Retired parents renting their house from me and cannot afford to pay

xylophone

You are a landlord.

Your mortgagee was aware of the gifted equity and is content that you are renting to your parents?

Have you been declaring the rent for tax purposes?

Your parents have made you a gift of £75,000 - this could be regarded as deprivation of assets if either of them need care.

If you cannot afford to pay the mortgage, you will need to sell and repay your parents their £75,000 - or lend it to them interest free on the basis that if there is any capital left when they die, you will be entitled to it.

In view of their ages, they might be able to get some kind of sheltered accommodation through a housing association - the capital would enable them to pay the rent and supplement their pensions.

agrinnall

I don't think (although it's one of the many areas in which I am not an expert) that housing benefit is payable when the property is owned by another close family member.

suki1964

agrinnall wrote: »

I don't think (although it's one of the many areas in which I am not an expert) that housing benefit is payable when the property is owned by another close family member.

It can be, but you have to prove its not a contrived tenancy , which in this case, from what's been posted, there's not a cat in hells chance of proving

lewishardwick

Sell the house. Pay off the mortgage. Whatever is left you give to your parents to either rent something for the remainder of their lives, or buy mortgage free so they have a roof over their heads.

If they are struggling with £200 rent and relying on state pensions, it seems insane that they have should ever sell you their home for 50% of its market value. You don't sound in much of a better place if missing £200 a month will put pressure on your family finances. Rid yourself of the stress (and potential legal bill from not fulfilling landlord legal obligations).

onlyroz

How big is the house? Could you take on a lodger in a spare bedroom?

urbanhim

"One does wonder if this was one of those deprivation of assets workarounds that's crumbling at the seams already"

It wasnt... My father remortgaged his house to fund his building business which did not workout, being of a certain generation and in some respect an idiot, he thought a hand shake was strong enough but unfortunately it was not and he lost a fortune. Having remortgaged and only paying interest on the property the time came on his 70th birthday where the bank said we want the mortgage paid in full now. Which he couldnt do, for my mothers sake as the long suffering wife (baring in mind he didnt tell her that he remortgaged the house). I had to step in buy the house from them. We tried the route of just transfering the mortgage over to me but it didnt work. My parents therefore had to sell the house to me for just what they owed. We had to sign loads of forms of course, and had to declare various things before I could get a mortgage on a house whereby I wasnt living in it but it was to remain occupied by my parents. The mortgage is around £700 a month, to help out my dad offered to pay £200 towards this, its not official rent that I charge them, but the £200 is needed by me at this stage. Ideally I would love them to live there for free, but that £200 a month is a huge help to my family and I.

I dont want to make any money from this house, I merely done this as I didnt want them to lose it. I cant really afford this mortgage, and its caused all kinds of problems with my wife and I (as she said they should just sell it move) but they love the house and for mothers sake the only real option for me was to buy. With the fact that when they die, I should at least get my money back. If I have to sell it to cover their care then i'll happily do that, i'd love to be able to pay for their care. When they die, I will sell and if I have to give any money back to government for whatever reason there might be, then so be it. Its not a scheme where I want to make money. In an ideal world this would not have happened. Ideally they would've paid their mortgage and retired happily without anything to pay, but that is not the case. I dont like the fact they pay me £200 a month, i'd love to not need that so they can have that to themselves. And hopefully in a few years I won't need that money, but at the moment as my children are young, I do need it. If ever my salary increases, then I decrease what my parents pay me.

So I was just wondering if there was a way in which we could take the official landlord / tenant route and I get an official tenancy agreement for £200 a month until the mortgage is paid and (when they would then live there rent free). ffectively though, its me who needs help with the £200 and not really them, so i'll need to work out what I can do from my side.

Unfortunately I too am disabled without benefits, so makes it tough to find evening work but i'll have to see if there's someway or another where I can increase my income by £200 a month to cover it.

