Selling home to parent

Yorkie1

Many experienced landlords are deciding to get out of the rental market at the moment, with likely changes to the rental legislation expected once an Act of Parliament is passed this year.

Even now, it is not easy to be a landlord. And even if you have an agent to represent you, there's no guarantee that they will do a good job (no qualifications needed). Although not common, tenants may cause significant damage. Or there may be void periods where there is no income. It can take months to evict a tenant who does not want to leave, in the event you need the house back. I suspect that once you and your mother have looked into this properly, you will realise that it is not something to be undertaken lightly.

In my view, this is not the solution you think it is.

p00hsticks

1spiral said:

p00hsticks said:

1spiral said:

Value of my home ~350K

She has her own home worth about 300K which she will remain in.

Sale price will be max cash she has available so probably 20K ish.

She is widowed,father died 11 years ago, mum inherited all so none of fathers IHT allowance used.

I am married.

How is she going to be able to afford the expenses and maintenance that go with a second home ?  
(Are you in an area that is charging 200% premium for a second home, for starters? ).
I really can't see what benefits there are in this for your mother at all ....

  
 

It isn't intended as a benefit for my mother, it is to help me get a quick sale to release the second home SDLT. If I did that, I wouldn't be overly desperate for the proceeds on the house sale and could wait a few years. All the risk is with me in that she lives until she's over 100 and/or it needs to be sold to pay for care home fees.

If she has £20k cash around to buy your house, and you are desperate for the SDLT cash, why don't you just ask her to lend you the money and then repay her when you do eventually sell the house ?

It would be far less problematic and risky for her than what you are proposing, which could leave her paying for a house she doesn't seem to want or need and will have to maintain and pay bills for or take on the responsibilities of being a landlady. There's plenty of risk in it for her, especially as you say you (or rather her) would then be in no hurry to sell the house. Don't lumber her with it. 

Keep_pedalling

1spiral said:

Value of my home ~350K

She has her own home worth about 300K which she will remain in.

Sale price will be max cash she has available so probably 20K ish.

She is widowed,father died 11 years ago, mum inherited all so none of fathers IHT allowance used.

I am married.

So your gift would use up your entire NRB plus a little bit more leaving a small IHT liability if you died within 7 years.

How does your wife feel about giving away a large chunk of your marital assets? 

The whole idea sounds a bit nuts, even if you need need to pay the additional SDLT initially you will be able to claim it back providing you sell within 3 years.

SDLT_Geek

Grumpy_chap said:

1spiral said:

I hadn't really thought too much about letting or leaving empty but would probably embark on the letting front

If your mother owns the property, all the liabilities if being a LL will fall on your mother.  Is she aware and does she want that responsibility?
The income arising will also be to your mother's account so suffer income tax accordingly.
That will affect any means-tested benefits your mother may receive.

i understand the same as Silvercar with regard to SDLT on the sale to your mother.  Obviously, Bookworm has a different view.  @SDLT_Geek will know definitively.

I am with @Bookworm on this one.  There is no market value rule for SDLT in this scenario, so if a mortgage free property is sold at under value for £20,000 to a relative, then the £20,000 would be the chargeable consideration for SDLT. That is below the £40,000 threshold, so there would be no SDLT to pay, even though it is a second property for the mother.

Brie

Presumably there are no siblings that might think that this could be part of their inheritance too?

1spiral

Thanks for all the comments.

I am aware that SDLT can be reclaimed if the property is sold within 3 years but I think I'm right in stating that if not sold within 9 months, CGT starts accruing. Is that correct?

Although I'd expect to sell within 3 years, 9 months may be a bit more challenging.

My first port of call would be to try and sell the property as that is by far the simplest and neatest option.

My post at the start is really to find what options are open to me if a quick sale is not on the cards.

Bigphil1474

I think you'd have to be really unlucky, or be asking far too high a price not to sell it in 9 months, especially if it's sold no chain. We went on the market and moved in to our newer house within 9 months and 2 weeks, and we were in a 4 person chain, and our old house was old and crap. 

saajan_12

1spiral said:

Thanks for all the comments.

I am aware that SDLT can be reclaimed if the property is sold within 3 years but I think I'm right in stating that if not sold within 9 months, CGT starts accruing. Is that correct?

Although I'd expect to sell within 3 years, 9 months may be a bit more challenging.

My first port of call would be to try and sell the property as that is by far the simplest and neatest option.

My post at the start is really to find what options are open to me if a quick sale is not on the cards.

Yes, but its not all or nothing after 9 months.. you only pay for the % of the gain that corresponds to the % of months you didn't live there (not counting the last 9 months). So if you sell after 12 months, that's 3 months extra out of the whole x years you lived there. Plus there's a 3k allowance to take off (each if you and your wife jointly own it). Depending on the numbers involved, that % of CGT might be less than the legal costs etc of an extra transfer. 

Also if you're planning on selling in the short / mid term ie during mum's lifetime, then she would also incur CGT as its her second home. This is only avoided if you wait until her death and inherit it under the IHT threshold. However that then means an extended period of maintaining an empty property which is likely more expensive, or her becoming a landlord with the responsibility, repairs costs, and taxes that entails. 

Grumpy_chap

1spiral said:

 if not sold within 9 months, CGT starts accruing. 

If you sell the property to your Mother, her CGT liability starts accruing from the point of purchase.

1spiral

saajan_12 said:

1spiral said:

Thanks for all the comments.

I am aware that SDLT can be reclaimed if the property is sold within 3 years but I think I'm right in stating that if not sold within 9 months, CGT starts accruing. Is that correct?

Although I'd expect to sell within 3 years, 9 months may be a bit more challenging.

My first port of call would be to try and sell the property as that is by far the simplest and neatest option.

My post at the start is really to find what options are open to me if a quick sale is not on the cards.

Yes, but its not all or nothing after 9 months.. you only pay for the % of the gain that corresponds to the % of months you didn't live there (not counting the last 9 months). So if you sell after 12 months, that's 3 months extra out of the whole x years you lived there. Plus there's a 3k allowance to take off (each if you and your wife jointly own it). Depending on the numbers involved, that % of CGT might be less than the legal costs etc of an extra transfer.

Thanks for this, this has put my mind at ease a bit more. We have been in the house about 32 years with a gain of about 300K so a quick calc seems to indicate that 11% unoccupied time (about 3 years over the 9 months free so the SDLT reclaim would run out before CGT would be payable) equates to our 2x3K allowance @ 18%CGT rate. Does that seem correct?