cash clinic: much to consider before renting out your property

18th December 2010

The Scottish private client and financial services team answer your queries, this week: the factors to consider before renting out your property.

Q After losing my job this year I have decided to use my redundancy package to go travelling around the world for 18 months or so.

I own a one-bedroom flat which I do not want to sell in the current climate so I am looking to rent it out to cover the mortgage and bills while I am travelling. I don't really want to deal with the tenants when I am away so I was thinking about asking my elder brother to look after my affairs. Is this possible? Also, I assume I will need to declare the income from the rent when I'm away, can my brother do this for me too?

A One way of having your brother looking after your affairs would be to appoint him as an attorney, assuming he is willing to do this. In Scotland there are two main types of power of attorney: a continuing power of attorney and a welfare power of attorney. The former enables a nominated person or persons to look after another person's financial and/or property affairs. The latter covers more personal matters of welfare such as medical treatment. They can be combined into one document.

It is sensible for everyone, particularly property owners, to have Powers of Attorney. They allow another to deal with your affairs in the event that for any reason, such as an accident, you are unable to deal with them yourself. They are also useful when someone goes abroad, as in your case. You should also consider having at least one other attorney in case anything should inhibit your brother from acting. For instance, he may himself be out of the country for a while.

There are many matters to consider before letting a property, such as landlord registration and gas safety checks. It is important to have a formal lease in place and legal advice should be sought.

You could consider consulting a letting agency who would be well placed to find a tenant, collect the rental income and advise you in general. There are many reputable letting agencies that handle such matters daily. Consulting the letting agency would perhaps take the burden from your brother to some extent as he may not be aware of all the implications of letting a property. To answer your specific question, you would need to report your income from the letting to the tax authorities by the relevant income tax deadlines.

Glen Gilson is a partner and head of private client & financial services at HBJ Gateley Wareing.