Rent a room scheme ground floor granny flat

JQ25

Hi All,

I'm looking at buying a house where the ground floor is set out as a granny flat;sitting room, kitchen, bedroom. This doesn't have planning permission, and was converted from the original garage. A few points to consider.

The living space is on the 1st floor where I would be living, this granny flat is self contained, there is no access to and from both floors, the granny flat has a separate door.

What can I do to get the Rent A Room scheme. The ceiling height is off, and possibly too low to be considered habitable. Does this come into consideration?

If we use one of the rooms in the ground granny flat as a communal washing room, would this help with showing its 1house not split upstairs and downstairs?

From what I've read under the Rent a Room posts here the person is not a tenant so does this mean the room(s) don't need all the specifications as a rented tenant. Like wall heights and fire proofing ceilings.

Thanks,
JQ

celtic_oz

Self-contained units
If you rent out a self-contained unit in your home, such as a converted garage attached to your home or a basement flat, the rights and obligations under residential tenancies legislation apply to you. For example, you are obliged to register the tenancy with the Residential Tenancies Board (RTB), provide a rent book to the tenant and ensure that the accommodation provided meets minimum physical standards.

The residential tenancies legislation provides for security of tenure for tenants. These provisions are in Part 4 of the Residential Tenancies Act 2004. However, if the self-contained flat or apartment was originally part of the main house, you can choose to opt out of these provisions. This option is available under Section 25 of the Act. You must give the tenant notice in writing, before the start of the tenancy, if you wish to take this option.

Read this

https://www.citizensinformation.ie/en/housing/owning_a_home/home_owners/rent_a_room_scheme.html

JQ25

celtic_oz wrote: »

Read this

https://www.citizensinformation.ie/en/housing/owning_a_home/home_owners/rent_a_room_scheme.html

So this isn't ideal I suppose if they're tenants you have to jump through hoops but you can still receive the 14k annually yes?

The question is what is the definition of part of the house. The basement/garage was always there, it was converted to a granny flat without planning permission. So if I made some sort of adjoining entrance to the main house and garage would this work?

If not and worse care scenario they're classified as a tenant, do I pay tax on the income. And can I apply for planning permission to get the basement up to the standards required?

celtic_oz

JQ25 wrote: »

it was converted to a granny flat without planning permission. So if I made some sort of adjoining entrance to the main house and garage would this work?

1. Self contained units qualify for 14000 if part of the house.

2. it would be more likely that you would require PP to "make an adjoining entrance to the main house and garage" than to convert your garage into a granny flat.

https://www.independent.ie/life/home-garden/do-i-need-to-get-planning-permission-to-convert-my-garage-35784341.html

3. the above qualifier is good for LL it means you can give less notice than a LL renting a seperated apartment or house ( as long as you make this clear in writing before the tenancy )

dennyk

Note that the Revenue qualifications for the Rent-a-Room relief and the RTA definition of a self-contained unit for the purposes of a tenancy are two different standards; a particular arrangement might qualify for the tax relief but not the Part 4 opt-out, and vice versa.

Revenue only requires that the unit in question be physically attached to your principal private residence:

https://www.revenue.ie/en/personal-tax-credits-reliefs-and-exemptions/land-and-property/rent-a-room-relief/what-type-of-residence-qualifies.aspx

As such, a converted attached garage flat, basement flat, or a new-built "granny flat" extension with its own separate entrance would qualify for the tax relief, while a converted shed or other outbuilding or a detached garage would not. A converted attached garage or basement might also qualify for the Part 4 opt-out under the RTA, if that space was originally part of the main dwelling, but a new purpose-built self-contained extension may not qualify for the Part 4 opt-out even if it qualifies for rent-a-room tax relief.

Also, even if you can opt out of Part 4 of the RTA, other aspects of the Act (such as registering the tenancy, providing a rent book, habitability standards, notice periods, etc.) still apply to any self-contained unit, whether it was originally part of the main house or not.

