone to look after their houses, and I lived in those houses to look after them. It wasn't an official 'job'

Genuinely, how is it any of revenues business where I live?

Donald Trump

https://www.boards.ie/discussion/comment/120902076#Comment_120902076

Well it would be like if your employer paid your rent, or provided you with an apartment to live in. Such schemes could be used to evade tax

the.red.baron

lads, Suvigirl is correct, no tax implications, no Benefit in kind etc etc

setting up a lease is a problematic at this stage as not having one at all

Peregrinus

https://www.boards.ie/discussion/comment/120902076#Comment_120902076

Revenue don't care where you live, but they do care if you are provided with accommodation for free, or for less than its market value. Why? Because that's a gift to you. And gifts can attract capital acquisitions tax.

Revenue guidance on this says as follows:

"If you have free use of a property, or for less than its market value, this is a benefit and you may have to pay tax on it. If you use the property over a number of years, the benefit is regarded as being received on 31 December each year."

More technically, Capital Acquisitions Tax Consolidation Act 2003 s.40(2) says this:

"A person is deemed to take a gift in each relevant period during the whole or part of which that person is allowed to have the use, occupation or enjoyment of any property (to which property that person is not beneficially entitled in possession) otherwise than for full consideration in money or money's worth."

Any actual CAT liability will depend on the value attributed to the use of the property (i.e. what rent would the property fetch if let out at a market rent?), on the relationship between you and the person providing the property and on the value of other gifts and inheritances that you may have received.

Donald Trump

https://www.boards.ie/discussion/comment/120902138#Comment_120902138

It will depend on the reality of the situation. And whether the person is "caught" is separate from the letter of the rules.

For example, if a parent has a spare house and allows their adult non-dependent child to live in it (post education), then technically speaking that would be a gift which would come off the childs lifetime allowance for that category. That would be following the rule. That is not to say that people would never "get away" with it

the.red.baron

https://www.boards.ie/discussion/comment/120902199#Comment_120902199

if you totally change the situation to the above, then tax implications

if they were an employer employee, tax implications

otherwise no

SupaCat95

https://www.boards.ie/discussion/comment/120901969#Comment_120901969

I never said it was easy to claim it I said it was difficult to eject an invader once they are in. Its 10 years for private and 2 years to register the land as your own. Hey i am doing this with my solicitors advise.

suvigirl

https://www.boards.ie/discussion/comment/120902298#Comment_120902298

Perhaps you could do with a second opinion.

SupaCat95

https://www.boards.ie/discussion/comment/120901964#Comment_120901964

The owner has no proof they did not know without a contract.

SupaCat95

https://www.boards.ie/discussion/comment/120902304#Comment_120902304

https://www.prai.ie/adverse-possession-registered-land-section-49/#:~:text=Under%20Section%2013(2)%20of,statute%20barred%20after%206%20years.

12 years. That is 10 years possession and 2 years to register as your. Once the 10 years are done you own it.

Donald Trump

https://www.boards.ie/discussion/comment/120902298#Comment_120902298

suvigirl told you the limits

(There is an additional limit for Foreshore too - I think it is 60 years ... might have changed with the recent update to the LCLRA in 2021)

suvigirl

https://www.boards.ie/discussion/comment/120902325#Comment_120902325

It is 12 years. And it is actually 12 years that the owner has to get the property back/try to remove someone from their property. Nothing to do with 10 years

are you trying to claim adverse possession yourself or trying to remove someone?

SupaCat95

I am claiming for myself. I am not sure I am that pushed about it now because I want to emigrate, I am not sure I can go the distance. We had a case in the family where an Uncle really screwed up a will intentionally (he wanted to initiate a family fight). He left a tenant in cash in hand with NO lease. The man did noting with the land but fenced it and I reckon he was planning for adverse possession. Luckily someone else scared him off with a solicitor and ejected him.