A friend asked me for my opinion on this so I’m turning to MN. This is going to be annoying post where I don’t say who is who - feel free to pass on this one if that’s too irritating. I don’t want to bias the advice.
They’re a couple, late twenties, both with their own mortgaged properties who have moved in together into the larger, and more expensive house.
Until now, they both continued to pay their own mortgages, and calculated the combined cost of utilities and groceries and paid half each.
If they were to marry, their long term plan is to sell the second house, put the proceeds against the mortgage of the bigger house and add the other name to the deeds, and combine finances. For now though they are keeping their assets separate.
In the interim the smaller property is being readied to be rented out and the question is now about how to equitably calculate a fair division of costs. The partner whose property is being rented, expects to cover a significant proportion of the mortgage costs.
The owner of the larger house feels uncomfortable asking for rent, as it feels grabby to expect to profit from the other partner’s asset which they have kept separate until now. The owner of the smaller property could not rent it out without living elsewhere, and feels they would be profiting by living rent free. But by renting it, they lose the ability to leave easily in the event of a relationship breakdown. They would need to look for another place to rent. By paying rent, they would gain rights re period of notice etc.
The owner of the bigger house has a childhood history of dv, and values independence highly. I think that the increased commitment, and the potential of being stuck living together in the event of a relationship breakdown is contributing to the reluctance to charge rent. They are happy for the partner to stay rent free, and say they are benefitting because the shared utility bill drops under the new arrangement.
However, they’re also considering doing some work to the big house and the extra income makes that a possibility sooner than the owner had originally budgeted. The owner of the bigger house doesn’t want to take advantage, but also doesn’t want to be open to any claim on the property either. The owner of the smaller property would be contributing both money and a not insignificant amount of labour.
On the one hand charging rent, and then spending the rent on the improvements makes sense. On the other, that money gets taxed twice if it’s paid as rent and it might be better to hold off on any improvements until they’ve figured out their next step, and keep the extra income as a safety net for the partner who might want to leave.
I think previous generations would just have got married, but these young people and much more hard headed than we were.
What would you advise?