deed of assignment rental income

Cookies on Community Forums

We use some essential cookies to make this service work.

We’d also like to use analytics cookies so we can understand how you use the service and make improvements.

We use cookies to make this service work and collect analytics information. To accept or reject cookies, turn on JavaScript in your browser settings or reload this page.

You’ve accepted analytics cookies. You can change your cookie settings at any time.

You’ve rejected analytics cookies. You can change your cookie settings at any time.

beta This is a new service – your feedback will help us to improve it.

• Customer Forums
• Income from property

Transferring Rental Income to Wife (Deed of Assignment)

In terms of mortgage interest, SAIM10030 - Relief for interest paid: general conditions: the claimant - HMRC internal manual outlines that relief. This may only be claimed by the person/parties who took out the loan/ pays the interest on the loan, so this depends on the terms when the mortgage was initally set up. So if the mortgage is solely in your name all the relief would be claimed by you.

You must be signed in to post in this forum.

Assignment of Rents – What, Why, and How?

Article by:

Madelaine prescott, esq., share this post:.

• November 29, 2023

These days, almost all commercial loans include an Assignment of Rents as part of the Deed of Trust or Mortgage. But what is an Assignment of Rents, why is this such an important tool, and how are they enforced?

An Assignment of Rents (“AOR”) is used to grant the lender on a transaction a security interest in existing and future leases, rents, issues, or profits generated by the secured property, including cash proceeds, in the event a borrower defaults on their loan. The lender can use the AOR to step in and directly collect rental payments made by the tenant. For an AOR to be effective, the lender’s interest must be perfected, which has a few fairly simple requirements. The AOR must be in writing, executed by the borrower, and recorded with the county where the property is located. Including an AOR in the recorded Deed of Trust or Mortgage is the easiest and most common way to ensure the AOR meets these requirements should it ever need to be utilized.

When a borrower defaults, lenders can take advantage of AORs as an alternative to foreclosure to recoup their investment. With a shorter timeline and significantly lower costs, it is certainly an attractive option for lenders looking to get defaulted borrowers back on track with payments, without the potential of having to take back a property and attempting to either manage it or sell it in hopes of getting your money back out of the property. AORs can be a quick and easy way for the lender to get profits generated by the property with the goal of bringing the borrower out of default. But lenders should carefully monitor how much is owed versus how much has been collected. If the AOR generates enough funds so that the borrower is no longer in default, the lender must stop collecting rents generated by the property.

Enforcement of an AOR can also incentivize borrowers to work with the lender to formulate a plan, as many borrowers rely on rental income to cover expenses related to the property or their businesses. Borrowers are generally more willing to come to the table and negotiate a mutual, amicable resolution with the lender in order to protect their own investment. A word of warning to lenders though: since rental income is frequently used to pay expenses on the property, such as the property manager, maintenance, taxes, and other expenses, the lender needs to ensure they do not unintentionally hurt the value of the property by letting these important expenses fall behind. This may hurt the lender’s investment as well, as the property value could suffer, liens could be placed on the property, or the property may fall into disrepair if not properly maintained. It is also important for lenders to be aware of the statutes surrounding the payment of these expenses when an AOR is being used, as some state’s statutes require the lender to pay certain property expenses out of the collected rents if requested by the borrower.

In addition to being shorter and cheaper than foreclosure, AORs can be much easier to enforce. In California, the enforcement of an AOR is governed by California Civil Code §2938. This statute specifies enforcement methods lenders can use and restrictions on use of these funds by the lender, among other things. Under CA Civil Code §2938(c), there are 4 ways to enforce an AOR:

• The appointment of a receiver;
• Obtaining possession of the rents, issues, profits;
• Delivery to tenant of a written demand for turnover of rents, issues, and profits in the correct form; or
• Delivery to assignor of a written demand for the rents, issues, or profits.

One or more of these methods can be used to enforce an AOR. First, a receiver can be appointed by the court, and granted specific powers related to the AOR such as managing the property and collecting rents. They can have additional powers though; it just depends on what the court orders. This is not the simplest or easiest option as it requires court involvement, but this is used to enforce an AOR, especially when borrowers or tenants are uncooperative. Next is obtaining possession of the rents, issues, profits, which is exactly as it seems; lenders can simply obtain actual possession of these and apply the funds to the loan under their AOR.

The third and fourth options each require delivery of a written demand to certain parties, directing them to pay rent to the lender instead of to the landlord. Once the demand is made, the tenant pays their rent directly to the lender, who then applies the funds to the defaulted loan. These are both great pre-litigation options, with advantages over the first two enforcement methods since actual possession can be difficult to obtain and courts move slowly with high costs to litigate. The written demands require a specific form to follow called the “Demand To Pay Rent to Party Other Than Landlord”, as found at CA Civil Code §2938(k). There are other notice requirements to be followed here, so it is essential to consult with an experienced attorney if you are considering either of these options. California Civil Code §2938 specifically provides that none of the four enforcement methods violate California’s One Action Rule nor the Anti-Deficiency Rule, so lenders can confidently enforce their AORs using the above methods with peace of mind that they are not violating other California laws.

Whether you are looking to originate a new loan, or you are facing a default by your borrower, understanding what an Assignment of Rents is and how it operates can be extremely beneficial. Enforcing an AOR can be an easier option than foreclosure and can help promote a good relationship with your borrower when handled correctly. If you have any questions about AORs, or need further details on how to enforce them, Geraci is here to help.

Navigating the Maze of Licensing Rules for Private Lenders: Simplifying Business Purpose Lending Secured by Residential Real Estate

Private lenders provide vital financing options for real estate investors. However, there are numerous myths and misconceptions surrounding the licensing rules for private lenders, specifically

Geraci LLP Elevates Steven E. Ernest, Esq., to Partner, Reinforcing Commitment to Excellence in Legal Representation

IRVINE, February 9, 2024 – Geraci LLP, the nation’s foremost private lending law firm, proudly announces the promotion of Steven E. Ernest, Esq., to the

Navigating the Maze: Understanding Service of Lawsuits in California

When it comes to the legal landscape of California, the process of serving a lawsuit is akin to navigating a complex maze. For anyone embarking

What Constitutes a Good Set of Loan Documents?

Sometimes, people are afraid to ask the basic questions, for fear that the questions are too obvious or that they should know better. But a

• (949) 379-2600
• 90 Discovery, Irvine, CA 92618

Subscribe to our Newsletters

Receive attorney-authored articles, legislative updates, webinar reminders, magazines, and more straight to your inbox. Choose the newsletters below you’d like to receive.

CONNECT WITH US

Beneficial Interest in Property

Table of Contents

Andrew Watson, a London-based divorce lawyer in our family department and Resolution accredited cohabitation lawyer , summarises the law in relation to joint owners’ interests in property and comments on the recent Court of Appeal decision of Kernott v Jones.

What does beneficial interest in property mean?

A beneficial interest in property gives someone the right to share the benefits of a property, even if they are not a legal owner. Specifically, it gives someone the right to:

• Live in the property
• A share of the rental income
• A share of the proceeds when the property is sold

The person with a beneficial interest is called a beneficial owner.

Beneficial interests are usually defined as a percentage, such as 40%. This means the beneficial owner is entitled to receive 40% of any sale proceeds or rent.

How can I get beneficial interest in property?

The law presumes that legal ownership and beneficial ownership are the same thing unless something happens to split the ownership. This can occur in three ways:

• Express trust

The most common way to create a beneficial interest is through an express trust. This is where the legal owner signs a trust deed or written agreement declaring that the legal owner holds the property ‘on trust’ for someone else, the beneficial owner.

For example, a mother could declare that she holds the property on trust for her son, or a cohabiting couple could declare that they hold the property on trust for themselves in 70/30 percent shares to reflect their individual contributions toward the purchase price, rather than holding the property equally.