Gumbo

Ignoring the rent a room requirements, if there’s no interlink between the 2, the bank may not release the funds as it is classed as 2 unauthorized flats.

There’s another thread on here where the OP, needed to turn a multi unit back to a single dwelling in order for the mortgage to be released.

Are you buying it as a PPR with a PPR mortgage?

JQ25

dennyk wrote: »

Note that the Revenue qualifications for the Rent-a-Room relief and the RTA definition of a self-contained unit for the purposes of a tenancy are two different standards; a particular arrangement might qualify for the tax relief but not the Part 4 opt-out, and vice versa.

Revenue only requires that the unit in question be physically attached to your principal private residence:

https://www.revenue.ie/en/personal-tax-credits-reliefs-and-exemptions/land-and-property/rent-a-room-relief/what-type-of-residence-qualifies.aspx

As such, a converted attached garage flat, basement flat, or a new-built "granny flat" extension with its own separate entrance would qualify for the tax relief, while a converted shed or other outbuilding or a detached garage would not. A converted attached garage or basement might also qualify for the Part 4 opt-out under the RTA, if that space was originally part of the main dwelling, but a new purpose-built self-contained extension may not qualify for the Part 4 opt-out even if it qualifies for rent-a-room tax relief.

Also, even if you can opt out of Part 4 of the RTA, other aspects of the Act (such as registering the tenancy, providing a rent book, habitability standards, notice periods, etc.) still apply to any self-contained unit, whether it was originally part of the main house or not.

So to summarise, it should be fine for Revenue. And once I confirm with the renter that this is not a tenant agreement, set up house rules etc and that this is a rent a room agreement. I would obviously like to not go with the log book etc and be caught with jumping through hoops for a tenant.

So if this was you, would you rent a room or go the registering under the RTA and get the exception? And what is the story with enforcement, is it Revenue that can inspect or who? It seems like a grey area, what's the outcome, the make me pay 20% in backtax?

dennyk

And once I confirm with the renter that this is not a tenant agreement, set up house rules etc and that this is a rent a room agreement. I would obviously like to not go with the log book etc and be caught with jumping through hoops for a tenant.

If the unit is in fact self-contained, then it would be a tenancy covered by the RTA, not a license agreement. The only section of the RTA that doesn't apply is Part 4 dealing with security of tenure, if you notify the potential tenant in advance that Part 4 will not apply. You'll still need to register the tenancy, have a rent book, and abide by all of the other regulations in the RTA such as notice periods and minimum standards. Being a tenancy rather than a licensee arrangement has no impact on your Rent-a-Room tax relief, however; as noted, Revenue applies different standards and a self-contained basement flat would generally qualify for the relief since it's clearly attached to your main dwelling (assuming you live in the house above yourself as your principal residence, of course, and that your rental income doesn't exceed the €14k threshold).

As for enforcement, Revenue would audit your tax relief claim if they had reason to. If Revenue finds that you have failed to report income, underpaid, or claimed tax relief you weren't entitled to, they can assess penalties on top of your back taxes owed, and you'll generally pay interest on those taxes owed as well. The penalties vary depending on just how badly you've ****ed it up, whether Revenue think you were deliberately evading taxes or just made a mistake, and how cooperative you are with their investigation. They can also bring criminal charges against you, though that's not especially likely unless your offence is particularly egregious and they can prove that it was deliberate evasion.

On the tenancy side, the RTB would oversee any disputes about the tenancy should your tenant file a complaint, and the local council would generally be responsible for inspections to confirm the property is up to standard (historically those have been virtually nonexistent for non-social-welfare tenancies, but there have been recent pushes to have all rental properties inspected by the various councils, so you might get an inspection at some point regardless of whether you take on a HAP tenant or not...).

