Renting property below 'market value' permitted?

[Skybox]

My old house (bought when single) is now empty - family had been staying there and have moved out.

The house needs some modernising - the bathrooms need to be re-tiled and proper flooring put down, toilet cisterns need attention (slow to fill) and the house needs to be fully painted. A mattress and couch and dining room chairs need to be replaced.

I doubt I could rent it out as is.

However a friend of a friend is interested in renting it from me at a reduced rate - 50% of current market rates for the area. The attraction is that this would give me some time to organise and get the money together to do the necessary work. It would all be above board and via PTRB, declare to Revenue etc, but I have done the maths and taking into account expense for wear and tear, mortgage interest and other expenses, I would be renting at a loss.

I suppose the situation suits us both - but is ok legally or in terms of tax to offer a reduction in rent to allow for the fact that the house is not in 100% condition?

Your thoughts would be appreciated!

 

[Trustmeh]

There is nothing wrong with what you propose.

In fact, if you can afford it, to cover the mortgage, it makes perfect sense. An empty house is asking for trouble. Copper is robbed daily throughout the country, at least you have a live in sitter. And i presume the tenant will let you in to do the place up as you wish.

Only word of warning is cover yer rear with a lease, and make sure you have a break clause in there. At some point u will want to raise rent, and your tenant may decide he wants to stay. Keep the lease short so you can ge out of the situation if required and dont let it fall into a part 4 tenancy by doing nothing.

If you dont know what im talking about you need to do some research on tenants rights.

 

[Dermot]

It is your house so you can rent it for what you are happy to accept. Do up a lease and give the new tenant a lease for under 6 months initially to see how things work out. By doing this you can terminate at the end of this period without getting into legal difficulties. Register with the PRTB.

 

[Bronte]

There are rules against 'uneconomic lettings'.

From : http://www.revenue.ie/en/tax/it/leaflets/it70.html#section8

Losses sustained from the uneconomic letting of any premises may not be offset against rental income from other premises arising in the same year. Nor may they be carried forward to future years

It's not clear to me whether this covers your situation. One is allowed to have losses and to carry them forward. I cannot figure out if you are getting a reasonable rent for the property based on it's current state of repair, or whether you are actually giving a reduced rent that is uneconomic.

 

[ang1170]

One option is to treat it as a "house-sitting" rather than rental.

See: http://www.irishtimes.com/life-and-...rty/vacant-properties-to-watch-over-1.1562765

This includes the statement "In Ireland, guardians do not have the same rights as tenants and sign a guardian licence rather than a tenancy agreement"

 

[T McGibney]

There are rules against 'uneconomic lettings'.

From : http://www.revenue.ie/en/tax/it/leaflets/it70.html#section8

Losses sustained from the uneconomic letting of any premises may not be offset against rental income from other premises arising in the same year. Nor may they be carried forward to future years

It's not clear to me whether this covers your situation. One is allowed to have losses and to carry them forward. I cannot figure out if you are getting a reasonable rent for the property based on it's current state of repair, or whether you are actually giving a reduced rent that is uneconomic.

Worth pointing out perhaps that these rules don't actually prohibit or restrict landlords from engaging in 'uneconomic lettings', but merely prevents them from offsetting losses arising from such lettings against taxable rental income from other sources.

 

[Skybox]

I appreciate the replies highlighting the 'uneconomic letting' (Bronte and your response T McGibney.)

I can keep that in mind - though I don't have any other properties to rent so would not be offsetting losses against other rental income. I suppose it is subjective whether the rent is uneconomic or unreasonable, but I get a feeling Revenue win in subjective debates!

Anyway, I think I'll start with a 6 month lease, register with PTRB and file a return with Revenue for 2015 and see how I get on.
If I can get the house repairs completed soon this should only be a 6 month issue anyway, and I could advertise and let the house for a higher rate once the lease is over.

Thanks. (And the house sitting idea was interesting - must look into that as well.)