Good fences may make good neighbors, but good leases make good tenants. This is especially true when renting to relatives. Having both parties' rights, obligations, and expectations in writing prior to renting, selling, or transferring ownership of real estate is essential to maintaining good business and personal relationships.
■ Rental property is property used by the owner for personal purposes less than the greater of 14 days or 10 percent of the number of days during the tax year the unit was rented at fair rental value. Fair market rent is the estimated amount property with a certain number of bedrooms, in a certain area of the country, will rent for.
■ If a home qualifies as rental property and as your tenant’s primary residence, expenses including mortgage interest, property taxes, homeowner association dues, utilities, and maintenance can be used to offset rental income, but you must charge fair market rent.
■ While it might be difficult to ask a family member to sign a lease, it’s worth it. The lease will protect you, your relative, and your relationship if problems arise. In your lease, detail the terms of your agreement including rent amount, due dates, rules about smoking and pets, who can live in the property and when the lease ends.
■ If you have received a deed to property in Tennessee, it’s vitally important you record that deed in the Register’s Office of the county where the property is located. Tennessee has what’s called a “race-notice” recording statute. Under that statute, if someone else, with no knowledge of your already existing deed, purchases an interest in the property for a fair price later and they record their interest before you record yours, their deed will stand. However, if you record your deed in the property records, anyone else who purchases a conflicting interest received after yours will be held to have notice of your interest.
■ This situation is likely to come up in transfers of property between friends or relatives where there is no title company involved. If Grandpa deeds property to you, record that deed immediately to protect your interest. Later, any number of situations may arise that cause Grandpa to change his mind or to forget he conveyed the property to you. He may sell the property to someone who records before you do. Protect your interest and record your deed.
217 S. Peters Road