Buying a house outright for my sister...

ShanTats28

marksoton wrote: »

Last time i looked mortgage companies were for profit organisations.

What do you mean everything else?

What I mean is, I will find out what a fair/reasonable charge for rent is for this property that she can afford. She will also pay the bills and council tax. There will be no interest or anything like that.


I will cover the costs of any repairs without adding it to her rent and other costs included in renting a house to someone.

missbiggles1

Will she be paying the rent out of earned income or benefits?

marksoton

ShanTats28 wrote: »

What I mean is, I will find out what a fair/reasonable charge for rent is for this property that she can afford. She will also pay the bills and council tax. There will be no interest or anything like that.


I will cover the costs of any repairs without adding it to her rent and other costs included in renting a house to someone.

In which case the first charge option is better.

booksurr

ShanTats28 wrote: »

Could you explain in more detail what a first charge entails? I have not heard of this before?

Would she first have to pay tax on the money I gave her, would it be classed as a gift it is to buy property with etc?

a first charge simply means the house cannot be sold by her (she would be its legal owner afterall) until the money she owes you has been repaid to you.

It is how every mortgage lender across the whole country operates. When a sale is agreed the solicitor dealing with the sale makes sure that the money coming in from the purchaser is first used to repay the loan. Once that money has been paid out, only then will anything left over be paid over to the property owner

if you lend your sister the money so she buys in her name she could quite legally sell the property and not repay one penny to you since it would be her property, not yours. To protect the fact the money is a loan from you, it is quite normal to put a first charge on - your solicitor will do that for you, you don't need to know how to do it, merely that you want it done.

there is no tax on gifts of money

ShanTats28

booksurr wrote: »

the gas safety inspection and annual is the only thing required in law that you must do

landlords are advised to follow the electrical safety inspection requirements (a Periodic Inspection Report") but it is not a requirement. However, if the electrics kill her and you did not have the relevant paperwork to hand you would be "done" for failing to take due care

read every word of GM's guide for new landlords (link below) and every word of each link therein because you are liable for loads of things you have no idea about even though she is your sister. Obviously you will also have to pay the higher rate SDLT when you buy and declare the "rent" for your own income tax



only if the rental property is in Scotland. You do not need to register as a Landlord if the property is anywhere else in the UK since it is not going to be a house in multiple occupation, it is only going to have your sister in it (plus partner if she wants of course)

Thank you, this really helps, I appreciate your time. I want to everything above aboard so won't be skipping on this, that and the other. I just wanted to know what is required and what I need to do and this answers it for me!

ShanTats28

missbiggles1 wrote: »

Will she be paying the rent out of earned income or benefits?

It will be from money earned, she doesn't receive benefits.

Hoploz

This is the second time this week the question of registering as a landlord has come up. Although it is not a nationwide requirement, in some areas you actually DO need to do so. The advice should be to contact the local council concerned and check.

Please google Landlord Licence and you'll see what I mean. For example, here: http://www.hastings.gov.uk/housing/landlord/housingselectivelicence_advice/

flashg67

Hoploz wrote: »

This is the second time this week the question of registering as a landlord has come up. Although it is not a nationwide requirement, in some areas you actually DO need to do so. The advice should be to contact the local council concerned and check.

Please google Landlord Licence and you'll see what I mean. For example, here: http://www.hastings.gov.uk/housing/landlord/housingselectivelicence_advice/

Agreed, where I am (NW), licensing is only in certain ('poorer')areas, so literally, one street could require a licence, the next may not, and my council is looking to expand the areas over time. Ours is £500 for a 5 year licence and means further obligations are made on the landlord.

Check your local council website to confirm. They're not the end of the world to comply with, but the costs need to be factored in.

Carrieanne

ShanTats28 wrote: »

It will be from money earned, she doesn't receive benefits.

If you go ahead and purchase the property in your name and become your sister's landlord then you would be well advised to do everything by the book, and visibly so to the authorities - meaning a tenancy agreement, annual gas inspection, register with HMRC for tax purposes, rent book and a month's rent deposit placed in one of the accredited schemes. I say this because if in the future she falls on hard times she may need to seek state aid to satisfy the rent (or some part of it) via Housing Benefit. If that scenario were to unfold then the Local Authority would examine the previous history due to your close relationship and rules surrounding contrived tenancies (aka not a commercial tenancy). Should you treat her as a tenant as you would a total stranger then the LA would have a tough job justifying a denial of any HB, providing of course her savings/assets didn't exceed the £16k cut-off threshold.

Alice_Walker

Carrieanne wrote: »

If you go ahead and purchase the property in your name and become your sister's landlord then you would be well advised to do everything by the book, and visibly so to the authorities - meaning a tenancy agreement, annual gas inspection, register with HMRC for tax purposes, rent book and a month's rent deposit placed in one of the accredited schemes. I say this because if in the future she falls on hard times she may need to seek state aid to satisfy the rent (or some part of it) via Housing Benefit. If that scenario were to unfold then the Local Authority would examine the previous history due to your close relationship and rules surrounding contrived tenancies (aka not a commercial tenancy). Should you treat her as a tenant as you would a total stranger then the LA would have a tough job justifying a denial of any HB, providing of course her savings/assets didn't exceed the £16k cut-off threshold.

A tenant would be charged more than the mortgage payment. One of the key tests for a commercial tenancy is if a market rent is charged.

OP you do need to think about what would happen if your sister could not pay, or if she decided to move out.