• Resulting trust

Sometimes, the law will presume that a beneficial interest has been created if there has been a financial contribution. For example, if Person A pays part of the purchase price for a property that is registered in Person B’s name, the law will impose a ‘resulting trust’ where B holds the property on trust for the benefit of A relative to A’s contribution.

• Constructive trust

A constructive trust arises when there is a common intention that someone has a beneficial interest in the property, even if they did not contribute to the purchase price. For example, if Person A moves in with Person B and pays the mortgage, or pays for a new kitchen, the court may decide that they behaved this way because there was a common intention to share the property. After all, it would be very unusual to pay someone else’s mortgage for no financial gain.

Is beneficial interest the same as legal ownership?

Beneficial ownership is not the same as legal ownership. Broadly:

• The legal owner is the ‘official’ owner of the land, whose name appears on the title deeds at HM Land Registry. The legal owner has a right of control over the property, which means they can decide to sell or lease it.
• The beneficial owner owns the ‘fruits’ of the property, including income and the right to occupy. Their name does not appear at HM Land Registry and a member of the public cannot find out who the beneficial owners are..

It is very common for a person to be both the legal and beneficial owner at the same time – but it is not always the case.

Why does there need to be a difference between legal and beneficial interest?

No more than four persons can be the legal owners of property in England and Wales. By law, those persons have equal ownership.

However, this may not reflect the reality of the situation, especially if one person has contributed more to a deposit (for example) and therefore wants more ‘interest’ in the property. By creating beneficial interests, you can achieve a fair result.

How do I change the beneficial interest of a property?

Assuming a deed of trust already exists, you can transfer the beneficial interest in property to another person with a deed of assignment. This changes the beneficial ownership of the property without changing the legal title, which is helpful if there is a mortgage since changing the legal title would require the mortgage lender’s consent.

Special rules apply to joint tenancies. Joint tenants have equal rights to the whole property and co-own it together. To change the beneficial interest, you would first need to sever the joint tenancy and change the legal title to tenants in common. Multiple steps are required and there may be tax and other implications to consider. Specialist legal advice is a must.

The Court of Appeal provides further clarification on interests in property

Jones v Kernott

The Court of Appeal has handed down a detailed judgement in the case of Kernott v Jones that has gone some way to clarifying how the Court should deal with property disputes between non-married owners of property. This article summarises the complexities of the law and what needs to be shown to demonstrate an interest in a property before considering what changes Kernott v Jones brings and what needs to be done for further clarity.

Summary of the current law

Oxley v. Hiscock

The cases of Oxley v Hiscock (sole owner) and Stack v Dowden (joint owners) are the leading recent cases in this area of law. These cases both consider what gives rise to a beneficial interest in a property. Beneficial ownership is a legal concept that relates to who has an interest in a property. The concept of beneficial ownership was set out in the case of Lloyds Bank v Rosset. It is a different concept to legal ownership which is simply whose name property is in. Beneficial ownership relates to what the intentions of ownership were. For instance, a property may be purchased in one person’s name but it might have been clear that the property was for both people. On the other hand, a property may be purchased in the name of two people but it might be just for the benefit of one person. It is the beneficial owners who are entitled to occupy the property and who are entitled to receive the proceeds of sale.

The current law is far from simple, mired as it is in the concepts of trusts law and principles of ownership of land. In brief and basic summary:-

Express Trusts

• It is a basic and long-standing principle of law (see for instance Goodman v Gallant) that if there is a formal written declaration of trust (ie of the existence of and extent of beneficial interests in a property) then this is conclusive unless fraud or misrepresentation can be shown. If there is a clear and complete declaration of trust then that should be the end of the matter. Property purchasers should take note that perhaps it would be a good idea when purchasing properties together that your respective beneficial interests are clearly defined and declared.

Equity follows the law

Stack v Dowden

• Stack v Dowden confirms that equity follows the law – in other words, it is assumed that the legal ownership of the property reflects the beneficial ownership. It also confirms that this presumption is rebuttable (but see below for how difficult this can become).

Resulting Trusts

• Stack v Dowden confirmed that the old principle of resulting trusts (where it was presumed that a financial contribution towards a property resulted in a beneficial interest proportionate to that financial contribution) should not apply in quasi matrimonial cases. Interestingly a distinction is made between these quasi matrimonial type arrangements and non quasi matrimonial cases. In Laskar v Laskar, which was a case about a property beneficially owned by a mother and daughter and importantly was used primarily as an investment property, resulting trust presumptions did apply. The primary focus of this article is on quasi matrimonial property interests and hence I do not intend to consider resulting trusts in any more detail here.

Constructive Trusts

• Lloyds Bank v Rosset sets out the principle of a constructive trust (where a beneficial interest in a property can be found on the basis of a common intention construed either by evidence of direct discussions or from conduct together with a detrimental reliance on this intention). Unlike resulting trusts, constructive trusts remain an applicable concept in quasi matrimonial cases post Stack v Dowden.
• Evidence of direct discussions is usually a matter of factual dispute and ultimately the Court would have to make a determination on such issues. The knotty problems come with finding a common intention on the basis of conduct and with then quantifying the respective interests upon finding that there is a trust.
• Direct financial contributions towards the purchase of a property can be used to construe a common intention of joint beneficial ownership (this sounds very similar to the resulting trust discussed above, the difference being that there is more to the question than just whether or not a contribution has been made, the contribution is evidence of a common intention rather than of an interest. Furthermore, the construction of intention on this basis does not mean that the quantification of the interests would be in proportion). This can include regular and direct payments towards a mortgage but, significantly, not necessarily payments to an account from which the mortgage is paid.
• Indirect financial contributions were not approved as evidence of common intention in Lloyds Bank v Rosset and nor were non financial contributions. Whilst the recent cases do not deal specifically with this issue the case law suggests that the Courts find the position restrictive and that there are moves towards indirect contributions and non financial contributions being considered as evidence of common intention.
• Once a common intention is proven one still needs to show the second half of the equation before establishing a beneficial interest on the basis of a constructive trust, detrimental reliance. Detrimental reliance is what it says it is, a reliance on something to your detriment. Usually if you have shown a common intention on the basis of conduct then this will also show detriment. If an express agreement has been construed from evidence of discussions then the detrimental reliance may not be so immediately obvious and may need proving.

Existence of interest established – what now?

• So you have demonstrated that you have a beneficial interest in a property, that’s it then? No, there may then follow a dispute as to the extent of your beneficial interest.
• In Oxley v Hiscock an attempt was made to introduce the concept of fairness into these proceedings, with the proposed test for what should be the share of beneficial interests being what was fair.
• In Stack v Dowden Baroness Hale defined the Court’s task as  “to ascertain the parties’ shared intentions, actual, inferred, or imputed, with respect to the property in the light of their whole course of conduct in relation to it”.    And that the Court should not   “abandon that search in favour of the result which the court itself considers fair”

This has the consequence not only of moving away from resulting trusts (as discussed above) but also of appearing to disapprove the Court’s approach in Oxley v Hiscock (a sole legal owner case) in relation to quantification.

• The issue of quantification of beneficial interests remains open to considerable judicial discretion, Baroness Hale confirms that “Each case will turn on its own facts”. The real impact of Stack v Dowden is that common intention constructive trusts are now much more likely to be found by the Courts and that quantification may then be considered on the whole course of conduct. More than just direct financial contributions can be considered in relation to quantification (see for instance Abbott v Abbott)

There are other principles that can be argued in relation to establishing an interest in a property, notably proprietary estoppel where someone has encouraged an expectation of an interest in property and the other parties has relied on this to their detriment. Applications can also be made in relation to rights over property on a number of different basis and acts of parliament.

Kernott v Jones – Clarification?

This case, heard at the Appeal Court level, considered the meaning of the search for “the parties’ shared intentions, actual, inferred or imputed” and the imposition of the Court’s views. Kernott v Jones provides some clarification as to the interpretation of inferring and imputing intention and imposing the Court’s views and as to what should be considered when doing this.

