Renting property off a relative

Jennyjue

Friend of mine has her niece working for her part time and she get tax credits by working for her aunt , shes a lone parent with 2 boys the niece she asked her aunt to buy a property for her to rent back from her aunt she tends to railroad her into things in the past but only small things and she doesn't say no because it's her niece and it's her only family she has, so her niece is looking for a property for her aunt to buy and the niece will rent it back from her I know it's an investment for my friend and she's got a ready made tennant and her rent will be paid by the local authority because she's getting benifits with her working tax credits but this is just me wondering is this enteritly legal she tends to talk her aunt into most things and sometimes I think she prays on her good nature but property buying is a huge step for anyone I know she's doing it on a buy to let and it all seems above board I just don't want her fingers burnt later on if it was something smaller a car or a loan but it's property I just think she needs to look further into it but her niece keeps saying it's perfectly legal I know it's got nothing to do with me but if it's all legal good luck to them both and I hope it works out anyone know anything about this

Rubyroobs

It would likely be seen as a contrived tenancy and would not be allowed.

System

It is possible, but if a buy to let mortgage is involved then the lender may have a restriction against that.

There is some info here which might be useful
https://www.which.co.uk/news/2019/01/buy-to-let-for-parents-should-you-invest-in-a-property-for-your-kids/

poppy12345

She would not be able to claim housing benefit because it no longer exists for new claims. She would need to claim for Universal Credit. If she claimed this her tax credits would stop and transfer to UC.


Whether she would be entitled to anything will depend on savings/capital and household income. Whether she would successfully be able to claim for any housing element will depend if the tenancy is a commercial arrangement and she will need to prove this. They'll want to be satisfied that she's paying rent on a commercial basis. In other words, they'll want to know that it's a proper tenancy, not just an informal arrangement between family members.

huckster

Agree that benefits will not normally cover rent of a property bought by a relative for sole purpose of renting to another relative.

When an application is made to claim for Housing benefit or Housing under Universal Credit, they ask the question of whether the claimant is a relation of the landlord. Because the answer would be yes, then it would necessary to go through more information to assess whether Housing could be paid. Some of the questions asked are whether the landlord has rented the property before to other people ( not relatives) or has it been bought solely for a relative to live in.

And the rent would need to be on a commercial basis with a proper tenancy agreement, where the Aunt could evict her Neice for non payment of rent.

And if Housing Benefit is not claimed currently, then it would be necessary to claim Universal Credit and any Tax Credits claim would be closed.

pmlindyloo

A similar thread with some relevant links:

https://forums.moneysavingexpert.com/discussion/5934219/universal-credit-housing-element-close-relative-renting