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Perhaps have a read of this thread Sharron. There will be a strong possibility that it is a newbie fresh off a guru training course with no financial back-up.I would not touch this with a bargepole!Why not just do it yourself and hand it over to a management company like GuestReady?Your mortgage provider will likely decline this activity though ...
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I have been researching SA strategies recently out of curiousity.
David Smith has pointed out that much more stringent fire regs may apply if it is considered a hotel use.
Planning is less likely to be an issue unless there is a material change in terms of coming and goings and noise compared to, say, a normal busy family. It is likely to still be covered by C3 use.
We know that mortgages may be an issue unless holiday let finance is found or commercial finance.
However, my main query is the inadvertant grant of a commercial tenancy to the SA business under the Landlord and Tenant Act 1954. It does not matter what the tenancy is called - an AST, a common law tenancy, a licence, whatever. It is the nature of the use which deterines the governing legislation.
A R2R to an HMO will still be an AST as far as I understand, even if the head tenant is a company. However, if the use is serviced accomodation it is a business use and not residential. Therefore, the LTA 1954 will apply, I suspect. No-one knows in the industry, whether it is a R2R SA company or the property owner, a letting agent who has introduced the parties, that the LTA 1954 confers substantial security of tenure to the tenant (i.e. the SA company). It is difficult to get them out after the term has expired. However, I doubt anyone practicing R2R whether landord or tenant knows this. Solicitors and surveyors do know the nature of various uses and what legislation applies and I don't think you will find many who would reccoment this strategy unless every single box is ticked.
One way to get around the security of tenure of the LTA is to contract out of it with the relevant notices but you will not see many people knowing or realising how to do this. The alternative is not to have a landlord or tenant arrangemnet but a management contract or joint venture arrangement.
It would be very interesting if David Smith could comment on the above incase I am wrong on any points or if more clarity could be provided.
Rural Practice Chartered Surveyor. Experienced in estate management, residential investments, planning and development and rights for utility apparatus. All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.
There are certainly risks associated with fire regs here.
In relation to inadvertent grants of tenancy to a rent to rent company this should not be an issue. If a tenant lets a property and sub-lets the whole of it they are not deemed to be using it for commercial purposes and it falls outside the 1954 Act, so they don't get the protections of it. If they retain a part of the property to use as an office (for example) then the property will fall within the 1954 Act and that could cause a problem.
And no, a R2R to an HMO will not be an AST. Any rental to someone who is not living there as their main home or to a company will not be an AST. The end tenancy to the occupier will be an AST.
You have added some clarity but I am not sure that a hotel kind of business use would be considered sub letting (Rent to Rent HMO obviously is subletting and so no risk of the Landlord and Tenant Act 1954 there).I have read legal comment on SA uses that indicates otherwise in respect of SA use. It does need clarity I feel.For example, I would expect that a hotel chain that rents premises would be agreeing to a commercial tenancy that would be governed by the LTA 1954. Any further comment you have would be appreciated, for example if it is clear that a SA use is actually subletting.
It sounds like you will be providing a lodging or boarding house which changes things significantly:
I don't think it will qualify as a FHL as the stays are longer than 31 days but it may still qualify for entrepreneurs relief (10% CGT) and possibly capital allowances - check with someone who is qualified to give property tax advice.
Mortgages and insurance requirements will be different and may prove difficult to find.
A good teacher must know the rules; a good pupil, the exceptions.
Martin H. Fischer