Selling a Part Ownership in our house to daughter

theteapackets

This question is about an idea from a brief discussion held with family, so I'm sure there will be plenty wrong with our idea ... so please don't shoot me down!!!

My daughter, now a single mum with toddler, will be forced to sell the house she lives in when the fixed rate joint mortgage is up (her partner has stopped paying the mortgage, but has not removed himself from it) as she only works part time and could not get a mortgage on her own.  She will then have about £30-40k savings, which means if she rents somewhere she will have to use those savings.  She wouldn't be able to afford a Part Ownership mortgage, even with such a big deposit.  

We have just bought a flat for us to move into in a couple of years (around the time her mortgage is up) and were going to either sell or rent our current house out to provide income for us when we move.  My question is .... when we move, could my daughter buy a part share in our current house off us and live in it (which we would use to pay off any outstanding mortgage) and then we would charge her rent (in effect like Part Ownership) which she could then claim through UC.  She gets somewhere secure to live,  investment for her savings, and we continue to draw an income from the property.  (I'm sure we can legally rent property to family and they can claim UC, as long as it's not a shared property with us and has a proper Lease).  The question is really has anyone ever heard of selling/buying a part share in a 'home' as opposed to a newbuild/development property?

I'm sure there are all sorts of inheritance pitfalls (we have 3 other children, so would have to make sure our Wills took it into account)  that are not immediately obvious to us ... which is why I'm posting it on here before having to pay for advice from a Financial Advisor and/or Solicitor.     

Many thanks in advance

oldbikebloke

so she is going to spend her 40k savings on a part property she will own and therefore she will fall below the 16k savings threshold to enable her to claim UC? 
Good plan, might work

theartfullodger

As this deal to extract UC from the hard-pressed taxpayer by this financial hoop-jumping is clearly contrived to the benefit of her, it is highly likely UC will refuse it.  Quite right to IMHO.

Artful: Landlord, in receipt of 6 benefits (old....)

letsbetfair

It might be worth speaking to CAB or a law centre/solicitor about whether she does have to move, if she hasn't already. If the ex who's on the mortgage is also the parent of the toddler, there's the question of what their obligations are and whether they could force a sale. I appreciate your daughter might prefer a clean break, though!
It's quite legal to rent to family, but what you suggest sounds complex. I'd suspect there may be issues with claiming UC for rent - what you're proposing is a long way from a standard commercial tenancy - but it's unusual enough that I'm not sure.

Comms69

theteapackets said:

This question is about an idea from a brief discussion held with family, so I'm sure there will be plenty wrong with our idea ... so please don't shoot me down!!!

My daughter, now a single mum with toddler, will be forced to sell the house she lives in when the fixed rate joint mortgage is up (her partner has stopped paying the mortgage, but has not removed himself from it) - Why would he? as she only works part time and could not get a mortgage on her own - so he cant 'remove himself'.  She will then have about £30-40k savings, which means if she rents somewhere she will have to use those savings. - what savings are for really...  She wouldn't be able to afford a Part Ownership mortgage, even with such a big deposit.  

We have just bought a flat for us to move into in a couple of years (around the time her mortgage is up) and were going to either sell or rent our current house out to provide income for us when we move.  My question is .... when we move, could my daughter buy a part share in our current house off us and live in it (which we would use to pay off any outstanding mortgage) and then we would charge her rent (in effect like Part Ownership) which she could then claim through UC. - No, aside from this being a contrived tenancy, a part owner has full rights of residence.  She gets somewhere secure to live,  investment for her savings, and we continue to draw an income from the property. - from the taxpayer.... (I'm sure we can legally rent property to family and they can claim UC, as long as it's not a shared property with us and has a proper Lease - not usually ).  The question is really has anyone ever heard of selling/buying a part share in a 'home' as opposed to a newbuild/development property?

I'm sure there are all sorts of inheritance pitfalls (we have 3 other children, so would have to make sure our Wills took it into account)  that are not immediately obvious to us ... which is why I'm posting it on here before having to pay for advice from a Financial Advisor and/or Solicitor.     

Many thanks in advance

Sounds like a terrible idea. 

Also what are savings for if not difficult times?

Comms69

letsbetfair said:

It might be worth speaking to CAB or a law centre/solicitor about whether she does have to move, if she hasn't already. If the ex who's on the mortgage is also the parent of the toddler, there's the question of what their obligations are and whether they could force a sale. I appreciate your daughter might prefer a clean break, though!
It's quite legal to rent to family, but what you suggest sounds complex. I'd suspect there may be issues with claiming UC for rent - what you're proposing is a long way from a standard commercial tenancy - but it's unusual enough that I'm not sure.

Ofcourse they can force a sale....

