Proposal for father to purchase council house - how will it impact benefits

kinksfan

Situation is family member lives with long term partner, no longer have dependents at home, which is two bedroomed council property. Neither of them work as he has long term disability and partner is his carer. No significant savings. His father has expressed willingness to provide sufficient funds (£35k approx) to purchase outright the council house for them at a significant discount to market value given their long term residence at the property. There is a fear that it will negatively impact their benefits and also a fear that the DWP / authorities will be "suspicious" about sudden arrival of funds. I would hope that nothing would happen negatively in terms of impact to benefits except the removal of the housing benefit element of their set of benefits. The source of the funds is totally legit also in my view i.e. a gift. Is my perception correct or am I being simplistic / naive? Any advice welcome. It would be a shame if they didn't pursue one of the few opportunities fate has provided them with on incorrect assumptions.

calcotti

You mean that the father would provide funds to allow the family member to become the owner.

A gift given to them for the express purpose of funding the purchase should not affect any other benefits. Ideally the money would go straight to the solicitor dealing with the purchase rather then via the family member. This may not be permitted, if not then get the money to family member so taht it can immediately be transferred to solicitor.

Presumably they currently receive Housing Benefit to cover all of their rent and the landlord is responsible for property maintenance. If they buy the property the HB will, as you say, stop and they will then have the responsibility for looking after the property. There are costs involved in being a property owner including insurance and maintenance. Is family member able to afford and manage this?

kinksfan

Thanks a lot for prompt reply Calcotti, yes we did consider the costs of insurance and maintenance and the father has stated that he would step in to assist if and when things go wrong with the house eg roof repairs etc but you seem to agree with the logic that all other things being equal (and leaving aside the very temporary impact of having funds for a short period of time) the impact should just be on the housing benefit.

TELLIT01

calcotti said:

You mean that the father would provide funds to allow the family member to become the owner.

A gift given to them for the express purpose of funding the purchase should not affect any other benefits. Ideally the money would go straight to the solicitor dealing with the purchase rather then via the family member. This may not be permitted, if not then get the money to family member so taht it can immediately be transferred to solicitor.

Presumably they currently receive Housing Benefit to cover all of their rent and the landlord is responsible for property maintenance. If they buy the property the HB will, as you say, stop and they will then have the responsibility for looking after the property. There are costs involved in being a property owner including insurance and maintenance. Is family member able to afford and manage this?

That is probably the most important question to answer before even considering purchasing the property.  Will the financial contribution of the father give them part ownership of the property? 

kinksfan

Ah yes Tellit01 the proposal was for the father to provide funds to enable the residential couple to purchase the house outright so it would be in their names. The father would not be on the property deeds at all. Is this significant? 

sheramber

You need to look at benefIcial ownership and SDLT.

elsien

What is the benefit to the couple in question of becoming homeowners. It gives them increased costs when they already have a secure tenancy anyway. So what are they trying to achieve,  other than presumably an asset that is worth a lot more to someone else when they pass away?

TELLIT01

kinksfan said:

Ah yes Tellit01 the proposal was for the father to provide funds to enable the residential couple to purchase the house outright so it would be in their names. The father would not be on the property deeds at all. Is this significant? 

Possibly significant if the father was shown to have an interest in the property at the time of purchase.  The council may block the purchase in such a situation. Note I am only saying 'possibly' and 'may'.

slowcars

elsien said:

What is the benefit to the couple in question of becoming homeowners. It gives them increased costs when they already have a secure tenancy anyway. So what are they trying to achieve,  other than presumably an asset that is worth a lot more to someone else when they pass away?

Yes there are ongoing costs with owning your home - repairs, renewals etc. but what you have not mentioned is that owning a property under the right to buy scheme would mean that in say 5 year's time not only would the property increase in value but that the discount when bought would not be repayable to the council - win win .

We did this in 1985 and bought our property for £18,000 after a 50% (I think) discount. We moved out into another property in 1990 when I could afford to take out a bigger mortgage and rented the old house out for 6 years to provide a better income. We then disposed of it 1997 for £238,000. After paying off the original mortgage it left us with approx £229,000 which we used to pay off the second property. Living in a council house up until 1984 then mortgage free when I was 47 can't be bad 

Alice_Holt

slowcars said:

elsien said:

What is the benefit to the couple in question of becoming homeowners. It gives them increased costs when they already have a secure tenancy anyway. So what are they trying to achieve,  other than presumably an asset that is worth a lot more to someone else when they pass away

We did this in 1985 and bought our property for £18,000 after a 50% (I think) discount. We moved out into another property in 1990 when I could afford to take out a bigger mortgage and rented the old house out for 6 years to provide a better income. We then disposed of it 1997 for £238,000. After paying off the original mortgage it left us with approx £229,000 which we used to pay off the second property. Living in a council house up until 1984 then mortgage free when I was 47 can't be bad 

      If you had two properties, with one rented out and one your main residence - then, on sale, you would have had a capital gains liability on the property you rented out.

     In 1997 the capital gains on a potential £220k profit would have been substantial (even taking into account indexing and the years when this was your main residence), as the capital gain was aligned with income tax rates (up to 40%).  
Did you not declare or settle your CGT on your second property?   

F70

It is a very good way to maximise inheritance. Where else would you see at least 50% return investment in 5 years? 

Also protects against care home fees if over 7 years. 

Condition and age is everything though. 35k seems very cheap even with discount.