When you let a property the legal contract you enter into is a form of lease.
This can be an assured shorthold which allows a fixed period often 6 month in which both the Landlord and the Tenant agree to let/rent for a specified period. The contract is then renewed or rolled-over.
An assured shorthold tenancy allows the landlord to regain occupation of the property having followed a set process.
If there is more than one tenant both must enter into the agreement and be jointly and severally responsible. This covers you, the Landlord, if one leaves or refuses to pay.
The Landlord & Tenant act gave tenants much greater protection and some old tenancies are covered by this legislation as are any current tenancies which are not Assured Shorthold Contracts (see above). If you are considering a tenancy via Landlord & Tenant act you must take proper legal advice.
Holiday letting. This was aimed at the part of the UK property market which provides very short-term accommodation. Because a large number of businesses in our seaside towns operate for short periods often only May- October these are treated as businesses rather than investments and can cover just one property. The 2009 Budget changed the rules and until April 2010 short-term lettings in Europe are also covered. These lettings must be fully furnished.
There are leases which cover commercial buildings such as offices and factories and also equipment. You need to take proper legal advice before entering into any such lease.
Taxation – Leases generate income (rents) and these are subject to taxationas income after allowing for deductions. If you own a lease as a freeholder and sell this, special taxation rules may apply. The value will be based on a number of things including the yield and the time remaining before expiry.
For Inheritance Tax purposes the lease is an asset in the estate. If you don’t need the income consider if you need to retain the asset. May be give to your heirs now.
How we can help
We are not legal experts but have a good understanding of the Inland Revenue’s requirements. We can help you to consider the different options and which will suit your situation best.
As you can see taxation will almost certainly effect any decision you make concerning the lease.
For instance if a lease is in the joint names of husband and wife the income must be split equally for Tax purposes even if the ownership is not in equal shares. But if you and your joint owner(s) are not married different rules apply.
Please contact us for further assistance we would be happy to help.
Further Reading on Property Leases
- Letting a property, by Halifax Legal solutions
- What should be included in a tenancy agreement?, by Compact law
- Order the Assured Shorthold Tenancy Agreement, by ARLA
- Help for First Time Buyers: Joint Ownership : Joint Equity: Buying with Friends, Family or Other individual., by First Rung Now
- Successful Property Letting, by David Lawrenson