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

xylophone

Could you "buy" your mother's house for fair market value with the appropriate share in the new house as consideration?

Let us suppose the new house will cost £500,000. You have say £335000 in cash. At the moment, your mother has her house and say £165000 in cash.

You buy the house but because your mother has "sold" her house to you, her share of the house is £135000 plus £125000, ie £260000.

Therefore the TIC split would be 52% /48%.

You would own your mother's old house and would be wholly entitled to the rental income.

Your mother would not have deprived herself of capital because she would have received fair market value for the asset.

You would then have to consider what might happen if your mother had to go into a care home.

Of course it might be the case that your mother has enough income to support her in such a case .

If not, and she required LA funding, the LA could hardly turn you out of your home but might want to put a charge on your mother's portion of it. On the other hand they might disregard it.

http://www.thisismoney.co.uk/money/experts/article-2181497/How-navigate-care-fees-maze-long-term-care-questions-answered.html

Your mother should engage her own solicitor to discuss the whole question - she would also be well advised to address the question of her will, as indeed would you.

She might wish to consult a solicitor specialising in the needs of elderly clients - I found this example when I googled http://www.furleypage.co.uk/personal/elderly-client-services/ but no doubt there are others.

The STEP web site might also be of interest http://www.step.org/online-directory

And if an IFA is required, http://www.unbiased.co.uk/

littlepinkbiscuits

Thank you xylophone. In effect I am buying mum's house from her, because I would be gifting part of my share of the new house to her, ie the profit from the sale of my own property and some savings.

At the end of the transactions, I want it to show we still have the same proportions of capital (or property) as we both started out with. Presently it is two fifths to me and 3 fifths to her. If I own a quarter of the new house and her house, that will be two fifths of everything, same as now.

I hadn't considered that it looked like I was trying to deprive her of assets, but I suppose it does.

If mum needs assistance later in life, I am happy to provide it. I have no intention of turfing her out to a care home.

onlyroz

littlepinkbiscuits wrote: »

If mum needs assistance later in life, I am happy to provide it. I have no intention of turfing her out to a care home.

Very noble of you but if she develops advanced dementia you might find that her care needs exceed your ability to provide them.

littlepinkbiscuits

So we shouldn't move house because of the small chance that in several years time, mum might develop dementia, or some other problem that I may not be able to manage?

What is noble about accepting that a relative will need your help at some point?

onlyroz

littlepinkbiscuits wrote: »

So we shouldn't move house because of the small chance that in several years time, mum might develop dementia, or some other problem that I may not be able to manage?

What is noble about accepting that a relative will need your help at some point?

You seem to have missed my point. I'm not saying that you shouldn't do this, but you also should consider the possibility that your mum *might* need to go into care.

I agree that the "system" is stacked against arrangements like this, and hurdle after hurdle is put in your way if you genuinely would like to help an elderly relative. But having said that, it's not wise to stick your head in the sand and hope for the best.

littlepinkbiscuits

If the only thing to consider in this is the chance of a LA having a charge on mum's share of the house to cover any care home charges she might incur, then that is fine.

stevemLS

There is case law that says where a bank, for example, are granting a loan secured on a jointly owned property for a business purpose, the bank must ensure each party has had independent legal advice.

This, I imagine, is a similar scenario - it is part of the solicitor discharging their professional duty of care to you.

Errata

If mum needs assistance later in life, I am happy to provide it. I have no intention of turfing her out to a care home.

Would you be able to provide 24/7 care if it was needed?

Pricivius

On top of the issues raised above, have you considered what will happen if either you or mum or both of you get married? You both move partners in - would that work? You start a family? One of you gets divorced?