The facts of the case were that the parties jointly owned a property, purchased in 1985 using Jones’ deposit and a joint mortgage. Kernott then primarily paid for a small further loan used to build an extension. The parties shared household costs and mortgage repayments. In 1993 the parties separated and Jones, with the two children, remained at the property and paid for the property outgoings. A separate property was purchased by Kernott using the proceeds of the sale of a jointly owned policy. The parties agreed (eventually) that at the point of separation, their beneficial interests were equal. The issue was whether they subsequently changed. Importantly, it was common ground that there had been no discussion as to any change in beneficial interests.

The Court of Appeal considered whether or not and in what circumstances the Court could “impute” or “infer” a common intention to vary equal beneficial interest in a property and how to quantify such imputed or inferred interests. The Court of Appeal found that there was no evidence to infer a common intention to vary the beneficial interests since separation and that consequently, the beneficial interests remained equal, as they had been in 1993.

It is important to look at the definitions of impute and infer. Although the words were used by Baroness Hale, it was Lord Neuberger in Stack v Dowden who proposed a definition:-

“An inferred intention is one which is objectively deduced to be the subjective actual intentions of the parties in the light of their actions and statements”

“An imputed intention is one which is attributed to the parties, even though no such actual intention can be deduced from their actions and statements, and even though they had not such intention”

This suggests that the difference is that where inferred, there was an intention that becomes clear on considering the facts whereas with imputing, there was no intention but the Court is attributing one to the parties. Confusingly, the Court also confirmed in Stack v Dowden that its views must not be imposed.

In the High Court in Kernott v Jones, the Judge felt that an intention to vary the beneficial interests could be inferred or imputed on the basis of the parties’ conduct. He then considered the quantification of the beneficial interests and imputed a share on the basis of what was fair and just, considering that imputing shares can only be on this basis if there is no way of deducing this from conduct.

The Court of Appeal (with one Judge dissenting) did not agree with the High Court Judge and instead found that there was no evidence to infer a common intention to vary the beneficial interests. Consequently, the Court of Appeal did not need to make a decision on the imputation of the shares but the Judges did comment on this issue, expressing different views.

Lord Justice Wall indicated that if the common intention to vary could be found then the imputation of the new shares of beneficial interest was one of judicial discretion and that the Court could use the Oxley v Hiscock test of what it considers fair when there is no evidence of discussions.

Lord Justice Rimer considered the meaning of impute and impose, he said that:-

“the Court could and would presumably only consider so imputing an intention to them if they had drawn a blank in its search for an express or an inferred intention but wanted to impose upon the parties its own assessment of what would be a fair resolution”

This seems to be the rationale that was used in the High Court but it is specifically rejected by Lord Justice Rimer who found that this approach was rejected in Stack v Dowden. Lord Justice Rimer concludes that the Court in Stack v Dowden did not intend to enable the Courts to impute an intention when there was no express or inferred intention. He also felt, in contrast to Lord Justice Wall, that the fair and just test of Oxley and Hiscock had been rejected in Stack v Dowden.

Lord Justice Jacob agreed with the High Court Judge and felt that the parties intentions could be found to have altered over the years, on the basis of their conduct. He indicated that the fair and just test was a part of the test but not the whole test as to quantification.

What can we draw from the decisions and judgments in Kernott v Jones?

• Whilst the leading judgment in Stack v Dowden did not define “impute” and “infer” the definitions proposed by Lord Neuberger have been approved.
• The principle of equity following the law espoused in Stack v Dowden is a very difficulty principle to rebut, particularly in joint ownership cases.
• Moving out of a property and providing little financial contribution towards a jointly owned property for a number of years is not sufficient evidence to infer a change in intention (although, given that it was enough for the District Judge, the High Court Judge and one Appeal Court Judge, perhaps one can “infer” that it is close to the boundary).
• The indications from the judgments are that imputation cannot be used to decide whether there was a common intention (presumably as this would be imposing).
• The issue of imputing shares remains unanswered, with the three Appeal Court Judges reaching different conclusions (one should note that the views expressed by the Judges are just that, as the Court found by majority that there was no common intention to vary the beneficial interests it did not have to make a binding legal decision on quantification).
• The circumstances in which the Courts can take into account what it feels is fair and just in these proceedings also remains something of significant judicial dispute. The High Court Judge felt that this test could be used to quantify shares when there was no other evidence, Lord Justice Wall seems to agree with this, Lord Justice Rimer concluded that there was no such test and that it was rejected in Stack v Dowden and Lord Justice Jacob the fair and just test formed just part of the Court’s consideration.

How can you protect your beneficial interest in property?

Under the Land Registration Act 2002, a restriction can be entered in the register of any property or land by anybody who has a sufficient interest in it. As well as safeguarding the interest of the beneficiaries of the land, a restriction may also control or limit the way the property or land is dealt with.

Hallman v Harkins

In the case of Hallman v Harkins [2019] UKUT 245 an application was made by Tracy Harkins to the Land Registry to enter a restriction against the registered title to a property in Bootle (“the Property”) to protect her beneficial interest which she claimed to have. She had shared the Property with her partner of 13 years, Laurence Hallman. They had separated in 2016 and Mr Hallman was the sole registered proprietor of the Property. Mr Hallman objected to the application.

First-Tier Tribunal Conclusions on beneficial interest

The dispute was referred to the First Tier Tribunal (“FTT”) under section 73(7) of the Land Registration Act 2002. They concluded that parties had has a common intention from January 2013 that Mr Harkin should have a beneficial interest in the Property. As a result, it directed the Chief Land Registrar to give effect to her application for a restriction to be entered on the register.

The FTT also went a step further and quantified Mr Harkin’s share on the basis that they had been invited to do so by the parties. By an arithmetical calculation based on the duration of the couple’s engagement relative to the length of their relationship, it then concluded that her beneficial interest in the Property was 35% of the whole.

Appeal Findings

Permission to appeal was granted by the Upper Tribunal on two grounds:

• The FTT’s conclusion that the couple had pooled their resources (which Mr Hallman argued was reached without regard to the relevant parts of the evidence); and
• The FTT’s approach to the quantification of Ms Harkin’s beneficial interest (which Mr Hallman argued was arithmetically incorrect, but which is also open to the more fundamental objections that it is contrary to principle and beyond the FTT’s jurisdiction)

On appeal, Martin Rodger QC made the following findings:

• The FTT was entitled to find that Mr Harkin has a beneficial interest which should be protected by a restriction;
• The FTT had no jurisdiction to determine the extent of that beneficial interest and its conclusion is not binding on the parties; and
• In any event, the FTT’s view that Ms Harkin’s interest was 35% was based on an incomplete assessment of the evidence and was wrong in principle.

Often where such disputes arise at the FTT stage, it is common for parties to issue proceedings in Court and for the FTT proceedings to be stayed pending the resolution of the Court proceedings. The Court can determine the extent of a party’s beneficial interest and therefore in the interest of costs, parties tend to pursue such claims through the Court route. Naturally, if a determination is made in Court and a party is found to have a beneficial interest, it follows that a restriction should be registered.

This case is, however, an interesting reminder of the FTT’s jurisdiction when it comes to beneficial interest claims as often these cases can arise from disputes relating to the registration of restrictions.

The law in relation to beneficial ownership of property remains complex, confusing and capable of interpretation in many different ways. Stack v Dowden and Kernott v Jones have provided some welcome clarification but there remain numerous questions.

Kernott v Jones has amplified the equity follows the law principle and confirmed that the bar is set high for anyone wanting to rebut this presumption in joint ownership cases. The case has also perhaps undermined arguments about the imputation of a common intention and possibly also about the imputing of the respective shares.

Contact our Camden or Hampstead Solicitors for more information about our other services including advice on property in the event of divorce .

Share this article

• Share on Twitter
• Share on Facebook
• Share on LinkedIn

Andrew Watson Partner Family Law

View profile

Speak to us about Beneficial Interest in Property

For a free initial conversation call 020 7485 8811, email us send us an email and we’ll get back to you.

