Wednesday 16 October 2019

Will not paying rent cause insurance problems?

Sinead Ryan

Sinead Ryan

I am moving into a vacant house owned by my aunt for a year while my own is being renovated. I'd like to pay her rent, but she won't hear of it and claims it's "too much paperwork". I'm concerned that there may be an insurance problem if, say, there was a fire, or my belongings were stolen and nobody knows I'm living there. I don't even know if she has a policy.

You're right to be worried on behalf of your aunt. Technically she becomes a landlady and should be registering the house with the PRTB, paying the second home tax and collecting rent, on which income tax is payable, less allowances for maintenance.

Insurers get worried if something changes which might alter the risk profile. However, Brian McNelis, of the Irish Brokers' Association, says: "Your aunt should definitely advise her insurance company, even though she's not charging rent.

In fact, they may reduce the premium because the risk is more acceptable in a house which is occupied, rather than unoccupied. Separately, it is possible to effect a policy to insure your own personal belongings."

I have been guarantor on my son's mortgage since 2006. He is in arrears and has decided to emigrate to Canada. He owes the bank €13,000 in back payments on the loan of €200,000. The house is worth probably €130,000. The bank has sent me a letter looking for the entire amount.

Whatever about my responsibilities, surely the maximum they could come after me for is half of the total?

Many parents went as guarantor on their children's first home as banks vied against each other to lend and stress-testing went out the window. Many guarantors assumed that after the first few years,their responsibility would be finished, but this is not so. David Hall of Irish Mortgage Holders Organisation says banks will go after whomever they can for outstanding debt – in this case, a pensioner with assets and cash, over an indebted mortgage holder.

"Many guarantors never realised they owe the entire debt equally with the mortgage holder. So, if the loan is €200,000, it's not that each of them owes €100,000 but that they each owe the full amount. The bank will never remove a guarantor from his responsibilities if they can help it – they see him as a potential mark when it comes to recovering money."

If your son entered the Mortgage Arrears Resolution Process (MARP), you would both get some protection as long as he engaged with the bank.

Check the contract and see if you are listed as co-owner rather than just guarantor – that was fairly common and would allow you to enter MARP. Both parties must co-operate before a debt resolution can be made.

If not, I urge you to get independent advice to protect yourself, your assets and other children who may have a right to your assets after death.

Irish Independent

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