Rent out PPR & lose Tracker | Should I tell bank?

Hi

I'm looking for some advice. Our situation is that we have a mortgage on a property that is in negative equity. We are not in a postion to bridge the shortfall, so we cannot sell the property.

We have been offered employment abroad within our company and will most likely take up these posts.

I understand that if we rent out our property, it no longer becomes our PPR and so the bank will remove our tracker.

My question is this: can I simply not inform the bank that we are moving abroad for a few years, and just go ahead and have the apartment rented out? As far as the bank knows, the mortgage account will get credited on a monthly basis with the usual payments - so from their side, nothing seems amiss? Or is this too simplistic a view? Any comments from past experience or thoughts are welcome please. Thank you.

There is a lot more to it than just the bank.

You need to tell your house insurer that its being rented out otherwise your insurance may be void. In some cases the bank may find out that it is rented when you do this as some banks are named as interested parties on the insurance policy.

You need to register as a landlord with the PRTB, inform revenue if you currently receive TRS, do yearly tax returns on your rental income, and understand any other consequences on renting out what was your primary residence. Given that you will be based abroad there might be other things you need to know about with the tax return on rental income. You will need to put utility bills in the names of the tenants otherwise if they do a runner you will be liable for whatever unpaid bills remain. If you are abroad how will you deal with tenant issues e.g. leaks, breakages etc.

So, there is a lot to consider and there is probably more I can't think of off-hand.

You don't necessarily lose your tracker if you rent out your house - it depends on the wording of your mortgage contract, so check that first before deciding what to do.

aristotle said:

There is a lot more to it than just the bank.......So, there is a lot to consider and there is probably more I can't think of off-hand.

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Ah, ok. It seems there is quite a lot to consider aside from the mortgage rate. Thank you aristotle.

Greta said:

You don't necessarily lose your tracker if you rent out your house - it depends on the wording of your mortgage contract, so check that first before deciding what to do.

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Thank you Greta. I checked the t's&c's and it does state that we'll lose the tracker rate unfortunately.

I'm an agent for someone who let their PPR here and now lives abroad (family member). Paying tax on such a property is not straightforward. You have two options, either the tenant withholds 20% of the rent and pays it for you or you get a nominated person to act as an agent. That person gets a seperate PPS number for the transation and is liable for the tax. As well as the usual taxes you are also liable for the 'second home' tax even though you only technically have one home, as it's no longer your ppr.

If it was me I would say nothing to the bank. You should absolutely meet the other obligations referred to by other contributors but in my view informing the bank of your intentions is crazy.

The inside cover of the Mortgage Arrears Resolution Process leaflet provided by AIB states ...

AIB MARP guide; said:

....
The protection of the code of conduct on Mortgage Arrears applies to your residential Property which you occupy as your family home, or your only residential property in the state that you may not currently reside in.

This code is effective from 1st January 2011 and replaces the previous code of conduct on mortgage arrears issues by the Central Bank of Ireland on the 19th February 2010

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The leaflet goes on to describe, amoung other things, how you generally can't or won't be taken off your tracker if you follow the steps discussed with regard to financial difficulty and arrears.

HOWEVER the leaflet does not elaborate or make further mention of the "only residential property in the state" section I have quoted above.

This does not seem very clear cut but it certainly leaves room for the OPs particular case. Also unless you want to renegociate your repayments why would you notify your bank of changes to your living arrangements. The chances of the bank connecting revenue and insurance with your mortgage are fairly small and in light of the above quote it may not matter anyways.

With regard to renting your property. You need to assign an agent to collect/receive rent (this can be a letting agent or a friend or family member) you will then be issued with the new and different PPS number for use by you and/or your "agent" for the purposes of paying tax on your rental income (20%) you should also register with the PRTB and adjust your insurance to cover rental property (and accordingly reduce contents insurance). This may probably cost you an extra 100 euro or so on a normal house - however don't forget you can write this against any rental income (thus reducing your tax burden).

