Buying a house to let a friend live for free in

Doshwaster

This all sounds far too complex - legally, financially and in terms of friendship. Wouldn't it be easier just to lend him some money to cover rent for a few months until his equity is released?

rock007

thanks for the replys and advice
going to seek legal advice from a solicitor and maybe head down the private landlord route with low/non-existant rent

jamie11

rock007 wrote: »

thanks for the replys and advice
going to seek legal advice from a solicitor and maybe head down the private landlord route with low/non-existant rent

For it to be an AST the rent must be set at a certain level, below that other rules apply. It is not too high but it must be at least that much.

The_Palmist

you can help your friend in other ways rather getting a house in your name for him. Now buying a mobile contract for a mate with poor credit is different to getting a mortgage and actually paying it for him.
If you do go ahead with this, I look forward to other interesting threads in future from you.

like:

got a house for friend and now he won't move.
gave my house to a mate now can't get a house of my own.
bought mate a house and now he is not returning my calls.
tried to get in my own house and lodger has changed the locks.

list goes on

The_Palmist

be the supportive mate that you are...buy a beer and be there to listen, by buying a house for him, I think you will only add to his misery.

holly_hobby

If you don't have a current mortgage (or held one usually within the 12 mths before application), further complicated by the fact you are a first time landlord, in the main you will strugle to secure a BTL mortgage. (although to be fair Ipswich BS don't stipulate a prescribed period pre app, re the servicing of a prev residential mge).

However, even if you were to satisfy the historical mge issue, as you do not intend to charge or collect rental income, your salary would need to be sufficient to service the mge and all commitments. Notwithstanding related AST issues arrising from a contractual basis, of no apparent consideration i.e no rental income to be received from the tenant.

Dependants mortgage would be another route, but is for depedant family members .... so I'm afraid you may be a bit snookered from many angles.

Hope this helps

Holly

edit - scrap the above, I've just re-read the OPs original post and spotted the very obvoius statement that he doesn't require a mge to buy for his friend ... doh ... had a blonde moment !!! (as a lame excuse to not reading the orig post correctly - I would say that if he did need a mge the above would apply ...! )

mikthe20

Why buy a house for him to live him, especially with house prices going down and wasting interest payments? As said above, it might take years for him to get the equity. You're obviously a good mate - pay his rent somewhere for say 6 months if he's that hard up.

G_M

1) Buy in your name and let him live rent free:
* He becomes a 'permitted occupier' - hard to evict
* you money is tied up - potentially a) long term and b) with little recourse if you change your mind
* avoid AST landlord obligations
* potential disputes over repairs/maintenance/running costs
* it's not your main residence, so you have CGT liability
* as said: stamp duty (x 2 when he buys off you)
* shouldn't affect your future mortgage application as you have no mortgage (I think!)

2) Buy in your name and charge him rent (at whatever rate you decide):
* create a formal AST - you can evict any time after 6 months and move in yourself, or sell
* possible income tax liability - depends what rent you charge
* it's not your main residence, so you have CGT liability
* as said: stamp duty (x 2 when he buys off you)
* you're a landlord - with LL obligations (gas checks etc)
* clarity about repairs/maintenance obligations
* shouldn't affect your future mortgage application as you have no mortgage (I think!)

3) Buy in his name
* all repairs etc his responsibility
* your cash tied up in his property - for.......how long?
* hard to get your cash back if there's a dispute unles...
* you place a charge on the property with clear terms about loan repayment and repossession rights (ie like a bank mortgage)
* only 1 stamp duty payment
* no income tax or CGT tax liability

May well be other pros/cons to each option, and I may have got some wrong!

holly_hobby

rock007 wrote: »

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Would anyone be able to explain to me how this would work legally, especially since i dont own a property of my own? If i decided to buy a property of my own afterwards would any mortgage i needed to get be calculated differently? Even though im not charging him rent would i still need to get the certificates for electricity/ gas etc..

Well as I read it your not actually acting as a landlord - and as there is no consideration (which are the building bocks of any contract) - I believe you can just have this as a friend living in a house that you own - which is exactly what it is. (I feel like I've over simplified that, and I am not a Solicitor so do verify this - but if there is no consideration , there is no contract and that is fact) (Neverdespairgirl - a forum contributor - is a Barrister (although I don't know her field) - maybe she will be able to give you a heads up on Contract Law (as my O level Law is a little bit rusty !).

rock007 wrote: »

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Would i need to worry about CGT in any way?

Yes if not your main primary residence at the time of disposal - the whys and wherefores can be discussed if you require. But there has been a recent flood of 2nd prop CGT threads I've contributed to, so have a hunt through they discuss property related CGT prop, reliefs and allowances.

rock007 wrote: »

Is it just easier to let him live there and say nothing to anyone...if so how would this look me paying council tax at 2 addresses?

Well who would you need to saything to, if you don't have a mge on the property and are not charging or receiving any rent ? (which means no annual self assesment to HMRC is reqd.

Re council tax - not my area of expertise, but if the occupied properties are having council tax paid, I can;t see what the issue would be, if both in your name. Although why can't he have the CT in his name at the prop he will reside in ? I'll have a check on this and get back.

Ok have now verified this - it is not the owner who is responsible, but who is deemed as the liable person.

In this case your friend, unless his main residence is elsewhere - which from your post I don't think is the case.

Here is a link for you to have a read through - http://www.adviceguide.org.uk/index/your_money/tax_index_ew/council_tax.htm#Whohastopaycounciltax

Without wishing to sound patronising - have you really thought about this, and although you are obviusly a very kind and considerate friend, often friends & money spell disaster .... ending in broken friendships and tears.

My worry is if for whatever reason, you don't conduct this as a formal landlord and charge rent with an AST (protecting the legal rights of all parties), if you reqd your investment to be liquidated with your friend refusing to vacate, or worse.

Please take some independent legal advice on this before you take a step further ...

Hope this helps

Holly

evoke

OP: it's a really nice thing to do for your friend.

I can't offer you any advice but I wish there were more people like you around!