Email address*

Phone number*

Which service can we help you with?* Please select Personal Injury Medical Negligence Family Law Residential Property - Sale / Purchase Wills, Probate & Disputed Estates Housing & Social Care Social Welfare Property Disputes Commercial Property Lease Extensions

By ticking this box, I confirm I am 18 years & over and consent to Osbornes Law processing my personal data to deal with my enquiry. Our privacy policy is available here

Please leave this field empty.

Related Insights VIEW ALL

Financial Remedy Orders Explained

It is common for disagreements to arise over the finances during a divorce, even if you are on good terms...

Lisa Pepper

What is a Final Order?

The introduction of no-fault divorces brought about a number of changes to the divorce process in England and Wales. One...

Harriet McMorrin

What is Parental Alienation?

Sometimes, a child may turn against one of their parents due to the other parent’s manipulation or influence. This...

My spouse is going bankrupt. Will it affect...

Bankruptcy is on the rise in the UK. In 2022, more than 1 in 10 businesses reported a moderate-to-severe risk of insolvency. More...

What is Spousal Maintenance ?

Spousal Maintenance Spousal maintenance is a legal obligation to provide financial support to a former spouse after the marriage or...

The 6 Most Common Reasons Why Couples Get Divorced

What are the most common reasons for divorce? Following the UK’s transition to a no-fault divorce system, couples no...

Hannah Goldstein

What is a Conditional Order?

The introduction of no-fault divorces in England and Wales removed the need to assign blame for the breakdown of a...

Claire Andrews

What is a consent order?

Most divorcing couples agree on how their finances will be divided without going to court. A consent order is what...

Child Maintenance for High Earners

How much should be paid? When separating or divorcing parents cannot agree the amount of child maintenance to be paid, (...

Family Dynamics: A Factor In Child Arrangements Cases

In proceedings involving children, the parents should consider the impact their behaviour towards each other may have on how the...

Maria Kitsiou

Approving Consent Order In High Value Divorce Case...

The case of Bogolyubov v Bogolyubov The best course of action for divorcing couples is to agree on a financial...

Sarah Norman-Scott

Does Divorce Jurisdiction Matter?

I am a family law practitioner with a large client following in England and in Gibraltar. I often have to...

Breadwinner or homemaker in divorce. Does it matter?

Breadwinner vs Homemaker Divorce Rights When it comes to deciding how wealth is split in a divorce, English courts do...

What is Parental Responsibility?

Understanding Parental Responsibility Parental responsibility is the legal term used to describe parents’ duties and responsibilities for their children. These...

Are trusts protected from divorce?

Can trusts protect an inheritance from your spouse? A trust is a separate legal entity. Neither spouse owns its assets. ...

Joanne Wescott

Is a limited company protected from divorce?

Is my spouse entitled to half of my business? If you are involved in running a limited company, then it...

How is a pension split in a divorce?

Pensions and Divorce In a divorce, pensions are taken into account together with all other financial assets. Once all assets...

Who gets the house in a divorce?

How is a house divided in a UK divorce? For most people thinking about getting a divorce, one of the...

Judge ignores pre-nuptial agreement but factors in non-matrimonial...

Case Law One of the reasons I am still passionate about family law, after 20 years in the field, is that...

Pension sharing on divorce

What is the new procedure for pension sharing? Pensions are one of the biggest assets of a marriage, yet many...

What is a transfer of equity?

Transfer of equity in divorce Transfer of equity refers to the process of transferring part or all of a property...

Do You Have To Go To Court For...

If your divorce is uncontested and there are no disputes over issues such as what happens to the marital home...

Capital Gains Tax on Divorce

Proposed Capital Gains Tax Rule Changes Could Reduce Stress for Divorcing Couples The government has proposed a number of changes...

My ex has cut me off during divorce

Can my spouse cut me off financially? Unfortunately, it is far too common that when clients say it’s over,...

Get in touch

• About Osbornes Law
• News & Insights

Transferring rental income or property between spouses

Chris Broome – Chartered Financial Planner

Transferring rental income or property between spouses can offer significant financial benefits, including potential savings on Capital Gains Tax (CGT) and Inheritance Tax (IHT).

It’s a smart financial move for married couples or civil partners.

Here’s how you can go about it.

1. Transferring Rental Income:

You can seamlessly transfer rental income to your spouse using various methods:

a. Deed of Assignment: This allows you to assign the beneficial interest to your spouse, regardless of whether both of you are named on the property’s title.

b. Sever Joint Tenancy and Draft a Deed: If you own a buy-to-let property as joint tenants, you’ll need to change to tenants in common and then share the rental income through a deed. Don’t forget to complete Form 17 and attach the deed when declaring your income to HMRC.

c. Transfer of Equity: If the property is solely owned, you can add your partner to the legal title through a transfer of equity process. If there’s a mortgage, you’ll need consent from the mortgage lender and likely add your spouse’s name to the mortgage.

d. Sale and Purchase: This is a more expensive option where the current owner completely transfers the property to their spouse. It’s typically done as part of a divorce settlement.

Remember that you’re responsible for the tax on your share of the rent on the day it’s paid. Ensure you file your tax return and pay HMRC by January 31st for the previous year’s rental income up to April 5th. The sooner you act, the sooner you can declare income according to your desired shares.

2. Transferring Property:

Transferring property between spouses can lead to CGT and IHT savings. For instance, if a husband transfers a rental property to his wife, it’s usually exempt from CGT and IHT. Plus, if the wife pays a lower tax rate, the couple will have less income tax to pay on the rental income. When they sell the property, they’ll also pay less capital gains tax.

Transferring property before selling it can further reduce the CGT bill by utilising both personal allowances, effectively doubling the allowance for married couples and civil partners, provided it’s a genuine, outright gift. However, transfers to others, such as siblings or common-law spouses, will incur CGT, treating the transfer as a disposal for capital gain.

3. Stamp Duty Considerations:

While property transfers between spouses are exempt from CGT, be aware of stamp duty implications. No automatic stamp duty relief applies when transferring property to your spouse. Stamp duty land tax is based on consideration, which can include cash payments or assuming mortgage liability. If the new owner takes responsibility for a mortgage, they become liable for the stamp duty land tax.

4. Principal Private Residence Relief:

Keep in mind that if you currently benefit from principal private residence relief, it may be at risk when transferring property to a spouse. To qualify for this relief, the transferee spouse must have lived in the property as their principal private residence during the ownership period. If this condition isn’t met, the relief may be lost.

In summary , transferring rental income and property between spouses can yield substantial financial advantages, including tax savings.

Ensure you follow the right procedures and consider potential stamp duty and relief implications.

The process for transferring would not be overseen by us here at Longhurst. We would look to introduce you to an accountant in the first instance.

Please note:

This blog is for general information only and does not constitute advice.

The information is aimed at retail clients only.

