!!!! hitting the fan - advice needed, please.

Curv

I'm looking for some advice on behalf of my Dad. A couple of years ago he raised capital on his previously mortgage free house so that he could buy a house for my brother to live in. The deal was that bro would live there and pay the bills etc and also pay Dad the cost of the mortgage repayment each month. The house in question is mortgage free.

The reason Dad did this is that bro has an appalling credit record, despite being bailed out by Dad since forever. He's got absolutely zero chance of getting any mainstream lending in his own name and would need a guarantor for a letting agreement - something Dad has done in the past and ended up paying dearly for. Bro was adamant he could easily afford to pay.

Unsurprisingly, payments from bro have been erratic, to say the least and Dad simply cannot afford to keep subsidizing him, so, after much soul searching and agonizing debate he's come to the end of his tether and asked bro to move in with his girlfriend so that the house can be sold.

We are anticipating resistance from the girlfriend so I'm in the process of speaking to Shelter (on behalf of bro) to find out what his options are. In the meantime, I need to find out the position from Dad's perspective. It has never been intended that there be a tenant/landlord relationship, although I suspect one may have inadvertently been created? Will he need to go to court if bro refuses to move out?

The whole (ill advised) 'arrangement' was made without legal advice, other than in relation to the purchase of the property, so neither really knows where they stand.

I could see this situation coming a mile off... bro lives in a constant state of denial and Dad has always wanted to give him the benefit of the doubt, bless him. Neither of them need advice about their respective poor judgments in the matter - particularly Dad... he's bitterly aware of his folly, but I would appreciate advice about where he stands and what steps he could/should take to protect his position.

Many thanks

Curv

cats!

Speak to Shelter but also I would recommend independant legal advice from a solicitor specialising in property/tenancy law.

Make sure that any notice to quit and other communications are in writing. Use a solicitor and hopefully this will impress upon your brother the importance of his actions. I pity the girlfriend! Do you actually like her??

Curv

cats! wrote: »

I pity the girlfriend! Do you actually like her??

LOL. Don't really know her well enough to pass judgment, but anyone who has the sense to not let my bro move in has their head screwed on right, so that's got to be a positive.

I love my brother dearly but he has to rescue himself this time. Being bailed out is what got him to 34 years old with no financial security whatsoever. There have never really been any consequences to his financial mismanagement, unless you count getting told off by my Dad :rolleyes:

cats!

I'm really sorry to hear about this situation. Mixing family with good intentions (and a home!) can often spell disaster. It might be the making of your brother if he finally has to stand on his own two feet. I really hope family relationships survive this situation. Your Dad needs good advice from a solicitor, I hope he doesn't "give in" to emotional blackmail

Let us know how it goes - good luck!

Curv

Thanks, cats!

I've spoken to Shelter... they (to my surprise) felt really sorry for my Dad who, it seems, is a landlord no matter what his original intention. So he may have to go down the Section 21 Notice route if bro doesn't play ball re quitting.

According to Shelter, being of sound mind and body, single with no kids and in full time employment means that my brother won't qualify for emergency housing under any circumstances so he has no option but to try and find a landlord who won't mind his poor credit record. Chances of that happening, anyone?

mustrum_ridcully

Well some private landlords don't run credit checks and so long as he can provide a wage slip to show he's earning he might find somewhere, probably in some form of shared house.

However, if that doesn't happen then I fear the only landlord that would accept him would be the sort that, for want of a better word, run dosshouses for people on DSS benefits.

Curv

I've been thinking some more about this overnight and I'm now REALLY concerned for my Dad.

He's going to have to address the tax position of having the last two years worth of rental income along with any CGT liability on resale. Does anyone know whether the interest payment are tax deductible if the loan used to buy the house is actually secured on another property?

Also, can anyone recommend a website/resource where can get more information about his basic responsibilities as a landlord and what he'll need to declare to whom, and by when etc.?

Any advice would be very welcome.

Thanks

mlz1413

just trying to put a different swing on this, your dad owns a property and selling could cost him dear in CGT without the problems of getting his son out of the house.

Howabout breaking it down into smaller bits, as in:
Get Dad to let your brother move in with him (bear with me!)
Rent ex-bro house out, getting tenants that do pay will give money and time breathing space to your Dad.
When house is rented and bro living with Dad, then Dad has to turf him out and make him stand on his own two feet, this will mean he avoids the courts and may give your brother a better chance on the council list.

This is such a tough situation, hope it goes well whatever happens.

(I remember being told never lend money to family, sadly it's true.)

mlz1413

On the money side, could your Dad raise a loan on the house that's rented and then pay off the one on his own home?

PasturesNew

If I am reading it right. the brother-house is mortgage free. Thus no interest being paid on a mortgage. Thus any rent cannot be counted against the interest.... because the mortgage/interest is on your dad's house.

Re getting him to move into dad's house - seems a good idea to convince him to leave the brother-house quicker... but as a single person, my experience has been that any council-style housing would take over 20 years on the list to get (although I believe people in big cities fare better as cities start off with double the housing/person than rural areas).

Getting a loan on the brother-house to pay off the mortgage on the dad-house seems a good idea - as this would at least ensure that if a repossession were the end point of all this, at least it wouldn't be directly on the dad-house (although if there were a shortfall, then he would have to pay that so he needs to be aware of that). Obviously only you know the current mortgage/tie-in/interest figures and the current value of the brother-house compared to the dad-house/mortgage.

Tricky one!

It's annoying ... you just can't help some people can you! (brother that is).

lynzpower

hang on,

whos name is on the deeds of the property?