What are the pitfalls of buying a house with a relative?

littlepinkbiscuits

Hi, I wonder if anyone can offer advice or info on the following.

I have sold my house stc, and am buying a property with my widowed mother, with the intention that she will have someone to look after her in her dotage and we can afford something detached and in a village. I am an only child. We are cash buyers and she is contributing a third of the new house cost. I would like us to buy as tenants in common with a two third/one third ownership split. Solicitor will not continue with purchase until we have taken advice from a financial advisor. I will do this but wondered what is obvious to the solicitor that isn't to me? I am not taking anything from mum, she will legally own a third of the property to match her contribution.

Mum also owns her own home and we plan to rent this out in the future but it needs work doing to it. We would like to transfer this property into my name (house is valued at less than £125k)and at that time increase mum's share of our joint property so that we still have the same proportions of property, if that makes sense.

BitterAndTwisted

Ask the solicitor why he advises you see a financial advisor? I can understand why he would advise that you both seek separate legal advice but not financial.

The ownership as tenants-in-common sounds perfectly sensible to me.

Sorry, but I don't follow your reasoning for Mum to transfer ownership of her own home to your name. Do you mean that at the time of purchase your shares will be 66/33 but at the time of transfer it will change to 50/50, or something else. Seems a bit of a long-winded way to arrive at the final position, as it could attract two lots of legal fees.

Could you please clarify?

littlepinkbiscuits

Thank you for your reply.

We would like to transfer mum's property into my name so I can get an income from the rental. at that point I would like mum to have a bigger split in the joint house to account for this.

Mum has pensions and therefore would have to pay tax on any rental income and she is really too old to be working out tax returns etc. I have recently been made redundant and presently neither work nor claim benefits, but will be a landlord as my job.

Are you suggesting that we could do the buy/sell and transfer all in one go?

martindow

littlepinkbiscuits wrote: »

Thank you for your reply.

We would like to transfer mum's property into my name so I can get an income from the rental. at that point I would like mum to have a bigger split in the joint house to account for this.

Mum has pensions and therefore would have to pay tax on any rental income and she is really too old to be working out tax returns etc. I have recently been made redundant and presently neither work nor claim benefits, but will be a landlord as my job.

I don't think doing tax returns should be a decisive factor in this. It is not very onerous and in any event you will be there to assist.

Is being a landlord really going to be a job either in terms of the work involved or annual income?

littlepinkbiscuits

No, it isn't a job as such, but will provide an income for me and give me something to declare to the taxman.

We had the option of selling either house but as mine was done up to a more modern standard and received a much higher valuation, we sold it.

I am trying to figure out what makes all this seem so fishy to an outsider that we have to have financial advice before we can proceed.

New_User

Not an expert, but...

Have you considered the implications if your mother needed to go into a care home?

Presumably she will be leaving everything of hers to you in her will?
So what about your mother giving you the money and you putting everything in your name.

Then you can just let her live in the house for free....?

littlepinkbiscuits

The phrase "deprivation of assets" springs to mind!

BigAunty

Have a look at the Age UK factsheet on care homes, home ownership and deprivation of assets/capital. Perhaps your legal advisor is asking you to consider the risks involved with joint ownership or transfer of capital when it comes to future means tested care or benefits.

Cheeky_Monkey

littlepinkbiscuits wrote: »

The phrase "deprivation of assets" springs to mind!

Yes and it seems to me that that is exactly what you are doing!

If she had to go into a care home and fees were payable by her, her own house couldn't be sold because it's in your name and the house you share presumably couldn't be sold either because you own half of it.

Is that not the case?

booksurr

New_User wrote: »

Then you can just let her live in the house for free....?

very bad idea

mother would be living rent free in a house which was purchased using money given by her to the property owning son - that is called a Pre Owned Asset and therefore is taxed as such - google POAT on HMRC website

booksurr

Cheeky_Monkey wrote: »

Yes and it seems to me that that is exactly what you are doing!

If she had to go into a care home and fees were payable by her, her own house couldn't be sold because it's in your name and the house you share presumably couldn't be sold either because you own half of it.

Is that not the case?

agreed

but if the council do investigate/spot they can easily resolve it by placing a charge on the half house still owned by mother

yes the son cannot be forced to sell whilst he is still in occupation but the council can soon sort out a method to get its money eventuially if deprivation of assets is judged to have taken place