Rental Income to Ltd Company

Rental Income to Ltd Company

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2 brothers and 2 sisters have recently inherited a house which they have just started to rent out. However, they have formed a Ltd company and opened up a Ltd company bank account into which rental income is paid and expenditure is paid of. The property has not been trnsferred to the company and this is not the plan going forward.

My initial thoughts to them is that at present the Ltd company is not beneficially entitled to rental income as there is no lease strusture in place confirming the company is leasing the property from the individuals. Therefore the rental income will remain the individuals?

Are my initial thoughts correct? Also to correct the position I assume a formal lease agreement needs to be in place ASAP? Can the annual lease be set at a peppercorn amount of £1?

Have any readers got such a standard lease agreement I could use?

Thanks
Jason

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By AnonymousUser
15th May 2008 09:38

Beneficial ownership
I would agree that it is most likely that the rent is that of the siblings still.

I would not recommend putting a lease in place without approaching a solicitor. The ownership issue is already muddied by these actions & you need to be sure that the lease is properly drawn up and the beneficial ownership of the property put beyond doubt. With 4 siblings involved, there is always scope they will fall out & there could be some nasty legal arguments otherwise in the future which might rebound on you if you were the one to offer them a proforma lease to put in place. A well drawn lease will of course also make sure all ancillary matters such as who is responsible for repairs are dealt with properly.

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Euan's picture
By Euan MacLennan
15th May 2008 10:45

Letting agent?
Those who let their properties through letting agents may complain at paying them a commission of 15% plus VAT, but there may be scope here for the company to charge a commission of 100% of the rent. This would not require a lease - just a standard contractual agreement with the agent. The individuals would have no rental income, but would presumably receive dividends from the company.

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