personal finance

Can I let out my second home when I’m not using it?


I have just bought a lovely second home by the sea in Bournemouth and am interested in letting it to guests while I’m not there. I have a few friends who have been doing this for years and it sounds to be a great way to make full use of the property. I don’t know where to begin. Are there any legalities or rules I need to know if I decide to let out my second home? Are there any tax benefits?

Charles Miéville, senior counsel in the residential real estate team at law firm Pemberton Greenish, says it is important to distinguish between a furnished holiday let and an Airbnb-style arrangement. The other vital difference is whether a property is freehold or leasehold. Though possibly subject to licensing arrangements from councils, owners of freehold, unmortgaged buildings can deal with their properties as they see fit.

Treating a property as a furnished holiday let can still afford you income tax relief as you can set off mortgage interest against income earned — something that is becoming harder on traditional buy-to-let properties.

Airbnb may allow you to earn income in a less formal way, subject to tax and any deductible expenses.

In addition, there may be relief from council tax for a furnished holiday let. If you are considering renting only when you are absent, you may be unable to claim this — the property must be available for at least 210 days a year and must be let for 105 days.

If a property is leasehold or mortgaged, expect more hurdles. A lender’s consent is most likely needed and may not be given if your mortgage is not a “buy to let” type. Any mortgage would probably prohibit Airbnb-style arrangements.

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As far as leasehold properties are concerned, subletting usually also requires consent. This is likely to be withheld in relation to Airbnb under most leases.

Leases often have a provision requiring use as a single-occupation private residence, and case law suggests Airbnb would fall foul of this; a lease may also prohibit either parting with possession or an underlease that is not a standard “assured shorthold tenancy”.

Given the issues subletting can cause for neighbours, this has been a topical issue, with landlords also citing breach of the “quiet enjoyment” provisions where subletting complaints arise.

Hema Anand, real estate partner at Bircham Dyson Bell, says several issues must be considered should you decide to let. You do not say whether the home is a flat or a house: if it is a flat, you must consider the terms of your lease and if you are permitted to let the property in the way that you propose. For example, you may require landlord’s consent or the lease may prohibit this type of letting.

Temporary occupation is considered to be carrying on a business, generally prohibited by most leases. If there is a mortgage, you must consider whether you require your lender’s consent, otherwise you risk being in breach of your loan conditions. Also, think if such occupation will invalidate any buildings insurance.

In terms of council tax, councils can exercise a discretion to give furnished second homes or holiday homes a discount of up to 50 per cent. In your circumstances, though, Bournemouth does not award an exemption or discount on council tax. Alternatively, if the letting is considered as a business, council tax is not payable and you may qualify for small business rate relief.

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There can be tax advantages for homes that qualify as furnished holiday lets. For example, “kitting out” the property can qualify for capital allowances. Capital gains tax relief may be available on the sale of the property.

From a planning perspective, the position in relation to short-term holiday lets and planning law is complex. Case law has established that permission will be required if there is a “material change of use” to holiday lets and this will be a matter of fact and degree in each case. Much will depend upon the characteristics of the use as holiday accommodation, such as whether the property will be occupied by people living as a family or by people who are not family groups.

In London, the government introduced an exception in 2015 that allows short lets without planning permission so long as the cumulative number of nights does not exceed 90 a year and the owner pays council tax. There is no such exception for areas outside London. I recommend you speak to Bournemouth council to discuss the proposals in more detail.

The opinions in this column are intended for general information purposes only and should not be used as a substitute for professional advice. The Financial Times Ltd and the authors are not responsible for any direct or indirect result arising from any reliance placed on replies, including any loss, and exclude liability to the full extent.

Do you have a financial dilemma that you’d like FT Money’s team of professional experts to look into? Email your problem in confidence to money@ft.com



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