JQ25

dennyk wrote: »

If the unit is in fact self-contained, then it would be a tenancy covered by the RTA, not a license agreement. The only section of the RTA that doesn't apply is Part 4 dealing with security of tenure, if you notify the potential tenant in advance that Part 4 will not apply. You'll still need to register the tenancy, have a rent book, and abide by all of the other regulations in the RTA such as notice periods and minimum standards. Being a tenancy rather than a licensee arrangement has no impact on your Rent-a-Room tax relief, however; as noted, Revenue applies different standards and a self-contained basement flat would generally qualify for the relief since it's clearly attached to your main dwelling (assuming you live in the house above yourself as your principal residence, of course, and that your rental income doesn't exceed the €14k threshold).

As for enforcement, Revenue would audit your tax relief claim if they had reason to. If Revenue finds that you have failed to report income, underpaid, or claimed tax relief you weren't entitled to, they can assess penalties on top of your back taxes owed, and you'll generally pay interest on those taxes owed as well. The penalties vary depending on just how badly you've ****ed it up, whether Revenue think you were deliberately evading taxes or just made a mistake, and how cooperative you are with their investigation. They can also bring criminal charges against you, though that's not especially likely unless your offence is particularly egregious and they can prove that it was deliberate evasion.

On the tenancy side, the RTB would oversee any disputes about the tenancy should your tenant file a complaint, and the local council would generally be responsible for inspections to confirm the property is up to standard (historically those have been virtually nonexistent for non-social-welfare tenancies, but there have been recent pushes to have all rental properties inspected by the various councils, so you might get an inspection at some point regardless of whether you take on a HAP tenant or not...).

Thanks Denny, really appreciate your advice on this. My major concern would be the low ceilings in the granny flat and what fireproofing of ceiling etc would be needed. Would you mind copy and pasting what conditions , minimum standards are required? I'm wondering how much I'd potentially need to spend to get it up to the required spec.

Thanks

dennyk

Here's the current law on the housing standards, which outlines the basics:

http://www.irishstatutebook.ie/eli/2019/si/137/made/en/print

Here's a booklet of guidelines further explaining the law, as well as the inspection process (note that this covers the 2017 Act, which was replaced by the above linked Act; the actual standards themselves are essentially unchanged in the 2019 Act, however, so the guidelines should still be more or less applicable...):

https://onestopshop.rtb.ie/images/uploads/general/guidelines_for_housing_authorities_-_minimum_standards_in_rented_accomodation_2017_%281%29.pdf

Cuddlesworth

You would also be against planning, meaning if a neighbour gets annoyed or nosey and reports you, you will also be up against the local county council.

JQ25

Cuddlesworth wrote: »

You would also be against planning, meaning if a neighbour gets annoyed or nosey and reports you, you will also be up against the local county council.

So I called the RTB. They said that if the renter used one of the upstairs rooms in the main house or vice versa if we had a shared washing room in the ground floor area, then it should be considered the one house and not 2 separate units and thus they wouldn't be Tenants, just licensees... Now this was only over the phone. But what do you think of this approach?

Also how difficult would it be to get planning permission for the existing work that was done. Is there grounds for retention if you claim it was done years ago etc? There is conservatory on the back of the house measuring 20metres sq approx. So the garage and conservatory combined would defo be over the 40metres sq allowed.

Cuddlesworth

JQ25 wrote: »

So I called the RTB. They said that if the renter used one of the upstairs rooms in the main house or vice versa if we had a shared washing room in the ground floor area, then it should be considered the one house and not 2 separate units and thus they wouldn't be Tenants, just licensees... Now this was only over the phone. But what do you think of this approach?

Then it wouldn't be a self contained unit in theory. But tenancy law revolves around a concept of exclusive use, so if the lodger could say definite proof that the living space in the garage was not attached to the house and you were not allowed enter or use it, they would have a decent case.

JQ25 wrote: »

Also how difficult would it be to get planning permission for the existing work that was done. Is there grounds for retention if you claim it was done years ago etc? There is conservatory on the back of the house measuring 20metres sq approx. So the garage and conservatory combined would defo be over the 40metres sq allowed.

Your not likely to get retention for the self contained flat in the garage of a home in a estate for use as a private rental. It would be easier to drop a door into the house and some need to go in or out before starting, for both the RTB and the planning authority(because its just converted internal space then).