Renting to relatives

ecclescake

We have a BTL property that we would like to rent to our son and his fiance (and her young son).. they both work and can pay the rent but we were worried that if our son lost his job (who knows in the current climate) would he get help to pay the rent through housing benefit? We are not sure as he would be a relative of the landlord.

Also.. we are not sure where we stand if they split up? Does she have any right to stay in the house?

steve1980

Don't do it!

If the worse was to happen it could cause a huge feud.

Benefits? Who knows in this day and age. I was out of work for 6 months and got nothing because my partner (a student) earned more than enough in the eyes of a computer system to support two adults and pay for all the bills.

Gwhiz

Sounds a recipe for disaster. Family and business should not mix.

System

Gwhiz wrote: »

Sounds a recipe for disaster. Family and business should not mix.

You mean like the Timpson Group or Robert Wiseman Dairies?

Gwhiz

!!!!!! wrote: »

You mean like the Timpson Group or Robert Wiseman Dairies?

Difference being that they are all "in" the business while the op' family will be "customers"!

But I think you knew that!

Jowo_2

Yes, a landlord can rent out a self-contained property to a close relative who receives Local Housing Allowance, as long as the local council consider it a proper commercially run tenancy and not a contrived one. A claimant cannot receive LHA when they share the same property as the landlord. A contrived tenancy is one regarded as being set up to exploit the Housing Benefit system, such as charging the tenant when they get benefits but not when they are in employment, for example. You'll need to issue a contract. Join a National Landlords association, attend a course and read up on your responsibilities and the tenants rights on the Landlordzone website.

You can get an idea of the maximum LHA payable for the size of property they are eligible for in that property postcode on the LHA direct website (2 bed property). Remember that LHA rates change and income/savings will affect the sum received.

If you issue the tenancy agreement in your son's sole name, this means that his girlfriend has few rights and virtually no security of tenure. She will not have any more rights than being a guest or visitor in someone's property.

It is extremely risky to let out property to relatives - we often see posts on this forum where tenant/landlord related issues cause a breakdown in a family relationship of vice versa. There's much more at stake and it's easier for informality to creep into the arrangements which causes disputes. Ultimately you have to ask yourself if you'd be happy to evict your own son.

mostlycheerful

“Also.. we are not sure where we stand if they split up? Does she have any right to stay in the house?”

Well, yes, you’re sensibly planning ahead, and you’ve put your finger on a couple of potential problems so, yes, consider worst case scenario and with a kid and being a woman you could find yourselves in a bad situation if they split. About half of marriages in UK break up in the first 5 years so you’ve got about a fifty fifty chance of this going wrong in this way over the next 5 years. And of course courts generally tend to favour single women with kids over men, so, yes, you may find that she can sit tight not paying you any rent for months and months on end and even for 6 or 12 months while you faff about trying to get court orders to tip her out, if that’s what you want to do but can’t bring yourself to go the illegal route and just do it yourself (which plenty of landlords do all the time, often with impunity, as you can read on this and other forums).

Having said this though it’s not necessarily any more risky or mucky than renting your place to strangers, is it, and you may in fact consider it to be a safer bet, at least while your son is still there and the relationship is still ok.

As other posters suggest, though, do you want to risk putting strain on your relationship with your son? Even the strongest of relationships can go to pieces when there’s property and money and such like at stake and then a difference of opinion.

Yeah, tricky, perhaps let us know what you decide, could be helpful for other people. Good luck with whatever you decide.

ecclescake

thank you for all your responses... I agree that it has the potential for family fueds.. at the moment they have moved in with us which is even worse I think.. renting in our area is a nightmare and they just cant get onto the property ladder.. we are going to rent it with a full and legal tenancy agreement that is fixed term so that we can review and renew on a regular basis should circumstances get tricky... but we have made it clear that if payments arent made then they will have to return to live with us..
I just wasnt sure about the housing benefit side of things so thank you to those who have shared that info.

ericonabike

Just to put the case for the defence - my son has just moved into a property my wife and I bought as buy to let, using money obtained from a remortgage on our own house + capital. We have set it up from the start as a commercial tenancy, the only difference being that the rent charghed is about two thirds of market rent and we have not asked for a deposit. [Before anyone asks, we have got a gas cert, EPC, tenancy agreeemtn etc]. This has meant that my son gets a decent place to live, as opposed to the very dodgy end of the rental market that his low wage would otherwise have bought him. Whilst my wife and I have a property that 'may' appreciate in value, but in the meantime the rent covers the mortgage interest. Unless its value [a two bed terrace in rental-land] drops by in excess of 15% we can sell it to repay the mortgage at any time.

The advantage is that I know my tenant's circumstances to the nearest penny! If we were to fall out to the extent that eviction was a possibility, then to be honest I think the house would be the last thing on my mind anyway.

Despite the barrrage of negativity the proposal originally received here, all parties involved are pleased with the outcome. As and when my son moves out we will continue to rent it out, using the experince we have gained to date. Whilst I wouldn't pretend this is the answer for everyone, nor is it the answer for no-one, as many posters seem to suggest.

G_M

We have set it up from the start as a commercial tenancy, the only difference being that the rent charghed is about two thirds of market rent and we have not asked for a deposit.

Contradiction of terms!

If we were to fall out to the extent that eviction was a possibility, then to be honest I think the house would be the last thing on my mind anyway.

The problem is the opposite. If financial issues arose to the extent that eviction was a possibility, then you might fall out..... Imagine the rent dries up for whatever reason but your mortgage still needs to be paid.

ericonabike

We'll have to agree to differ G_M. I trust my financial and filial judgement