Advice on eviction

Somerset

HelenRachel wrote: »

Is there a possibility that the OP could sell the house to an equity release scheme now? Using the equity to pay off the mortgage and then her parents could continue to live in the house?

There's 40K equity - nowhere near paying off a mortgage that I'd guess is over 250K.

silvercar

"When we completed the mortgage my father drafted together this 'contract' which states they can live in the house rent free until death,"

Normally doing something like this would require that the father sign something with the mortgage lender agreeing that, should the lender need to repossess, the father will move out. Without this agreement, the lender may not be able to repossess.

If the solicitor (acting for OP and the lender) knew that the father already lived there and would continue to do so, he would have been under an obligation to the lender to disclose this. Failure to do so leaves the solicitor in a difficult situation with the lender.

OP may also have a problem in breaching the contract with the parents that the parents could live there rent free, should the lender repossess.

Deprivation of assets hasn't been bandied about that much; if the parents need long-term medical care late in life, this could come into play and severely affect the OP.

I think they only look back 7 years for deprivation of assets.

One more thing, the sale (or repossession and sale) of the property could trigger a capital gains tax liability for OP. To look at the gain you would compare the market value of the property at the time it was bought - bearing in mind it was bought with the parents having a life long right to live in it against the sale price.

martindow

The value of the house was 250 000 five years ago. Has its value changed? Maybe is there is more equity now.

This is a terrible situation for you OP - be strong!

BigAunty

DaftyDuck wrote: »

Deprivation of assets hasn't been bandied about that much; if the parents need long-term medical care late in life, this could come into play and severely affect the OP.

It's been mentioned but it is such a complex area, its worthy of a thread to itself. But to recap,the OP should look into how selling their property for less than its worth could potentially affect her parents from claiming means tested benefits and end up with them treated as if they still have that capital (notional capital).The medical care issue can be researched via the Age UK website.

Anyway,its not the OPs problem.

DaftyDuck wrote: »

Equally, I can't see that the parents would be liable for housing benefit, as the disposal of their main asset - the house - and their subsequent occupation of it rent-free would be seen from this point of view.

There's two problems here - firstly, the deprivation of capital/notional capital issue whereby the DWP and local council take a dim view of people intentionally transferring/giving away their assets/selling them for less than they are worth in order to maximise their benefit claims. There's no direct evidence provided here that it was their main incentive to sell their property, nor is it clear it was sold for less than what it was worth.

Secondly, a former home owner cannot claim HB as a tenant for a property that they used to reside in for the first 5 years. However, 5 years has elapsed and while I am starting to get confused here, I believe that they moved to a new property anyway and it was perhaps the capital that was released in downsizing that made them ineligible for HB then.

This may have also been complicated by the 'contrived tenancy' rules that try to prevent the abuse of the HB system between relatives that also have a landlord/tenant relationship. For instance, it can be turned down for not being a commercially operated tenancy and when the tenants do not pay rent when they were in employment but then claim it when they qualify for benefits. Not charging rent in the beginning of the tenancy and then trying to get HB when there was no original liability to pay rent could be seen as a sign of a contrived tenancy. The OP can check the situation with the MSE poster called 'Housing Benefit Officer'.

yes, the OP is suffering as she doesn't get any income for the property and it causes financial hardship but only her parents can submit a HB claim and knowing that they've been rejected before, perhaps having too much capital to qualify or having the note that says they can live their rent free means that they won't apply or can't get it anyway.

Her parents may qualify for HB at their next property when the property has been repossessed or if the OP regains possession of it,if their income/capital is low enough.

Yet again, this is not the OPs problem.

BigAunty

silvercar wrote: »

I think they only look back 7 years for deprivation of assets.

.

Not for local authorities looking into care home matters.

I'm aware the DWP and local council have a formula for working out notional capital but I'm not sure if there is a cap of time on this.

silvercar wrote: »

One more thing, the sale (or repossession and sale) of the property could trigger a capital gains tax liability for OP. To look at the gain you would compare the market value of the property at the time it was bought - bearing in mind it was bought with the parents having a life long right to live in it against the sale price.

Excellent point. The HMRC website has information on how to work this out but if it is repossessed, there must be little equity or perhaps negative equity resulting from it which will mitigate this. The OP should seek expert advice on their exposure to this and factor this into their calculations. For example, the OP has identified some potential equity from the sale of the property should her parents consent to this (unlikely in my opinion) and therefore needs to know that CGT will eat into this.

The_Negotiator

BigAunty wrote: »

It's been mentioned but it is such a complex area, its worthy of a thread to itself. But to recap,the OP should look into how selling their property for less than its worth could potentially affect her parents from claiming means tested benefits and end up with them treated as if they still have that capital (notional capital).The medical care issue can be researched via the Age UK website.

Anyway,its not the OPs problem.



There's two problems here - firstly, the deprivation of capital/notional capital issue whereby the DWP and local council take a dim view of people intentionally transferring/giving away their assets/selling them for less than they are worth in order to maximise their benefit claims. There's no direct evidence provided here that it was their main incentive to sell their property, nor is it clear it was sold for less than what it was worth.

Secondly, a former home owner cannot claim HB as a tenant for a property that they used to reside in for the first 5 years. However, 5 years has elapsed and while I am starting to get confused here, I believe that they moved to a new property anyway and it was perhaps the capital that was released in downsizing that made them ineligible for HB then.