I am not an agent, I am not a landlord, i am not a tax adviser and i am not a solicitor - I have not done this. I also reserve the right to be wrong

HOWEVER I've looked in to this - I may be taking a similar route soon.

We rent out our property in Ireland (that used to be our PPR) while living abroad. Our tenants never withheld 20% and neither did our letting agent. We pay tax ourselves every year, and that's it. Never had any problems with that.

Other than once the revenue made a mess of our tax return, and when we appealed, they corrected it but then looked into our tax affairs and send a letter demanding that the tenants should pay them 20% tax throughout the year. However, the tenants never bothered and the revenue didn't pursue it.

The withholding of 20% tax is really protecting the tenants as otherwise the revenue can claim the tax from them if their landlord never pays. If the tenants don't bother with this, I don't see why landlords should. There is no penalty on anybody for not doing it, as long as landlords do pay proper taxes in due course.

speirbhean said:

I'm an agent for someone who let their PPR here and now lives abroad (family member). Paying tax on such a property is not straightforward. You have two options, either the tenant withholds 20% of the rent and pays it for you or you get a nominated person to act as an agent. That person gets a seperate PPS number for the transation and is liable for the tax. .

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As a non resident landlord I do neither of the above. Just make my returns like anyone else.

Think long and hard before you rent. It's not easy.

Bronte said:

As a non resident landlord I do neither of the above. Just make my returns like anyone else.

Think long and hard before you rent. It's not easy.

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As I understand it doing otherwise means you are not compliant. You run the risk of getting on the wrong side of the revenue. However - they are probably happy if you're paying your tax. I'm not sure the "proper" way to do it is any more complex TBH, but then I don't know.

Bronte said:

As a non resident landlord I do neither of the above. Just make my returns like anyone else.

Think long and hard before you rent. It's not easy.

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As far as I know the way we are doing it is 'correct' although I'm sure revenue are happy to get tax whatever way it's paid. It's not necessarily complex to go the agent route but you do need to have someone you trust because they hold a PPS number in your name and are liable for the tax to be paid. I only do it because it's a CLOSE family member... you wouldn't do it for someone you wouldn't trust. The other option, getting the tenants to collect the rent sounds very tricky to me, you'd be depending on their reliability and it could be messy if you change tenants a lot.

kid said:

As I understand it doing otherwise means you are not compliant. You run the risk of getting on the wrong side of the revenue. However - they are probably happy if you're paying your tax. I'm not sure the "proper" way to do it is any more complex TBH, but then I don't know.

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I do the same as Bronte, and I am fully compliant. It's not the non-resident landlord's responsibility to deduct 20% tax and pay it over to the revenue, it's the tenants'. Yes, my tenants are not compliant, but it's not my problem

However, there is no penalty on the tenants if their landlord pays all the tax due as I do. If I didn't, the revenue could have chased the tenants, but as I do pay all the tax, my tenants have nothing to worry about, no penalties from the revenue and no hassle of deducting 20% of rent.

There is nothing the revenue can to do me for that, so long as I pay the correct taxes when due, like everyone else.

If I was the tenant of a non-resident landlord, I might have decided to deduct 20% just to protect myself in case my landlord didn't pay their taxes, but there is no need for me to worry as I am the landlord

Hi All,
My wife and i have a ppr in Dublin which we have been renting out for the last 3 yrs, have since built a house down the country. At the time of renting, we registered as landlords with the PRTB and do tax returns for the property each year. When we built our house, we disclosed everything to AIB (different branch to PPR mortgage). A family member who is a bank manager with the AIB(different branch again) looked at our mortgage contract with AIB and stated that we needed to be living there, but said that we should continue as we disclosed everything previously and they didn't pick up on it.....So my advice is Say Nothing

I called my mortgage holder (Ulster Bank) today and enquired about this as I might return to the UK sometime next year. They said that the only way I would lose my tracker would be if I fixed the mortgage rate, not if I decided to rent out my house. I will need to call them again and get them to confirm this in a letter, but I'm a lot more hopeful about this possibility. I've separated from my wife, so if I can rent the house out and split the cost of the excess with her, it would be a lot fairer.