Purchasing flat but current owners want to stay for 6 months after purchase

macawac1

Hello,

This will be a long winded post, but just want to give you as much info as possible.

My husband and I are looking to go travelling full time in our motorhome in the next few years. I am 59 and my husband is 58. We own our property with a small mortgage that will be paid off before we go. My 34 year old son also lives with us but cannot afford to buy his own property. We also have some savings put aside, currently in ISAs and a savings account. We will be selling our current property when we go travelling as I do not wish to rent it out (we have a large garden and a fish pond and I would hate to see these or the bungalow ruined by bad tenants - you do hear horror stories!)

Anyway, that is briefly the background. So with this in mind I have been looking for a property that we can buy outright before we sell our bungalow. This will be a much smaller property that my son can live in while we travel, and will also serve as a temporary base when we return for family visits etc (as well as being a UK address for us while abroad). 

We have recently viewed a flat that is perfect, as it has a drive suitable for a motorhome and car parking. It is being advertised as a buy to let property as the current owners wish to remain in the flat for 6 months after the sale. This is because they took out an Equifinance loan a few years ago secured on the property and now they are not able to obtain another mortgage until this has been cleared for 6 months. So this is one aspect I am looking for advice on. 

Another aspect is from the tax angle. If we were to purchase the flat we would pay the higher rate stamp duty, and the flat would also be subject to capital gains if we ever sold it. I was thinking about gifting the money to my son so that he could buy it (as he will be the one living in it, and we are more than happy to do this for him so that he has somewhere secure to live). However I understand that with the previous owners remaining in the property, this would mean he would not get the first time buyer's stamp duty rate. Is this correct?

Another consideration of course for gifting my son the money for the flat is that if we manage to live for another 7 years it will not be subject to inheritance tax. I also believe it would be safe if we needed to go into a care home and have our assets used to pay for our care, again keeping my son's future home secure for him.

Any advice gratefully received as it is a right old minefield!

Yorkie1

Others will comment in more detail, I am sure, but I was under the impression that renting a property back to the seller after completion came under the heading of Sale and Rent Back, which is quite challenging in many ways:
Buy & Rent-Back Risks & Complexities | Guide 2025

prowla

I suppose the risk is if the previous owners decide they want to stay longer.

RAS

There is no way you should even consider this. Would you even be allowed to let given the lease?

Once the sale is complete you would have to comply with all the statutory duties of a landlord in the relevant country. Fail to do that properly and you will find it very difficult to remove your tenants either to provide your son with a property or to provide yourself with a bolthole.

Sign the property over to junior and have a row, or he gets a partner and you have no bolt-hole. As he'd have no legal duty to give you access. If that relationship fails (there's recent case on here) and he's in a civil partnership or married and his soon to be ex is entitled to 50% of the value that property.

Where do you propose living when you return to the UK after your travels? Will you be able to buy a smaller house outright?

macawac1

Yorkie1 said:

Others will comment in more detail, I am sure, but I was under the impression that renting a property back to the seller after completion came under the heading of Sale and Rent Back, which is quite challenging in many ways:

Thank you Yorkie1. I have never heard of this before, very informative and an eye opener on the legal complexities.

Albermarle

Another consideration of course for gifting my son the money for the flat is that if we manage to live for another 7 years it will not be subject to inheritance tax. I also believe it would be safe if we needed to go into a care home and have our assets used to pay for our care, again keeping my son's future home secure for him.

You are correct about the 7 years and IHT, but the rules about Deprivation of assets to avoid care home fees are not the same. The local authority will have their own views.
Also without your own funds you are at the mercy of the local authority about where they place you etc.

It is being advertised as a buy to let property as the current owners wish to remain in the flat for 6 months after the sale. 

Could be a big mess, I would look for somewhere else with less potential complications.
The owners would become official tenants ( you will need contracts, understand all the rules about being a landlord etc ) and after 6 months could decide they don't want to move anymore.

macawac1

prowla said:

I suppose the risk is if the previous owners decide they want to stay longer.

Yes Prowla, we had considered that scenario. We are currently in no rush, as our travel plans are 18 months away at least. 

RAS

Yorkie1 is right. Can't imagine a lawyer suggesting anything other than a bargepole.

macawac1

RAS said:

There is no way you should even consider this. Would you even be allowed to let given the lease?

Once the sale is complete you would have to comply with all the statutory duties of a landlord in the relevant country. Fail to do that properly and you will find it very difficult to remove your tenants either to provide your son with a property or to provide yourself with a bolthole.

Sign the property over to junior and have a row, or he gets a partner and you have no bolt-hole. As he'd have no legal duty to give you access. If that relationship fails (there's recent case on here) and he's in a civil partnership or married and his soon to be ex is entitled to 50% of the value that property.

Where do you propose living when you return to the UK after your travels? Will you be able to buy a smaller house outright?

Thank you RAS. I do understand the potential issues with family gifts, although I am sure every family thinks it will never happen to their family just to find out it does. Had a situation with my sister many years ago after my father died so I should really know better. Just trying to decide the best way forwards to ensure my son has a secure home and we do have that temporary bolt hole. I would hate to have to leave an empty property behind just to be used maybe once or twice a year as properties do not like to sit empty, never mind the expense of keeping it!

We will have the equity from the bungalow sale that I would like to invest safely until we come back and can then purchase a suitable property to live in afterwards.  

kimwp

Why aren't you just keeping your bungalow and your son continues living there while you are travelling?

macawac1

Albermarle said:

Another consideration of course for gifting my son the money for the flat is that if we manage to live for another 7 years it will not be subject to inheritance tax. I also believe it would be safe if we needed to go into a care home and have our assets used to pay for our care, again keeping my son's future home secure for him.

You are correct about the 7 years and IHT, but the rules about Deprivation of assets to avoid care home fees are not the same. The local authority will have their own views.
Also without your own funds you are at the mercy of the local authority about where they place you etc.

It is being advertised as a buy to let property as the current owners wish to remain in the flat for 6 months after the sale. 

Could be a big mess, I would look for somewhere else with less potential complications.
The owners would become official tenants ( you will need contracts, understand all the rules about being a landlord etc ) and after 6 months could decide they don't want to move anymore.

Thank you Albermarle. The more I hear and the more I look into it I believe that this is not the solution for us. 

Finding another property sounds like a much more sensible idea. I am still undecided however on whether we buy the second property and take the hit on stamp duty, CGT, IHT etc. or whether to gift the purchase price so that my son can buy in his name. I will have to eat my hat if this ends up as a family fall out, and take the hit on that. I cannot protect my son from future relationship breakdowns, but would be grateful if anyone could offer advice on whether we could protect from him losing 50% of his property if this ever did happen.