Investing in property to let can seem like an intimidating prospect for first time landlords. However, joint ownership is quickly being recognised as a way to lessen the burden of the initial purchase of a rental property. Couples might also want to sub-let a room in their property to off-set mortgage costs. This post contains all the information you need to know if you are considering co-owning a property or living in a building with two landlords.
What’s the definition of a landlord?
According to the Health and Safety Executive, the title of landlord falls on ‘anyone who rents out a property they own under a lease or a license that is shorter than seven years’. Although it is possible for landlords to rent out a property for longer than seven years. In these cases, the tenancy agreement might have slightly different legal implications so it’s worth making tenants aware. Regardless, landlords still have a range of duties they must fulfil in relation to their properties. This includes:
- Ensuring their property is safe and fit to live in.
- Making sure gas, electricity, and water is supplied to the building.
- Protect the tenants’ deposit.
- Provide an Energy Performance Certificate.
- Pay income tax on income generating from the rental of the property.
- Follow any fire safety regulations, as well as fit and test smoke alarms.
These responsibilities may vary depending on whether the property is used for commercial or residential purposes. You can find more details on what’s expected of landlords in our blog ‘Can a landlord sell a commercial property during a lease?’.
Types of joint property ownership
If you decide to buy, inherit, or become a property trustee with someone else, there are two different ways in which you can own the property. This includes:
Joint tenants/beneficial tenants
This type of ownership means both individuals:
- Have equal rights to the entire property.
- You cannot pass ownership of the property onto someone else in your will.
- The whole property is automatically passed to the other owner in the event of your death.
Tenants in common
- The property is owned to varying degrees by each party.
- You are free to pass on your share of the property in your will.
- Your share of the property won’t automatically transfer if you die.
If you want to change how you own a rental property with another person(‘transferring ownership’), there’s no fee associated with doing so. Even so, it’s worth considering whether this is the right option for you during residential or commercial property conveyancing. When it comes time to register the property, you’ll need to notify HM Land Registry that you are entering into joint ownership of the property. If you are looking to transfer your ownership of the property entirely, whether you are a landlord or a residential owner, you will need to complete a transfer of equity.
What tax do you pay as one of two landlords?
If you are co-owning a rental property, both you and the other landlord will have to file separate tax returns for the income generated by rent. Unless you are married to the other landlord or in a civil partnership, the amount of tax you have to pay will also be based on your share of property ownership. For instance, tenants in common that have their ownership of the property split 70-30% between each other.
How are landlord’s responsibilities split up between multiple owners?
In cases where there are multiple landlords for the same property, both will share the legal obligations to the tenants regarding maintenance works and documentation. It may be decided amongst the two individuals how the work is completed, either by informal agreement or in consideration of the overall share of ownership (similar to the above tax example). Regardless, both landlords will be liable to neglecting their duties.
Read our ‘Landlord’s guide to Electrical Installation Condition Reports (EICR)’ for more information on the obligations of landlords under a lease.
Potential complexities with dual landlords
While there are relatively few legal implications of two landlord properties, issues can arise if the relationship between the landlords breaks down. When this happens, one of the landlords may want to live in the tenanted property, move out of it, or sell it. In the case of the latter, existing tenants would need to be served a notice. This would come in the form of a section 8 notice or failing that, a section 21 notice that both landlords are required to agree upon. However, regulations outlined in The Housing Act state that the names of both landlords are not always needed so it’s important to get appropriate legal advice if you find yourself in this situation.
Conveyancing services for landlords and other property owners
Toomey Legal have experience in all manner of property transactions. From standard purchases to business sales and commercial property leases set up by multiple landlords, our team is here to provide support. Our services cover Durham, Newcastle, and places in-between in the north east of England. Get in touch if you’d like any more information.