Renting to my Mother

fridgidusdude

Hi all
(new to this so please be patient)
Both my wife and I are 52 and recently inherited a sum of money from my late aunt.
My Mother is 82 and on H/B and currently lives in a council flat, she has 20 plus concrete stairs to go up and down every time she goes out, and she is totally unhappy about her situation, and so are we due to the fact that she has already fallen once in her flat resulting in a broken wrist, so my questions are as follows and I would be most grateful for any comments.
Our intention is to buy her a little bungalow closer to us, and we are aware of the contrived tenancy rule, but having spoken to DHSS we do not think this should be to much of a problem (ha ha)
comments welcome on that point.
The main issue we have is that do we buy outright and pay 20% tax on the rental income, or do we look for a buy to let mortgage to off set the tax and save some capital for ourselves??
Thank you in advance

slopemaster

I'm not an expert but I think BTL mortgages don't generally allow you to let to close family

Old_Git

slopemaster wrote: »

I'm not an expert but I think BTL mortgages don't generally allow you to let to close family

but if you havent bought how do they know who you are renting to

specialboy

Have you been to the council to see if she can swap for something more suitable?

lighting_up_the_chalice

fridgidusdude wrote: »

Our intention is to buy her a little bungalow closer to us,

What a lovely thing to do. You must care for her deeply.

fridgidusdude wrote: »

and we are aware of the contrived tenancy rule, but having spoken to DHSS we do not think this should be to much of a problem

Oh, I see. You want US, the taxpayer, to buy it for YOU. Not so lovely after all.

You're going to really struggle with the whole contrived tenancy thing. And rightly so.

If your mother is struggling with the stairs, has she approached the council with regards to a move to more suitable accommodation? At least that way she will have security of tenure without being reliant on your financial good fortune. If you really wanted, you could still buy a property and let it on the open market.

lighting_up_the_chalice

Old_Git wrote: »

but if you havent bought how do they know who you are renting to

Because no-one would suggest being dishonest to a lender, would they?

brit1234

Old_Git wrote: »

but if you havent bought how do they know who you are renting to

Reading your thread:
https://forums.moneysavingexpert.com/discussion/4962776

You seem to be a dodgy landlord, I actually feel sorry for your tenants.

To the original poster, you would have to find a mortgage provider that allows this and be open with them. A few exist.

However I am not sure housing benefit people would be happy at all and probably be illegal. You could get round this by buying the property, stop claiming the benefit and let your relative reside rent free through a normal residential mortgage. Probably the ethical thing to do.

Morglin

Housing benefit if renting from family

If you rent your home from a family member, you may not be able to claim housing benefit, depending on your relationship with the family member and the type of rental arrangement you have with them.
Key advice

Housing benefit if living with other family members

If you (or your partner) rent a home, or a room in a home, from a close family member who shares all or part of the home with you, you won’t receive housing benefit, even if you are paying them rent. This applies if you are renting from a:

• parent or step-parent
• father-in-law or mother-in-law
• child or step-child
• son-in-law or daughter-in-law
• brother or sister (including half-brothers and half-sisters)
• brother-in-law or sister-in-law
• partner of any of the above.

Housing benefit if living in a property owned by a family member

If you live in a property owned by a family member and pay them rent, you may be entitled to housing benefit. However, the council will want to take a detailed look at your agreement with your landlord.
You won’t get housing benefit if:

• you're not paying rent on a commercial basis
• the arrangement has been set up to take advantage of the housing benefit system – this is called a ‘contrived tenancy’. For example, if your landlord only asks you to pay rent when you are not working (and so are eligible for housing benefit), but not when you are working (and earning too much to qualify for housing benefit), this would be a contrived tenancy.

http://england.shelter.org.uk/get_advice/housing_benefit_and_local_housing_allowance/what_is_housing_benefit/housing_benefit_if_renting_from_a_family_member


Lin

elmer

The DHSS haven't existed this century, I hope you spoke to your local council regarding Housing Benefit.
In my area, one of the considerations for HB is, would you evict if the tenant got into arrears? If you wouldn't,(and I would hope you wouldn't) then it is a contrived tenancy and no HB is payable.
Perhaps sheltered housing would be a good option?

fridgidusdude

Thank you for your answers, but I must add, Yes I have already approached our local council and there is a long waiting list for suitable alternative accommodation possibly a few years, and the real situation is we are not looking to make a proffit from this, the rent that would be paid would be less than half of what we could get on a private rental agreement, what little profit there may be would go towards the house insurance and extra cost for heating etc, we are simply trying to help her and look after our only asset, we have very little savings and no pensions.

Principia_2

fridgidusdude wrote: »

the rent that would be paid would be less than half of what we could get on a private rental agreement

Personally I think that would be a huge pointer towards a contrived tenancy.


If the council will not pay housing benefit (and rules may change in the future even if your mother could claim now) how would the rent be paid and could you recover your costs and/or protect your investment?


Would it be worth considering renting to someone else and using this money to subsidise renting a more suitable place for your mother?