Email Address *

• QUICK LINKS
• Execs / Business Owners
• Retirees / Life Pivot
• Private Office
• Frequently Asked Questions

Where to find us

I nnovation Centre, Silverstone Park, Silverstone, NN12 8GX

5 St John’s Lane, EC1M 4BH

T:  01327 223243

E: [email protected]

Mon-Thurs 9:30-5 / Fri 9:30-1

• Commercial contracts
• Consumer law
• Competition
• Franchising
• Information technology
• Intellectual property
• Outsourcing
• Construction disputes
• Construction frameworks
• Construction projects and development
• Risk management
• Company law and corporate governance
• Mergers and acquisitions
• Partnerships
• Private equity and venture capital
• Restructuring and insolvency
• GDPR in health and social care
• Commercial litigation
• Cyber risks and disputes
• Debt recovery
• Defamation and reputation management
• Litigation funding
• Professional negligence
• Property litigation
• Subrogation and recovery
• Solicitor disciplinary defence
• Employment contracts, policies and procedures
• Employment tribunal litigation
• Grievance and disciplinary advice
• HR investigations
• Immigration
• Management of trade disputes and industrial action
• Mental health in the workplace
• Settlement agreements
• CQC and HIW Regulations
• GDC fitness to practise hearings
• GDPR in Health and Social Care
• GMC fitness to practise hearings
• Interim Orders Tribunals
• Maintaining High Professional Standards
• Medical investigations
• Medical malpractice
• Medical Student Fitness to Practise
• Mental health
• NHS counter fraud investigations
• Performers List
• Catastrophic personal injury
• Counter fraud
• Cross border and travel
• Defending winter sports accidents
• Directors and officers
• High net worth and specie
• Occupational disease
• Product liability
• Professional risk and construction
• Property damage
• Reinsurance
• Technology and cyber
• Assets and estate management
• Development and regeneration

Landlord and tenant

• Leasehold enfranchisement
• Planning and infrastructure
• Property acquisitions and disposals
• Property finance
• Business and financial crime
• Criminal motor defence
• Environmental
• Environmental, social and governance (ESG)
• Food safety
• Health and safety
• Inquests and coronial law
• Public inquiries
• Trading standards
• Transport regulation
• Challenging a Lifetime Gift
• Contentious Probate
• Contesting a Will
• Disputed Wills Resolution
• Estate and Trust Disputes
• Inheritance Act claims
• Pre-death Agreement
• Cohabitation
• Collaborative family law
• Divorce and separation
• Divorce settlement calculator
• High net worth divorce
• Family mediation services
• Financial advice on marriage and dissolution
• International family law
• LGBTQ family law
• Prenuptial agreements
• Scottish family law
• Separating Together
• Asset protection
• Business succession planning
• Court of Protection
• Family investment companies
• Inheritance tax advice
• International private wealth
• Lasting power of attorney
• Energy generation
• Energy management
• Ambulance Trusts
• Primary care

Assignment of rent: an effective remedy against defaulting borrowers?

This article relates to:

The property market is still volatile despite rising property prices, and it remains a tricky time for lenders.

The property market is still volatile despite rising property prices, and it remains a tricky time for lenders.  For those lenders struggling to keep debts serviced until property values rise again, the assignment of rental income by way of security can provide an effective remedy against defaulting borrowers.

Through such an assignment, lenders can demand that rent is paid to them directly from tenants which can then be used to discharge outstanding loan or interest payments as an alternative to repossession and sale.   

For those properties in negative equity, where the current value is less than the amount secured on it, the assignment route enables lenders to keep loans serviced until property values increase again when the land can be sold to repay the lender in full.

Whilst lenders are commonly entitled under their standard mortgage terms to appoint Law of Property Act 1925 Receivers to collect rent directly from tenants, the main benefit of using the assignment by way of security route rather than relying on the receiver is that with the latter:

• Receivers charge a fee or commission by the receiver for any rent collected;
• Receivers have a discretion to exercise wider powers than simply rent collection, potentially increasing costs and depleting available funds from the property; and
• Receivers may be unwilling to accept the appointment if they feel it is too minor, such as where only one low value property is involved.

Using the assignment method, there are no costs to the lender whose security entitles them to gain direct control over rental income without the need for a receiver appointment, as the lender is empowered to take all necessary steps themselves.

Under lenders’ standard legal mortgages, there is often a provision requiring landlords to hold any rent received upon trust for the lender. However this provision is ineffective against a defaulting or insolvent landlord since unlike assignments it does not confer rights of ‘appropriation’ of the money. An assignment gives powers for the lender to pursue the money directly.

To take advantage of this type of security, lenders should ask the borrower to sign a form of assignment containing a fixed charge over the rental account held by the landlord together with an assignment of the borrower’s right to receive rent from the tenant

Once this document is entered into, the borrower is prevented from using or releasing the money held in the rental account because it is charged to the lender, and is additionally unable to collect rent directly from tenants since this right is conferred on the lender as a direct assignment.  Lenders are also entitled to sue tenants directly for non-payment of rent.

It would be prudent for lenders to require this type of security in every case where rental income from the property is to be the borrower’s main or only source of repayment of the mortgage loan.  Otherwise, if prices have fallen and the borrower directs the tenant to pay its rent elsewhere, lenders will be left in the cold with no immediate remedy except the more expensive receiver route.

The status of the lender’s security over the rental account will depend on the level of control it exerts over that money.  If the lender does not allow funds to be released without their express consent, it will usually be a fixed charge.  However if lenders allow the borrower freedom to use and release money without reverting back to them in every case, it is more likely to be construed as a floating charge.

If the rental account is held by another lender, that other lender should be asked to confirm that it will not exercise any right of set-off or counterclaim against the money standing to the credit of the rental account.

To be binding on liquidators, the security assignment must be registered at Companies House. It is not registrable at the Land Registry.

Also, notice of the assignment must be given to all affected tenants in order to reserve priority over the rental money.  The notice explains to tenants that they must make rent payments directly to the lender if they are asked to do so at any time in the future.  It goes on to say that the tenant need not contact the landlord to enquire as to the justification of any request it receives from the lender, and will not be penalised by the landlord at a later dated for following the lender’s instructions.

The tenant signs a counter-notice confirming its understanding of those rights and verifies that it has not already received a similar request from another lender.

If no notice is served, the assignment will still confer the same rights over the rent but the lender could lose priority to another lender who took an equivalent assignment and served notice on the affected tenants.  Priority over the rent between competing lenders is determined by the date notice is served and not by the date of the assignment.

The main advantage of the assignment is that it provides lenders with a more direct route to obtaining critical funds to service debts. This route is quicker and often cheaper than appointing a receiver, as the lender may carry out the work itself. The assignment gives lenders powers of appropriation not normally found in standard legal mortgages, and if the money has already been paid to the borrower’s rental account it is effectively frozen in favour of the lender.

Find out more about the services offered by our landlord and tenant solicitors .

Did you find this article informative? Would you like to receive more, or just leave us some feedback and suggestions?

More articles by David Tabinor

Landlord and tenant — accepting surrender and waiving right to forfeit.

David Tabinor

Implying rights into a completed transfer of land

Sectors and services featured in this article.

Cookies on GOV.UK

We use some essential cookies to make this website work.

We’d like to set additional cookies to understand how you use GOV.UK, remember your settings and improve government services.

We also use cookies set by other sites to help us deliver content from their services.

You have accepted additional cookies. You can change your cookie settings at any time.

You have rejected additional cookies. You can change your cookie settings at any time.

• Personal tax

Declare beneficial interests in joint property and income

If you jointly own property with your spouse or civil partner and want to change the split of income from it for tax purposes use Income Tax form 17.

Declare beneficial interests in joint property and income (form 17)

Ref: Form 17

https://public-online.hmrc.gov.uk/lc/content/xfaforms/profiles/forms.html?contentRoot=repository:///Applications/SpecPersTax_iForms/1.0/17&template=17.xdp

If you live with a spouse or civil partner and have income from property you jointly own, you’ll normally be taxed on an even split of the income between you.

Use this form if you want to change the split of income to your actual share of ownership.

You’ll also need to provide evidence that your beneficial interests in the property are unequal, for example a declaration or deed.

Before you start

If you’re using an older browser, for example, Internet Explorer 8, you’ll need to update it or use a different browser. Find out more about browsers .

You’ll need to fill in the form fully before you can print it. You can’t save a partly completed form so gather all your information together before you start to fill it in.

Welsh translation and Welsh I-form have been added to this page.

First published.

Related content

Is this page useful.

• Yes this page is useful
• No this page is not useful

Help us improve GOV.UK

Don’t include personal or financial information like your National Insurance number or credit card details.

To help us improve GOV.UK, we’d like to know more about your visit today. We’ll send you a link to a feedback form. It will take only 2 minutes to fill in. Don’t worry we won’t send you spam or share your email address with anyone.

