Renting to potential purchasers of house

[trouble99]

I have agreed to sale my house but unfortunately the title deeds have to be reconstituted and it will delay the sale for a few months. The potential purchasers would like to rent the house in the interim till the legal issue has been resolved. Does anyone have any advice on whether there are any potential problems with this scenario. Thanks

 

[rkeane]

Could you get a 3 month contract drawn up with rent above your mortgage payments? Give the potential buyers first refusal but dont take it off the market yet in order to cover yourself. But I think renting it out (unless you need to live in it) is a good idea.

 

[circle]

If the house that you are selling is your PPR, you could be exposing yourself to CGT on the sale.

 

[dam099]

If the house that you are selling is your PPR, you could be exposing yourself to CGT on the sale.

If it goes on for longer than a year and not the few months that are anticipated.

 

[ClubMan]

If the property is rented out for 12 months or less after vacation as one's PPR and then sold then no CGT applies. If the property is rented out within 5 years of purchase as an owner occupied PPR then a clawback of stamp duty applies.

Post crossed with dam099's.

 

[JohnG]

Hi Clubman,

While it does seem to have become an accepted fact here on AAM - where in the legislation does it say that you can rent out your PPR for 12 months without CGT implications.

From my reading, the 12 months is allowed to give you time to sell and you are deemed to be still resident for that period. However I think that when you rent your house out it automatically becomes an investment property.

John.

 

[ClubMan]

However I think that when you rent your house out it automatically becomes an investment property.

For the purposes of SD clawback if applicable - yes. But not for the purposes of CGT as far as I know. Somebody else can probably quote the specific TCA legislation but all I can provide is this:

5. Private Residence

...

Partial Relief

...

• ...
• The exemption is also restricted where the taxpayer has not lived in the house for long periods. However, a period of up to twelve months immediately before the end of the period of ownership is treated as a period of occupation even though the owner may not have been actually living in it during that period.

As far as I know this partial relief applies even if the property was rented out during the relevant period.