Advice about renting to girlfriend

InkyBlue

Hi
My girlfriend and I need to continue to live separately for another couple of years. (We don't want to move children from previous relationships to different schools / areas.)

Our finances are mostly separate at present.
She has a low income and struggles to pay her mortage, and because she's a homeowner, she can't claim housing benefit.
If she was in rented accommodation, she could claim housing benefit.
Her house needs work and she probably has zero equity. It might also be hard to sell without fixing it up a little.

My income is also low, but my house is paid for.
I have a lump sum earning very little interest. I'm wondering if I should clear her mortgage / buy her house.

If I bought her house and rented it to her (at a lower rate than her current mortage payments), would it be legal for her to claim housing benefit?
(I would never live at, or even stay over, at her house - it's too small.)
Thank

Rollinghills

Yes, I think she could legally claim housing benefit as she would be renting.

Do you have enough cash to buy the house outright? Or would it be a buy-to-let mortgage for you?

Either way I am not sure if it is the best thing to do, you should carefully consider the alternatives, such as helping her do the house up a bit (how much would that cost?) and selling it in the open market. Have you looked carefully into how much the house could be worth?

If you buy it and later decide to move in together, would the house be a good renting opportunity?

If you don't split but your gf has trouble paying you rent what will happen? If you split would you still happy to be her landlord assuming she can pay rent?

Pixie5740

Is the plan to buy her property at the full market rate or are you suggesting that you only pay the outstanding balance of the mortgage with her gifting you whatever equity is in the property and then letting the property to her?

I think this is what the council would call a contrived tenancy meaning that your girlfriend would not be eligible to claim housing benefit.

InkyBlue

Thanks for the replies - there is quite a lot to consider, and they are useful points.

The house is worth about the value of the mortgage - her late husband increased the mortgage, to pay off personal loans.

Perhaps it's simpler to buy some other house and rent it to a stranger.
On the other hand, renting to someone I trust seems more appealing.

Helping her fix up and sell the place is a good idea too.

theartfullodger

a) Sounds like that would be likely assessed as a "contrived tenancy" and HB/LHA refused... (She could appeal..) if her circumstances ever changed and she could/did apply for HB/LHA. See
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

b) IMHO: Never rent to friends or relatives: NEVER! By all means - if you trust her - act as guarantor for her renting from someone else, but don't rent to her..(renting from someone else would not hit the "contrived tenancy" problem but **). Hereabouts & landlord sites are rank with stories of such well-intentioned moves ending in tears, financial losses, relationship breakdown... However your life, your assets, your relationship, your decision.

c) Golden rule in lettings: Only rent to those you are prepared to evict, in the full glare of publicity... (i,e, not her..)

d) (No offence intended but...) I have always wanted any partner or any of my offspring to be self-sufficient & be able to look after themselves... but yes, I know, some can't... The world is getting harder & more unfortunate.

** She owns a house: So if sold it the HB/LHA people would want to understand why with all the proceeds she was still wanting/expecting HB/LHA: Expect a refusal if she goes that way, whoever she rents from (appreciate you think no equity). See eligibility for HB/LHA & savings here...
https://www.gov.uk/housing-benefit/eligibility

Cheers & I hope the relationship flourishes....

Rollinghills

theartfullodger wrote: »

a) Sounds like that would be likely assessed as a "contrived tenancy" and HB/LHA refused... L]

** She owns a house: So if sold it the HB/LHA people would want to understand why with all the proceeds she was still wanting/expecting HB/LHA: Expect a refusal if she goes that way, whoever she rents from (appreciate you think no equity). See eligibility for HB/LHA & savings here...
https://www.gov.uk/housing-benefit/eligibility

From OP's comments there is no or very little equity in the house (or perhaps even negative equity as some people are embarrassed to admit the true extent of their difficulties). So I can't see how "contrived tenancy" would apply (although selling in the open market and renting elsewhere might be preferable for other reasons mentioned). There is a rule against living in the home of a close relative so that is something to consider but I don't think a bf is considered a close relative.

I can't see why the lady would in not be eligible for HB were she to rent after selling her house for the value of her mortgage. HB does not exclude previous homeowners.

marliepanda

I thought there was a rule that you cannot claim housing benefit on a house you previously owned for a certain amount of years after sale?

Pixie5740

The OP mentioned charging rent at a rate less than the current mortgage repayments. If that rent also happened to be below the market rate and if the OP would be unwilling to evict his girlfriend should she fall into arrears then it would probably be a contrived tenancy. Boyfriend/girlfriend is not a usual landlord/tenant relationship as in this case the tenant would be a tenant claiming housing benefit with benefits if you see what I mean...

There's also the question of whether, if this wasn't his girlfriend's house, would he ever consider it as a BTL investment. The answer is probably not so maybe it's best just to get the place done up and sold, or sold as is, if that's possible and for the girlfriend to rent somewhere else.

terryw

marliepanda wrote: »

I thought there was a rule that you cannot claim housing benefit on a house you previously owned for a certain amount of years after sale?

Yes. This is the former owner rule. Sorry can't give links on this tablet but Google will provide links.

InkyBlue

Thanks again everyone.
Sometimes I get carried away wanting to help people. Your comments have helped me get things in perspective and think more about the risks.

G_M

* When applying for HB it might or might not be deemed a 'contrived tenancy'. Do you really want to find out at that point......?

* If for any reason she went into rent arrears, would you
a) continue to pay your mortgage and swallow the extra cost from your savings
b) reduce/stop your mortage payments and go into mortgage arrears
c) evict your girlfriend and get a paying tenant instead?

* New landlords: advice, information & links