Deed of Assignment: Everything You Need to Know

A deed of assignment refers to a legal document that records the transfer of ownership of a real estate property from one party to another. 3 min read updated on January 01, 2024

Updated October 8,2020:

A deed of assignment refers to a legal document that records the transfer of ownership of a real estate property from one party to another. It states that a specific piece of property will belong to the assignee and no longer belong to the assignor starting from a specified date. In order to be valid, a deed of assignment must contain certain types of information and meet a number of requirements.

What Is an Assignment?

An assignment is similar to an outright transfer, but it is slightly different. It takes place when one of two parties who have entered into a contract decides to transfer all of his or her rights and obligations to a third party and completely remove himself or herself from the contract.

Also called the assignee, the third party effectively replaces the former contracting party and consequently assumes all of his or her rights and obligations. Unless it is stated in the original contract, both parties to the initial contract are typically required to express approval of an assignment before it can occur. When you sell a piece of property, you are making an assignment of it to the buyer through the paperwork you sign at closing.

What Is a Deed of Assignment?

A deed of assignment refers to a legal document that facilitates the legal transfer of ownership of real estate property. It is an important document that must be securely stored at all times, especially in the case of real estate.

In general, this document can be described as a document that is drafted and signed to promise or guarantee the transfer of ownership of a real estate property on a specified date. In other words, it serves as the evidence of the transfer of ownership of the property, with the stipulation that there is a certain timeframe in which actual ownership will begin.

The deed of assignment is the main document between the seller and buyer that proves ownership in favor of the seller. The party who is transferring his or her rights to the property is known as the “assignor,” while the party who is receiving the rights is called the “assignee.”

A deed of assignment is required in many different situations, the most common of which is the transfer of ownership of a property. For example, a developer of a new house has to sign a deed of assignment with a buyer, stating that the house will belong to him or her on a certain date. Nevertheless, the buyer may want to sell the house to someone else in the future, which will also require the signing of a deed of assignment.

This document is necessary because it serves as a temporary title deed in the event that the actual title deed for the house has not been issued. For every piece of property that will be sold before the issuance of a title deed, a deed of assignment will be required.

Requirements for a Deed of Assignment

In order to be legally enforceable, an absolute sale deed must provide a clear description of the property being transferred, such as its address or other information that distinguishes it from other properties. In addition, it must clearly identify the buyer and seller and state the date when the transfer will become legally effective, the purchase price, and other relevant information.

In today's real estate transactions, contracting parties usually use an ancillary real estate sale contract in an attempt to cram all the required information into a deed. Nonetheless, the information found in the contract must be referenced by the deed.

Information to Include in a Deed of Assignment

• Names of parties to the agreement
• Addresses of the parties and how they are binding on the parties' successors, friends, and other people who represent them in any capacity
• History of the property being transferred, from the time it was first acquired to the time it is about to be sold
• Agreed price of the property
• Size and description of the property
• Promises or covenants the parties will undertake to execute the deed
• Signatures of the parties
• Section for the Governors Consent or Commissioner of Oaths to sign and verify the agreement

If you need help understanding, drafting, or signing a deed of assignment, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.

Hire the top business lawyers and save up to 60% on legal fees

Content Approved by UpCounsel

• Define a Deed
• Contract for Deed California
• Contract for Deed in Texas
• Assignment Law
• Deed Contract Agreement
• Assignment Of Contracts
• Legal Assignment
• Deed vs Agreement
• Assignment Legal Definition
• Contract for a Deed

• Practical Law

New standard document on deed of assignment of beneficial interest in land

Practical law uk legal update 4-591-5405  (approx. 2 pages).

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.

A bit of data which remembers the affiliate who forwarded a user to our site and recognises orders from those who become customers through that affiliate.

Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Please insert your e-mail address in the below box. You will receive a link to reset your password.

A link to reset your password has been sent to:

Already have an account? Sign In

Don't have an account? Sign Up

Please log in or register to access this page

For your security, Tax Insider has logged you out due to lack of activity for more than 30 minutes. To continue using Tax Insider please log in again.

Transferring Rental Income – Anti-Avoidance Problems?

Share and share alike, settlements trap, transferring income only, practical tip:.

• Using Your Own Property Management Company to Reduce Property Taxes
• Watch Out for the CGT Pitfalls of Taking in Lodgers
• Legal versus beneficial ownership: It matters!
• Business Premises Renovation Allowance – The Final Countdown
• Putting Property “in the name of” Another Person - Be Careful!

• Home Improvement
• Property News
• Advertise with us

• Resources & Guides

Free Deed of Assignment Tenancy Agreement Sample Form and Template

A Deed of Assignment is a legal document that transfers the ownership rights and interests of a property or asset from one party, known as the assignor, to another party, known as the assignee. It is commonly used in real estate transactions but can also apply to other types of assets such as intellectual property rights, stocks, or contractual rights.

The Deed of Assignment serves as evidence of the transfer of ownership and provides a clear record of the transaction. It outlines the terms and conditions of the assignment, including the details of the parties involved, a description of the property or asset being assigned, and any applicable terms or conditions.

Key elements typically included in a Deed of Assignment are:

• Parties: The document identifies the assignor (current owner) and the assignee (new owner) involved in the transaction. It is essential to provide accurate and complete information about both parties.
• Description of the property or asset: The Deed of Assignment should include a detailed description of the property or asset being transferred. For real estate, this includes the physical address, boundaries, and any relevant identifying information. In the case of other assets, it may include specific details such as patent numbers or stock certificates.
• Consideration: Consideration refers to the value or payment exchanged in return for the assignment. It can be in the form of money, goods, services, or any other agreed-upon consideration. The Deed of Assignment should clearly state the consideration provided by the assignee to the assignor.
• Terms and conditions: This section outlines the specific terms and conditions of the assignment. It may include any restrictions, warranties, or obligations that the assignee must adhere to after the transfer of ownership. These terms are mutually agreed upon by both parties and are legally binding.
• Signatures and witnessing: To make the Deed of Assignment legally enforceable, it requires the signatures of both the assignor and the assignee. Additionally, it is common to have witnesses present during the signing of the document to validate its authenticity.

Once the Deed of Assignment is signed and executed, it becomes a legally binding agreement between the assignor and the assignee. It ensures that the assignee acquires the rightful ownership of the property or asset, and the assignor relinquishes their ownership rights.

It is important to note that the requirements and legal implications of a Deed of Assignment can vary depending on the jurisdiction. Consulting with legal professionals or experts in the relevant field is recommended to ensure compliance with local laws and regulations.

When Can A Contract Be Signed As A Deed?

Under certain circumstances, a contract can be signed as a deed, distinguishing it from a standard contract. This is typically the case when the parties involved agree that no consideration, or payment, is necessary for the agreement to be valid.

As a more formal document, a deed follows a specific execution process. It requires the presence of a witness during the signing and in some cases, the use of a seal to authenticate the deed.

Is it Possible to Reverse a Deed of Assignment?

Once a deed of assignment has been executed and dated, it remains legally binding and enforceable until specific actions are taken. These actions include varying the deed using a deed of variation, surrendering it using a deed of surrender, or selling the property involved. If you intend to make changes to the original deed, it is more common to surrender the entire deed and then create a new deed with the desired modifications.

Which document do I require, a deed of assignment or a deed of trust?

When it comes to transferring the beneficial interest in land or property from one party to another, a deed of assignment is typically utilized. This document focuses solely on the assignment of the beneficial interest. On the other hand, a deed of trust can serve the same purpose but includes additional clauses that outline procedures for selling the property, among other things.

For most married couples seeking to assign their beneficial interest in an investment property, a deed of assignment is suitable for their needs.

Download a Deed of Assignment Tenancy Agreement Template

If you like a custom, completely personalised assignment agreement, use the link below. It takes about 5 min to create and you will end up with an agreement, tailored to your specific property.

Download CUSTOM Assignment Agreement

Alternatively, if you just want to download a generic deed of assignment of tenancy template, use the link below.

Download GENERIC Deed of Assignment of Tenancy Agreement

All content on this form and other forms for landlords published by Property Division are provided “as is”, with no guarantees of completeness, accuracy or timeliness, and without representations, warranties or other contractual terms of any kind, express or implied. Property Division does not represent or warrant that this letter or other material supplied by Property Division will be accurate, current, uninterrupted, error-free or omission-free.