This may have also been complicated by the 'contrived tenancy' rules that try to prevent the abuse of the HB system between relatives that also have a landlord/tenant relationship. For instance, it can be turned down for not being a commercially operated tenancy and when the tenants do not pay rent when they were in employment but then claim it when they qualify for benefits. Not charging rent in the beginning of the tenancy and then trying to get HB when there was no original liability to pay rent could be seen as a sign of a contrived tenancy. The OP can check the situation with the MSE poster called 'Housing Benefit Officer'.

yes, the OP is suffering as she doesn't get any income for the property and it causes financial hardship but only her parents can submit a HB claim and knowing that they've been rejected before, perhaps having too much capital to qualify or having the note that says they can live their rent free means that they won't apply or can't get it anyway.

Her parents may qualify for HB at their next property when the property has been repossessed or if the OP regains possession of it,if their income/capital is low enough.

Yet again, this is not the OPs problem.

If the house is repossessed or sold, and the contract that the OP signed is genuine and legal, I suspect the OP will have a liability towards her parents.

Rocky99

Hi everyone

I have been reading through your posts and thank you all for you input.

I have to say I'm struggling to understand a lot of these elements up for discussion.

I just wanted to clarify figures

Purchase price of property £250000, parents 'gifted' £100000 as a deposit as this was the ONLY way the mortgage company would entertain this mortgage.

Parents took £100000, we took £50000 and paid all fees.
Hoping to use the leftover to plunge into a family house for us. This did not happen so over time was used for mortgage payments and we did purchase a car, which we have no sold and downsized to release some money.

The mortgage payment has been an average of £700 per month. We signed this 'contract' three months after the completion. The tenancy agreement was signed around a year ago. I'm struggling to find this agreement at this moment. I really want to push that although the tenancy agreement was arranged the council officer was informed of everything, we did not pretend any rent was being paid or going to be paid, my parents would have never agreed to that.

The house at the time was given a very generous valuation compared to other houses. Right now the house it is joined to sold 2 months ago for £185000, my parents house is slightly bigger.

If you really get down to it we're possible 5000/8000 'infront' when taking off mortgage payments and fees. But adding up the costs we've incurred moving around etc because we are struggling and have been for sometime we might even break even.

When I signed that contact as a naive 24 yr old I looked up to my dad thinking a parents job was protection. I did not ever consider my father would nail me to the wall in this way...

BigAunty

The_Negotiator wrote: »

If the house is repossessed or sold, and the contract that the OP signed is genuine and legal, I suspect the OP will have a liability towards her parents.

Yes, she might be exposed to litigation by her parents but I see this as a separate action, one that can't forestall the repossession process. If her parents have no money, then they either can't afford to proceed or will have to employ no-win/no fee jokers.

The thing about winning claims for compensation in court is that is only the start of the process, its then another kettle of fish for trying to enforce it. If the OP has limited income and no capital, then I guess part of the settlement would be an affordable repayment programme.

I don't know enough about debt management to know if any CCJs that could result from non payment of any judgement made against her could be simply written off by a debt management order, IVA or bankruptcy or paid back via a token sum. Hopefully the solicitor or the Debt Free Wannabee board members can tell her what kind of court action they may take, what kind of decision could result and how she could mitigate any liabilities found by the court. There's always the prospect of a mutually agreed settlement that means no need to go to court. The OP might be able to successsfully defend the action anyway.

RAS

Does the contract give them the right to exclusive occupation of the named property?

BigAunty

Rocky99 wrote: »

Purchase price of property £250000, parents 'gifted' £100000 as a deposit as this was the ONLY way the mortgage company would entertain this mortgage.

Parents took £100000, we took £50000 and paid all fees.

The mortgage payment has been an average of £700 per month. ...
The house at the time was given a very generous valuation compared to other houses. Right now the house it is joined to sold 2 months ago for £185000, my parents house is slightly bigger.

If you really get down to it we're possible 5000/8000 'infront' when taking off mortgage payments and fees. ..

What have they done with the 100k? What is the sum of debt they owed and do you believe they paid it? You can find out if they have CCJs by paying a small fee for each of your parents, there's an online website for that - that will give you an idea if they are still debt laden.

So the property is perhaps worth 190,000k at best and the mortgage is around 150,000k which leaves after legal/estate agent fees so may leave around 30-35k equity.

As you've paid around £42k in mortgage payments, you view this as you owing them a maximum of £8k (less your legal expenses for the purchase) for their 50k gift.

Will they consider the original 100k gift as a simple exchange to pay their debt or only viable way you could have borrowed the maximum that you could or do you think they will believe that you also owe them this 100k, too?

Rocky99 wrote: »

We signed this 'contract' three months after the completion. The tenancy agreement was signed around a year ago. I'm struggling to find this agreement at this moment. I really want to push that although the tenancy agreement was arranged the council officer was informed of everything, we did not pretend any rent was being paid or going to be paid, my parents would have never agreed to that.

...

It's a shame you can't find the tenancy agreement- I take it the local council won't or can't supply you with a copy? This could perhaps have been used as proof that the rent free agreement had been mutually superceded - what did your solicitor say on the matter.

Again, I am not accusing you of creating a false HB claim for your parents, just that I want to emphasise that perhaps one of the many and multiple reasons why their claim failed is that there was no liability to pay rent, ergo no entitlement to HB - that's not fraud, that it the most basic rule to be entitled to HB in the HB regulations.

The same naivity that led you to pay at least a stonking £8400 per year for the rest of your mortgage term or their natural lives is also indicative of your naivity with the benefits system that doesn't take kindly to claimants gifting 100k of their capital to a relative or only claiming HB when it can be paid by benefits when they would not do so out of their own pocket.