house for mum

sharynm

hi

I'm wondering if somebody can give me some guidance. I've tried to find the answers on here and online but still confused. I inherited some money this year from my father who hasn't been married to my mother since I was a baby (filled in the probate forms etc myself with some guidance on the other moneysaving forum!)

I'm in the middle of buying a house closer to me for my mum to live in as she's getting older and lives a few hours away. She currently has her house on the market and will probably sell for around 130k. I've purchased a bungalow for 190k (no mortgage) I'm not doing this to make any money, or avoid tax etc and don't want to charge her any rent (though I will suggest she puts a fair amount of her money away so that she isn't tempted to blow it!) I was originally thinking of renting it to her but it appears to be lot of hassle and i'll pay 40% tax and as i wasn't originally doing it to make money, or deprive her of any assets I think it's better to just let her live there.

I own my own home outright with no mortgage (I've had to pay the extra stamp duty on the new one) but i'm not sure what else I need to be aware of if i'm not charging rent. Do i have to have all the yearly checks on gas etc and certificated, landlords insurance, tenancy agreement? this all seems a lot of hassle for just moving her nearer to me

I understand that I may be tying up my money for 15 years or so but i'm in a fairly lucky position as I don't have any children that have drained the coffers! I'd like her to live somewhere nice while she can still enjoy it. I'm 52 and she's 75. she will have to pay all the bills and upkeep and decoration of house etc, basically as if it were her own

will the tax man presume i'm charging rent even though I'm not and how do I prove this? answering my own question, I suppose if she still has her house sale money she can't be paying me

If anybody has any ideas on things I've not mentioned above, please feel free!

xylophone

The taxman will not assume that you are receiving rent.

You have bought (rather than inherited) but see

https://www.thisismoney.co.uk/money/buytolet/article-4487684/Can-let-property-family-member-no-rent.html

re your responsibilities as a landlord.

You will note the advice concerning a formal agreement - it seems that your mother has full repairing responsibilities so cover in the agreement for her protection and yours.

You have made a will to protect your mother in the sad event that you should pre decease her?

Would your mother benefit from independent advice on how to save/invest her capital?

allypally26

You’d need to seek legal advice but you might be able to put in place a lifetime lease.

So you own the freehold and your mother has a lease for the property which ends on her death.

sharynm

thanks for the replies. Yes I have a will and my estate goes to my brothers children as I don't have any so he wouldn't throw her out ( I hope :-) ) his children are also small so its not as if they would want to live in it. I'l have a read of the attachment thanks.

It was responsibilities I wanted to get away from but it looks like that isn't possible re being a landlord

She probably would be better investing it. I'm always concerned about her getting scammed which wasn't a problem before as she didn't have much money but moving forward

ill check into the lifetime lease also

thanks again

trailingspouse

If she's selling her house, why didn't she just buy another house nearer to you? Would have avoided CGT, you wouldn't have had any landlord responsibility, etc etc etc. If there was a shortfall between how much her house sold for and the cost of the new one, you could have gifted her the difference. Then, in the fullness of time, if she needed care, she would have had the house to sell if needed.



In the current scenario, her capital is sitting idle, and she has all the hassle of house ownership (repairs etc) without the benefit of any gains the property market might make in the coming years.


I think you both need to take independent financial advice.

xylophone

As the OP has the capital, she might lend her mother the difference between mother's sale proceeds and the purchase price of the new house and take a first charge against the property.

It would be possible to set the loan up in such a way that on sale a proportion of the sale price as well as the principal was repaid.

However, such an arrangement would have income tax/possible CGT tax implications so should be discussed with a qualified professional adviser.

sharynm

thanks I had also thought about this but wasn't sure if my charge would be the first charge if she needed care in the future (or if a council would move ahead of me)

I really don't want all the LL duties, which i thought I would avoid if I wasn't actually charging her rent or running it as a business, but it appears not, so this may well be the way we go. I did want her to have some capital left to have a good time but i could still do this and just not leave her as much!

I think I need to talk to a Solicitor

PasturesNew

sharynm wrote: »

I really don't want all the LL duties, which i thought I would avoid if I wasn't actually charging her rent or running it as a business, but it appears not, so this may well be the way we go.

It's not that bad/hard to do realistically in your position.

You'd want mum to be safe, so an annual gas inspection is a good thing... and all the other stuff.

Once you've done it once, it'll tickle along nicely.

In trying to avoid the "landlord duties" you might be cutting your nose off to spite your face really...

sharynm

I must admit I haven't looked into all the full LL duties and the thought of the gas inspection etc doesn't particularly worry me. I think I was more concerned about which duties I could ignore (such as deposit scheme) and which were a must, as in the gas inspection and smoke alarm. I need to check also if I need to have LL house insurance or just normal house insurance. I need to call a couple of insurance companies to find out

xylophone

if my charge would be the first charge if she needed care in the future

A First charge is just that........

A lender with a first legal charge over a property has a first call on any funds available from the sale of the property.

You should discuss the situation with your solicitor and decide on the best way forward.

xylophone

Remember that if your mother buys the property (albeit with the help of you as "mortgagee'), she is then responsible for insurance, bills etc just as she is now with her own property.

As "mortgagee", with first legal charge, you will have first call on the sale proceeds of the property should it need to be sold.

The loan can be set up in various ways.

It could simply be an interest free loan and you get back just what you lent her in the first place.

Or it can be interest bearing - remember that this would be taxable income as far as you are concerned.

It would be possible to defer the interest until sale but this could lead to a large tax bill in the year of receipt.

It could be structured in such a way as you receive a proportion of the capital value on sale.

It could be set to increase by RPI/CPI etc.

But, as I said above, there would be tax implications of any of these approaches which you would discuss with your professional adviser before embarking on the arrangement.