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Room rental agreement more useful for landlord than tenancy

09th July 2012
By Clark_Taylor in Legal
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Rental Agreement

A rental agreement, or lease, is a legal contract that must contain certain terms. The agreement dictates the relationship between the landlord and the tenant or tenants. Some are very short documents that contain only the most essential information, while others run several pages and spell out more specific restrictions and privileges. Landlord-tenant law varies from state to state, but all rental agreements should contain some basic information to protect both parties in case of a dispute.

Attraction option

Leasing out a room in the house can seem like an attractive option for anyone trying to fight their way through the credit crunch without doing anything too drastic. Luckily, at the moment you won’t even get stung by the tax man if lease a room, as long as the rent is low enough not to be outside the  Scheme.

Rent a room scheme Ireland

Leasing a room in home to a son or daughter one cannot get tax relief on the rental income.

Rent out a room(s) in home, is not covered by landlord/tenant legislation in Ireland. This means that one is not obliged to register with the PRTB as a landlord, provide a rent book to the tenant or ensure that the accommodation provided meets any minimum physical standards.

This also means that private tenants living in  principal home are living under a "Licensee Agreement" not a tenancy agreement and are really only entitled to "reasonable notice" if  choose to terminate the agreement. Tenants are, however, entitled to refer disputes regarding periods of reasonable notice, retention of deposits, and disputes regarding deductions from rent for damage to property that is over and above normal "wear and tear" to the Small Claims Court.

Precautionary measure

Lodgers that people take in under any standard lodging system don't have the same rights as standard tenants. It isn't therefore absolutely essential to put a lodger agreement in place .But, a full tenancy agreement may not be essential but it could be useful

A written agreement may include:

  •  Monthly payment

  • Payment details

  • Rooms and facilities included;

  • How much their share of household bills is

  • Any notice period

Notice to Quit

Landlord has much more control over the situation with a lodger than doing with full tenants. This is because Lodgers occupy home on licence, and they do not have security of tenure - unlike tenants. Lodgers cannot call the place their own; therefore they have no right to stay on if landlord gives them notice to leave. Agreement should specify the amount of notice required (usually about 1 month) and this should be given in writing.

Keeping Records

It will be useful to keep good records of the income make from leasing a room, and any expense incurred as a result, and keep hold of these for six years, just in case the Inland Revenue decides to look into tax affairs.

It might work advantageous to declare the income for tax purposes, because if you spent a lot of money improving the room or area of the property that you’re letting out, but received less back in rent, you can offset this as a loss and won’t pay any tax, even if the amount of rent received was more than the threshold amount.

Statutory right not the same with tenant

A landlord can simply ask their lodger to leave if things don't work out. The statutory rights of a lodger are not the same as those given to assured tenants, for example, so they should simply then leave subject to any agreed notice periods. But, things may go more smoothly with a formal agreement in place before the lodger actually moves in. This way both know where they stand and this may prevent any problems from happening in the first place.

Leasing a room in landlord’s home and living with him, is not covered by the Residential Tenancies Act 2004.

Why useful - Tax free

More people are taking a lodger into their homes to take advantage of the tax-free Rent a Room scheme. Is this agreement really necessary?

The Government led scheme allows people to take a lodger into their homes and to earn money without having to pay tax on it.

Essential feature

  • Attractive option

  • Tax relief

  • Notice

  • Easy to terminate

  • Beneficial for owner

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