Thank you all for your time.

xylophone

My M-I-L went through a solicitor to set up a trust arrangement to try and protect her property (inheritance for my wife and her brother) should she ever need to go into care. This was a few years ago now so I think the trust is now effective and the Council couldn't force the sale of the property to pay/contribute to care costs. (Until or unless the law is changed, I guess).

http://www.telegraph.co.uk/finance/personalfinance/insurance/longtermcare/10117822/Warning-over-care-home-trust-schemes-that-promise-to-protect-your-property.html


http://www.solicitorsforolderpeoplescotland.co.uk/guides/Guide-To-Planning-for-Care-Costs.pdf

A Discretionary Trust can be set up and the house transferred into the Trust. This puts ownership of the house beyond your own reach and therefore the asset does not belong to you. At the same time your own
right to occupy the house is protected as the Trust will not become bankrupt, divorced or die. There are various other benefits from completing such trusts and these may include taking the property out of an assessment for care costs, therefore avoiding the need for it to be sold. However Capital Gains Tax may well arise on a future sale of the property and the local authority might seek to attack the arrangement as a ruse intended primarily to try to avoid nursing home fees as in Option 1.

G_M

You own a property.
You permit someone else to live there.
You receive rent in return.

You are a landlord.

You should be complying with all the relevant leglislation including declaring the income to HMRC.

An 'unofficial' landlord is simply someone who is breaking the law, but who thinks that because it's within family it's a) morally OK and/or b) safe as no one will know.

Your parents have gifted their equity away - this is "Deprivation of Assets" ie giving away savings, investments, property etc in order to get below the maximum threshold for claiming various benefits/care home costs etc.

The benefits Office is likely to consider this a 'Contrived Tenancy' uness you are able to prove the rent is full market ret - in most cases they require the landlord to have let the property on the open market prior to letting to family.

Another issue not yet raise is Capital Gains Tax. If/when you dispose of the poperty (sell/give it away) you will be liable for CGT since it is not your main residence.

Options:
1) evict your tenants for rent arrears
2) subsidise your tenants and allow them to live there rent free
3) sell the property back to your tenants (see CGT above) and let them manage their own mortgage and other financial affairs
4) Sell the property and buy a cheaper one which you then rent to your existing tenants
5) Sell the property and allow the tenants to move in with you

Note I consistantly refer to 'your tenants' - this is deliberate because this is what they are. They are not "unofficial tenants" any more than you are an "unofficial landlord".

See also:

* New landlords: advice, information & links

luvchocolate

I am really surprised your mortgage lender allowed you to rent to family, they usually make you jump through hoops and need to show them you can pay this mortgage if the family member do not.
I believe its a regulated buy to let mortgage you should have.

urbanhim

G_M wrote: »

You own a property.
You permit someone else to live there.
You receive rent in return.

You are a landlord.

You should be complying with all the relevant leglislation including declaring the income to HMRC.

An 'unofficial' landlord is simply someone who is breaking the law.

Your parents have gifted their equity away - this is "Deprivation of Assets" ie giving away savings, investments, property etc in order to get below the maximum threshold for claiming various benefits/care home costs etc.

The benefits Office is likely to consider this a 'Contrived Tenancy' uness you are able to prove the rent is full market ret - in most cases they require the landlord to have let the property on the open market prior to letting to family.

Another issue not yet raise is Capital Gains Tax. If/when you dispose of the poperty (sell/give it away) you will be liable for CGT since it is not your main residence.

Options:
1) evict your tenants for rent arrears
2) subsidise your tenants and allow them to live there rent free
3) sell the property back to your tenants (see CGT above) and let them manage their own mortgage and other financial affairs
4) Sell the property and buy a cheaper one which you then rent to your existing tenants
5) Sell the property and allow the tenants to move in with you

Note I consistantly refer to 'your tenants' - this is deliberate because this is what they are. They are not "unofficial tenants" any more than you are an "unofficial landlord".

Thank you, firstly, I dont declare the income as its not rent that they pay me, I pay £700 mortgage on the property and my dad gives me £200 to help. There is no tenancy agreement, I have of course had to sign various forms to the mortgage lender declaring the current situation.

I am of course a landlord, but effectively they are living there for free as I will no longer be receiving that £200.

Secondly, I dont want to breaking the law so I will look to address this and get legal advice on what I need to do.

And lastly, I dont care if I have to pay CGT, i'm not doing this to make money. I'm doing it so they do not lose their house. If and when I sell it, I do not care if I have to a CGT, I will be happy to do so. Also, I do not expect my parents to get free care either, if and when they need a care home I will pay for this for as long as I can with whatever money I can get from the sale of the house they are currently occupying.