[Deleted User]

When the fixed rate runs out the lender usually just offers a switch without affordability being assessed. As long as its an online switch with no advice, it literally takes two minutes, so all may not be lost 

tacpot12

I've not heard of this arrangement, but I don't see why it shouldn't work. 
This link confirms that providing your daughter is renting on a commercial basis, she can get help with the rent from UC. 
https://england.shelter.org.uk/housing_advice/benefits/housing_benefit_renting_from_family
This link confirms she can get help with the rent for a shared-ownership property:
https://www.gov.uk/housing-and-universal-credit/property-you-own#:~:text=If%20you%20or%20your%20partner,39%20weeks%20without%20any%20breaks.
You will need to meet all the obligations of being a landlord, and this will increase your costs; but if you were going to rent your property anyway would have to meet all these obligations anyway. 
You also need to act in as a commercial landlord would. This means maintaining rent records and evicting her if she doesn't pay her rent. 

Capital Gains Tax will be payable on the portion of the property you own if it is sold (including to your daughter). You will receive the Private Residence Relief for the time that the property was you own home so you are only paying CGT on the increase from the point she starts renting it from you.

xylophone

My daughter, now a single mum with toddler, will be forced to sell the house she lives in when the fixed rate joint mortgage is up (her partner has stopped paying the mortgage, but has not removed himself from it) 

Should this not be addressed immediately? Is she still in touch with the ex partner? Is he your grandchild's father?

davidmcn

tacpot12 said:

This link confirms she can get help with the rent for a shared-ownership property:
https://www.gov.uk/housing-and-universal-credit/property-you-own#:~:text=If%20you%20or%20your%20partner,39%20weeks%20without%20any%20breaks.

That's a shared ownership property in its usual sense (as it says on that page) i.e. where you part rent from a social landlord, not jointly owning a property with family.

Ditzy_Mitzy

The simple answer to this, in my opinion, is 'no'.  'Shared Ownership' schemes are nothing of the sort, being instead glorified leasehold arrangements.  One's 'share' is simply a share of the lease element with rent payable to the landlord on the rest.  The difference is that the householder can buy extra shares of the lease, up to all of it.  When that happens the property reverts to an ordinary leasehold title.  The leaseholder, tenant, whatever you want to call it, is then obliged, if so desired, to buy the freehold title from the freeholder or landlord or whatever you want to call the entity that actually owns the land.  
In England there are three types, as far as I am aware, of property title: freehold, leasehold and commonhold.  An ordinary house, such as the OP's, is more than likely freehold.  If it's leasehold already things get even more complicated but we shall assume it isn't.  With freehold one owns the building, the land it sits on, the ground beneath and the air above.  Freehold titles are registered and, crucially, each is owned by a single entity.  That entity might be a company but the point is that it is not shared.  If a freehold title is to be shared it can either be split, as in physically split, into pieces with new titles established and paperwork completed or it can be purchased by a company, set up by you, which issues a limited number of shares, two here, to each of those wanting a share in the freehold.  It's still owned by a company but OP and daughter are shareholders.  You'd also need to convert the property into separate flats/maisonettes with permission from the council which may require separate entrances and/or fire escapes.  Disclaimer: if daughter owns the other part of the freehold outright, because you sold it to her, there's nothing to stop her paying rent on the other flat.  You cannot evict her as you aren't her landlord any more.  You probably can't even attempt to divide the freehold anyway because it's mortgaged.  Your lender is likely to have a pink fit if asked the question. 
Moving on....
You currently own the freehold, sort of as it's mortgaged, therefore might consider attempting to convert the freehold title to leasehold.  You could then 'sell' shares of the leasehold title to the leaseholder and, presumably, charge rent on the remaining amount but then you'd be in the position of an ordinary landlord.  The lender isn't going to like it.  Conversion to leasehold creates 'value' in the lease but, correspondingly, diminishes the value of the freehold itself.  This is likely to diminish the lender's equity holding in the house.  Your daughter will also gain rights as regards buying the freehold from under you, the freehold that you don't own outright etc.  It's an absolute minefield, legally, and you'll need to speak to a specialist conveyancer.  Or better still don't, and just forget about it.  
As a further thought - shared ownership schemes are operated by housing associations which are non-profit (hurr hurr) organisations.  I don't know whether a private individual can even act in this matter.  After all, it wouldn't be a 'real' leasehold given that a lease actually has to demise all or some of the property.  Thinking about this further, the lease would actually be OP as freeholder and OP/OP's daughter as joint leasehold tenants.  It can't be OP to OP as the law doesn't have provision for one to grant a lease to oneself.  Daughter would, in that case, gain more rights than the OP wants her to have.  Arrgghh!!