Can a landlord refuse to assign a lease in the UK?

In the United Kingdom, a landlord’s ability to refuse to assign a lease is governed by the terms of the lease agreement and relevant landlord and tenant laws. The Landlord and Tenant Act 1988 (as amended) provides certain protections and guidelines for both landlords and tenants regarding the assignment of leases.

Here are some key points to consider:

• Lease Agreement Terms: The terms of the lease agreement will typically outline the conditions and requirements for assigning the lease. Some leases may include provisions that require the tenant to obtain the landlord’s consent before assigning the lease.
• Reasonable Refusal: The Landlord and Tenant Act 1988 imposes certain restrictions on a landlord’s ability to unreasonably withhold consent to an assignment. Generally, the landlord’s refusal must be reasonable, and they cannot arbitrarily deny permission. Common reasons for refusal may include concerns about the financial stability of the proposed assignee or if the assignee’s intended use of the property violates the terms of the lease.
• Landlord’s Costs: The landlord may be entitled to recover reasonable costs incurred in considering the request for assignment. These costs should be outlined in the lease agreement.
• Procedure for Seeking Consent: The lease agreement may specify the procedure that the tenant must follow when seeking the landlord’s consent for an assignment. It is important for tenants to adhere to these procedures to ensure compliance with the terms of the lease.
• Landlord’s Remedies: If the landlord believes there are valid reasons to refuse consent, they may have remedies available under the lease agreement or applicable law. However, these reasons must typically be specified in the lease.

It’s important for both landlords and tenants to be aware of the specific terms of the lease agreement and to understand their rights and responsibilities under the Landlord and Tenant Act 1988. If disputes arise, seeking legal advice is recommended to ensure compliance with the law and the terms of the lease. Additionally, the laws and regulations may be subject to change, so staying informed about any updates is advisable.

RELATED ARTICLES MORE FROM AUTHOR

Handy contacts to have as a real estate property manager for your clients, what are the best insulation options for new homes, how to sell your propoerty successfully.

• Blog for us
• Privacy Policy
• Terms and Conditions

An official website of the United States Government

• Kreyòl ayisyen
• Search Toggle search Search Include Historical Content - Any - No Include Historical Content - Any - No Search
• Menu Toggle menu
• INFORMATION FOR…
• Individuals
• Business & Self Employed
• Charities and Nonprofits
• International Taxpayers
• Federal State and Local Governments
• Indian Tribal Governments
• Tax Exempt Bonds
• FILING FOR INDIVIDUALS
• How to File
• When to File
• Where to File
• Update Your Information
• Get Your Tax Record
• Apply for an Employer ID Number (EIN)
• Check Your Amended Return Status
• Get an Identity Protection PIN (IP PIN)
• File Your Taxes for Free
• Bank Account (Direct Pay)
• Payment Plan (Installment Agreement)
• Electronic Federal Tax Payment System (EFTPS)
• Your Online Account
• Tax Withholding Estimator
• Estimated Taxes
• Where's My Refund
• What to Expect
• Direct Deposit
• Reduced Refunds
• Amend Return

Credits & Deductions

• INFORMATION FOR...
• Businesses & Self-Employed
• Earned Income Credit (EITC)
• Child Tax Credit
• Clean Energy and Vehicle Credits
• Standard Deduction
• Retirement Plans

Forms & Instructions

• POPULAR FORMS & INSTRUCTIONS
• Form 1040 Instructions
• Form 4506-T
• POPULAR FOR TAX PROS
• Form 1040-X
• Circular 230

Tips on Rental Real Estate Income, Deductions and Recordkeeping

More in file.

• Business Tax Account
• Employer ID Numbers
• Business Taxes
• Reporting Information Returns
• Self-Employed
• Starting a Business
• Operating a Business
• Closing a Business
• Industries/Professions
• Small Business Events
• Online Learning
• Large Business
• Corporations
• Partnerships
• Governmental Liaisons
• Federal State Local Governments

If you own rental real estate, you should be aware of your federal tax responsibilities. All rental income must be reported on your tax return, and in general the associated expenses can be deducted from your rental income.

If you are a cash basis taxpayer, you report rental income on your return for the year you receive it, regardless of when it was earned. As a cash basis taxpayer you generally deduct your rental expenses in the year you pay them. If you use an accrual method, you generally report income when you earn it, rather than when you receive it and you deduct your expenses when you incur them, rather than when you pay them. Most individuals use the cash method of accounting.

Below are some tips about tax reporting, recordkeeping requirements and information about deductions for rental property to help you avoid mistakes.

What is Considered Rental Income?

You generally must include in your gross income all amounts you receive as rent. Rental income is any payment you receive for the use or occupation of property. You must report rental income for all your properties.

In addition to amounts you receive as normal rent payments, there are other amounts that may be rental income and must be reported on your tax return.

Advance rent is any amount you receive before the period that it covers. Include advance rent in your rental income in the year you receive it regardless of the period covered or the method of accounting you use. For example, you sign a 10-year lease to rent your property. In the first year, you receive $5,000 for the first year's rent and $5,000 as rent for the last year of the lease. You must include $10,000 in your income in the first year.

Security deposits used as a final payment of rent are considered advance rent. Include it in your income when you receive it. Do not include a security deposit in your income when you receive it if you plan to return it to your tenant at the end of the lease. But if you keep part or all of the security deposit during any year because your tenant does not live up to the terms of the lease, include the amount you keep in your income in that year.

Payment for canceling a lease occurs if your tenant pays you to cancel a lease. The amount you receive is rent. Include the payment in your income in the year you receive it regardless of your method of accounting.

Expenses paid by tenant occur if your tenant pays any of your expenses. You must include them in your rental income. You can deduct the expenses if they are deductible rental expenses. For example, your tenant pays the water and sewage bill for your rental property and deducts it from the normal rent payment. Under the terms of the lease, your tenant does not have to pay this bill. Include the utility bill paid by the tenant and any amount received as a rent payment in your rental income.

Property or services received, instead of money, as rent, must be included as the fair market value of the property or services in your rental income. For example, your tenant is a painter and offers to paint your rental property instead of paying rent for two months. If you accept the offer, include in your rental income the amount the tenant would have paid for two months worth of rent.

Lease with option to buy occurs if the rental agreement gives your tenant the rights to buy your rental property. The payments you receive under the agreement are generally rental income.

If you own a part interest in rental property, you must report your part of the rental income from the property.

What Deductions Can I Take as an Owner of Rental Property?

If you receive rental income from the rental of a dwelling unit, there are certain rental expenses you may deduct on your tax return. These expenses may include mortgage interest, property tax, operating expenses, depreciation, and repairs.

You can deduct the ordinary and necessary expenses for managing, conserving and maintaining your rental property. Ordinary expenses are those that are common and generally accepted in the business. Necessary expenses are those that are deemed appropriate, such as interest, taxes, advertising, maintenance, utilities and insurance.

You can deduct the costs of certain materials, supplies, repairs, and maintenance  that you make to your rental property to keep your property in good operating condition.

You can deduct the expenses paid by the tenant if they are deductible rental expenses. When you include the fair market value of the property or services in your rental income, you can deduct that same amount as a rental expense.

You may not deduct the cost of improvements. A rental property is improved only if the amounts paid are for a betterment or restoration or adaptation to a new or different use. See the Tangible Property Regulations - Frequently Asked Questions for more information about improvements. The cost of improvements is recovered through depreciation.

You can recover some or all of your improvements by using Form 4562 to report depreciation beginning in the year your rental property is first placed in service, and beginning in any year you make an improvement or add furnishings. Only a percentage of these expenses are deductible in the year they are incurred.

How Do I Report Rental Income and Expenses?

