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Buachaill
Buachaill, Barrister
Category: Property Law
Satisfied Customers: 10588
Experience:  Barrister 17 years experience
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Can I buy a house under personal name and receive rent from

Customer Question

Can I buy a house under personal name and receive rent from a limited company I set up?
Submitted: 10 months ago.
Category: Property Law
Expert:  Buachaill replied 10 months ago.

1. Yes, it is perfectly permissible to purchase a property in a personal name and to have a company of which you are shareholder pay you rent. The law does not prevent this occurring. However, you should ensure the rent is the open market rent and does not exceed the market rent, as otherwise you could run into trouble if you paid yourself an excessive rent. However, it is lawful to have a limited company of which you are shareholder pay you rent for a property rented. The company should occupy or lease the property. Here, I would recommend you draw up a written lease to document the transaction.

Expert:  Buachaill replied 10 months ago.

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Customer: replied 10 months ago.
Is the open market rent an issue? For example. a management company charge my tenants 3520 pounds a month for a 5 bedroom house deducts 1720 pounds (marketing fees, management fees, electric and gas bills, council tax, cleaning fees) for each month, leaving me 1800 pounds a month. Is this open Market rent? If so, I can set up a management company to do the same for my own properties.
Expert:  Buachaill replied 10 months ago.

3. The open market rent is an issue because there are anti-avoidance measures for companies which prevent the amount of the rent which is deductible in law from company profits exceeding what is the open market rent. There is no difficulty with a management company charging appropriate fees. However, again, there are anti-avoidance measures which prevent the level of deductible expenses exceeding what would be available if the services were contracted for, in the open market. The idea behind the legislation is that there should not be abusive deductions from company profits which exceed what the market would charge.

Customer: replied 10 months ago.
Thank you. I just noticed you said I should lease the property to the company. However, I found in the mortgage policy that the property cannot be lease to a company for sub-let. It can only be let to a company for its employees. If that's case, can I just use the company as the managing agent for the property. For example, the rent charged from the tenants is 3500 pounds a month, the company will pay 1800 pounds to me monthly. The rest will pay for bills and council tax, as well as the managing agency fees?
Expert:  Buachaill replied 10 months ago.

4. You can certainly use the company as the managing agent. There is nothing to prevent this and you can earn a proportion of the monies charged in rent.