How to (legally) participate in 2017 City of Culture’s homestay campaign
Hull will be welcoming over 1 million visitors in 2017 as the UK City of Culture but with only one thousand hotel rooms in the city centre, organisers are encouraging residents to turn spare rooms into guest rooms with their Homestay campaign.
Lewis Couth, senior solicitor, provides advice on how to participate in Homestay and make sure you stay on the right side of the law.
Hull will be welcoming over 1 million visitors in 2017 as the UK City of Culture, but with only one thousand hotel rooms in the city centre, organisers are encouraging residents to turn spare rooms into guest rooms with their Homestay campaign.
The Homestay campaign is a fantastic opportunity to be at the centre of what will be an amazing year for the city. And with websites such as Airbnb, homeaway.co.uk and holidaylettings.com allowing residents to advertise rooms, and whole houses, to visitors it can be an easy way to make some extra money.
However, some people remain worried about ‘renting’ out a spare room whilst others may not have given any thought to the potential risks; will I be evicted by my landlord? Do I need a buy-to-let mortgage? Will I have to pay tax?
Don’t be put off. To avoid opening your doors to potential court proceedings, disputes with your mortgage company and the taxman, the following advice will help.
First - check that you are allowed to rent out your spare room
If you own your house
There is not a common approach taken by mortgage companies where you let out a room on short term lets. The Council of Mortgage Lenders have said “if it is something people are doing for a few days’ a year or when they are on holiday, it is not likely to be too much of a problem, but for anything more long term, it may be that they would need to convert their mortgage to a buy-to-let mortgage.”
What you should do: The safest approach is to call the customer services department of your mortgage company or book an appointment with the mortgage advisor at your bank to ask for permission. Alternatively, you can seek the advice of a solicitor to review the terms of your mortgage. If you are renting out the whole of your property, or see this as a long term business, then you may need to convert your mortgage to a buy-to-let mortgage which may result in a change to your interest rate or the term of your mortgage.
If you rent your flat/house
If you rent with a private or social landlord then you can expect to have restrictions on ‘sub-letting’ and running a business from your house. You could face possession proceedings for breaching the terms of your tenancy agreement.
What you should do: Speak with your landlord or the managing agent about varying the terms of your tenancy agreement. Specifically, ask them to provide you with written consent to ‘sub-let’ a room during 2017. If you face objections, try to encourage them to embrace the City of Culture – more people into Hull means more potential and more money for everyone. A solicitor will be able to assist both landlords and tenants with preparing or varying the tenancy agreement.
If you own your flat:
Those that own their own flat will have a long-term lease and it is very likely to state that the flat can only be used ’as a private residence‘. A recent decision in the Property Tribunal means that where your lease contains a ‘private residence’ clause, granting short term lettings of the whole of the flat could lead to the freeholder forfeiting the lease.
What you should do: The advice to flat owners is to let out a room rather than the whole of the property. If you intend to let out the whole flat, be very careful and seek legal advice from a solicitor, especially in light of the recent Property Tribunal decision.
I’m allowed to rent out a room – what next?
The first thing is to think about what happens if it all goes wrong; especially injuries to guests and damage to your property. Most standard home insurance policies are very unlikely to cover damages or injuries by paying guests, leaving you exposed to claims or unexpected costs.
What you should do: Speak to the customer services department at your home insurance company to ask if you have cover for holiday lettings. If not, you can look to amend your existing policy or consider speaking to a mortgage broker about taking out specialist covers for holiday lettings. Airbnb, also offer a Host Protection Policy that covers up to £600,000 in damages during a booking, and public liability.
The Government have provided a huge tax initiative by allowing you to earn up to £7,500 tax-free each year, under their Rent a Room scheme. However, the scheme does not apply to renting out a whole home and you will need to complete a tax return if you earn more than £7,500 a year from renting a room.
What you should do: If you earn less than £7,500 renting out a room, you do not need to do anything. If you earn more than £7,500 or if you rent out the whole of your home you will need to complete a tax return and return it to HMRC.
Start Renting Out
The City of Culture will be a fantastic year for Hull and the Homestay initiative provides you with a perfect opportunity to be at the centre of it (and make some money). However, do (a) check that you are permitted to rent out a room to visitors and (b) reduce the risks by protecting yourself against any claims or unexpected costs.
Finally, the City of Culture organisers have provided lots of useful and practical tips on their website such as stocking up on supplies and notifying your neighbours. They will also sign you up to ‘The Big Welcome’ training to provide guidance and support.
If you need any additional legal advice or support in setting up your home for the homestay scheme, you can contact me or a member of our team at Beverley.