If you rent real estate such as buildings, rooms or apartments, you normally report your rental income and expenses on Form 1040 or 1040-SR, Schedule E, Part I. List your total income, expenses, and depreciation for each rental property on the appropriate line of Schedule E. See the Instructions for Form 4562 to figure the amount of depreciation to enter on line 18.  See the Instructions for Form 4562 to figure the amount of depreciation to enter on Form 1040 or 1040-SR, Schedule E, line 18.

If you have more than three rental properties, complete and attach as many Schedules E as are needed to list the properties. Complete lines 1 and 2 for each property, including the street address for each property. However, fill in the “Totals” column on only one Schedule E. The figures in the “Totals” column on that Schedule E should be the combined totals of all Schedules E.

If your rental expenses exceed rental income your loss may be limited. The amount of loss you can deduct may be limited by the passive activity loss rules and the at-risk rules. See Form 8582, Passive Activity Loss Limitations, and Form 6198, At-Risk Limitations, to determine if your loss is limited.  

If you have any personal use of a dwelling unit that you rent (including a vacation home or a residence in which you rent a room), your rental expenses and loss may be limited. See Publication 527, Residential Rental Property, for more information.  

What Records Should I Keep?

Good records will help you monitor the progress of your rental property, prepare your financial statements, identify the source of receipts, keep track of deductible expenses, prepare your tax returns and support items reported on tax returns.

Maintain good records relating to your rental activities, including the rental income and the rental expenses. You must be able to document this information if your return is selected for audit. If you are audited and cannot provide evidence to support items reported on your tax returns, you may be subject to additional taxes and penalties.

You must be able to substantiate certain elements of expenses to deduct them. You generally must have documentary evidence, such as receipts, canceled checks or bills, to support your expenses. Keep track of any travel expenses you incur for rental property repairs. To deduct travel expenses, you must keep records that follow the rules in chapter 5 of Publication 463, Travel, Entertainment, Gift, and Car Expenses.

You need good records to prepare your tax returns. These records must support the income and expenses you report. Generally, these are the same records you use to monitor your real estate activity and prepare your financial statements.

Related Topics

Forms & instruction, publications.

•  Facebook
•  Twitter
•  Linkedin

Accommodation in Moscow

This guide was written prior to Russia's 2022 invasion of Ukraine and is therefore not reflective of the current situation. Travel to Russia is currently not advisable due to the area's volatile political situation.

Accommodation in Moscow  can be exceedingly expensive, but expats will find that it is not too difficult to secure a place in the city. Expats are often able to negotiate with Russian landlords about various things, although lowering rental costs is unlikely.

Types of housing in Moscow

Expats expecting only Stalinist relics or cookie-cutter communist apartments will be pleasantly surprised by the variety on offer in Moscow. Almost every type of accommodation is present, from high-priced villas and houses clustered in suburban gated compounds to modern, fully equipped, expansive apartments in the city centre.

There are more options available in older buildings than in Western-style highly secured complexes. Though they may be old, they often house stylishly renovated apartments that can be rented for more of a bargain.

Furnished, unfurnished and semi-furnished accommodation is available in Moscow. Expats will find that for the right price, landlords are willing to add or remove furniture as tenants wish, and prospective tenants shouldn't be afraid to negotiate. 

Finding accommodation in Moscow

One of the most important points to keep in mind when searching for accommodation in Moscow is that most areas of the city have severe traffic issues. Expats should choose housing that is conveniently located near a metro line for ease of travel to and from work or school . That said, living near a metro station often means living in a more polluted and congested area.

Most expats in Moscow live in the city centre, within the circular metro line. Expats should keep in mind that the closer one gets to the Moscow city centre, the more expensive rentals generally become. 

For those who prefer an area with more fresh air, new apartment buildings, gated communities and villas are springing up in the suburbs beyond Moscow’s outer beltway. The extra space and accessible greenery come at an additional cost, and the commute into the city centre can be as much as 90 minutes each way.

Those who don't speak Russian usually hire a real-estate agent to help them find accommodation. These service providers typically charge the equivalent of one month’s rent, although this varies. They assist in finding accommodation options and negotiate a secure lease. They can also deal with landlords when there is a conflict. 

Renting accommodation in Moscow

Securing accommodation in Moscow is often not done to the book, and many landlords demand monthly rental payments in cash to avoid paying taxes. Those lucky enough to secure an accommodation allowance through their company may not be able to do so – in this case, they may find that landlords charge more.

It would be wise for expats to seek help from an estate agent to arrange a lease in Moscow. Leases are often written in both Russian and English and range from one to three years. Rent is normally paid on a monthly basis. Dependent upon agreement between the landlord and tenant, rent can be paid in roubles, US dollars or euros.

A standard security deposit equivalent to one month’s rent is generally requested. If possible, expats should negotiate for it to be used to pay the final month of rent. Landlords will tend to find any excuse not to return this payment, even if all inventories are returned as they were received, and even if the apartment is left in a better condition than it was found.

Utilities 

For the most part, water and gas should be included in the rental cost. Electricity, internet, television and telecommunications are for the tenant's account. Be sure to address this topic during lease negotiations. Utilities tend to be cheap and are state-run. 

If expats live in a normal Russian apartment and not in one of the luxurious Western-style apartments they will have limited control over their heating. Heating will come on and be switched off centrally for the entire apartment block.

During summer, hot water is cut off for a week or more to allow general maintenance of the pipes. This happens in every area of Moscow, and one should look for notices in the building or surrounding area informing when to expect the water cut. Some apartment buildings may have their own water heating systems to compensate for this, but many will not.

Buying property in Moscow

Russia allows foreign people and companies to purchase property. Although expats tend to rent rather than buy property in Russia, if they do buy, they tend to buy apartments that are under construction as it can be difficult to find ready-built apartments. Finding a reputable and respectable real-estate agent is essential when buying a property in Moscow. This is to ensure expats carry out their due diligence, and have and receive the correct documents. Expats must be sure to weigh up the pros and cons and understand financial and tax implications of purchasing property in Moscow.

Further reading

►See Areas and Suburbs in Moscow  for an overview of the different expat-friendly neighbourhoods in the city

Expat Interviews "If you want to be inside the hustle and the bustle of the city, experiencing the best it can offer, then I recommend staying somewhere around the metro ring, inside or just outside." Read about Yulia, a global nomad from Russia, and her advice on choosing accommodation in Moscow to suit different needs in her interview . "The best place to live is in the centre, as there you can easily enjoy the culture and social life, as well as be in touch with other expats."  Read what Rob, an American expat, has to say about living in Russia in his expat interview .

Are you an expat living in Moscow?

Expat Arrivals is looking for locals to contribute to this guide, and answer forum questions from others planning their move to Moscow. Please contact us if you'd like to contribute.

Expat Health Insurance

Cigna Global Health Insurance. 20% off premiums booked before 31st March Medical insurance specifically designed for expats. With Cigna, you won't have to rely on foreign public health care systems, which may not meet your needs. Cigna allows you to speak to a doctor on demand, for consultations or instant advice, wherever you are in the world. They also offer full cancer care across all levels of cover, and settle the cost of treatments directly with the provider. Get a quote from Cigna Global - 20% off

Aetna Aetna International, offering comprehensive global medical coverage, has a network of 1.3 million medical providers worldwide. You will have the flexibility to choose from six areas of coverage, including worldwide, multiple levels of benefits to choose from, plus various optional benefits to meet your needs. Get your free no-obligation quotes now!

Moving Internationally?

International Movers. Get Quotes. Compare Prices. Sirelo has a network of more than 500 international removal companies that can move your furniture and possessions to your new home. By filling in a form, you’ll get up to 5 quotes from recommended movers. This service is free of charge and will help you select an international moving company that suits your needs and budget. Get your free no-obligation quotes from select removal companies now!

Free Moving Quotes ReloAdvisor is an independent online quote service for international moves. They work with hundreds of qualified international moving and relocation companies to match your individual requirements. Get up to 5 free quotes from moving companies that match your needs. Get your free no-obligation quotes now!