Co-habitation

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    Co-habitation

    My two sons jointly own a property with a buy to let mortgage. The current tenancy is ending and my youngest son intends moving into the house with his girlfriend. We know he is not supposed to live in the house with mortgage rules and will probably contact the mortgage lender first. I am concerned about the rights the girlfriend will accrue whilst living there, particularly as my older son owns half of the property. We are thinking that if my older son does a shorthold tenancy agreement with both tenants' names on it ie younger son and girlfriend, this might cover them both in the event of any claim in the future if things turn sour. My older son would be named as landlord. Can anyone give any reason as to why this might not be legally binding. My younger son is trying not to cause friction with his girlfriend and family and feels if his name is on agreement as well, it will cause the least "confrontation". I have told him he needs to protect his brother's asset so some sort of agreement has to be drawn up. I am sorry if this post is not appropriate for this site but hope someone can point us in the right direction.

    #2
    Your son won't be able to move into the property if it is subject to a BTL mortgage.
    Speaking to the lender isn't going to change things - the regulations that control mortgage lenders don't allow them to allow the borrower to live in a property that was bought as a business asset.
    It's not a small thing, either - if the lender finds out, they would most likely call in the mortgage and your son(s) could be on a blacklist that would affect all of their future borrowing.

    Ignoring that, your proposed tenancy is a sham, so it would have little effect, your younger son can't lease a property he jointly owns from the other joint owner. All you're doing is creating an income tax liability.

    And as the mortgage is going to have to be a new residential mortgage, that won't allow the property to be let.

    If you speak to a family solicitor, they would probably propose putting the property into a trust, which would make it harder for the girlfriend to acquire any beneficial interest in the property.

    However, if the girlfriend lives there for a long time and contributes to the cost of running the place, she might theoretically acquire some rights - in beneficial ownership. But if you think how often people live together in a property only one of them owns and how rarely you hear of anyone trying to claim ownership it's a remote risk. It's not like a divorce settlement.

    And it doesn't show a lot of trust in the girlfriend.
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

    Comment


      #3
      If from the outset there is no intention for the g to acquire an interest, and she doesn't make direct contributions toward the mortgage, or financially contribute toward improvements, unless there is a drastic change in the law, it is very difficult to see how she could acquire any interest in the property.

      Comment


        #4
        Ignoring possible problems with the mortgage:

        There is no reason legally why the two sons cannot let the property to the youngest son and his girlfriend.

        There is no need to instruct a solcitor to set up a trust because one already exists.

        If she is a tenant there is no prospect of the girlfiend acquiring a further interest in the property.

        Although there is already a trust, it would be wise for the sons to enter into an agreement that sets out what is to happen if one wants to sell, perhaps including a right of pre-emption.

        Whilst the whole thing can be sorted out legally (subject to resolving any mortgage issues) one has to wonder if it is a good idea.

        Comment


          #5
          Thank you for your responses. Propery wasn't purchased as an investmen but as a single mother with two sons all on minimum wage or just above buying a property meant doing it jointly with a BTL mortgage to enable us to qualify for a mortgage. this was during the time when mortgages were very freely available and since 2008 we would be lucky to get a further mortgage from anywhere. This has meant living frugally to get both children (now young men) on the propery ladder andt he lax conditions before the crash helped us enormously and this is why I am protective of what we have worked so hard for. I am hoping my youngest son's relationship works out and we never have o refer to that piece of paper and it's not about just trusting the girlfriend - when a relationship turns sour it's amazing how much family and friends advice suddenly appears from nowhere. I have seen much of this and have a "friend" who is currently making plans to rip off the son of her third husband (who is very ill), and who is encouraging her daughter to take similar action with her partner. It is everywhere. Surely it is sensible to take precautions, even if only in a small way. and then keep your fingers crossed that all will go well for them. So Lawcruncher we shall do a tenancy agreement with my youngest son and his girlfriend on the agreement - is there anything else we need to take into account. are we OK to put my eldes son down as landlords or do they both have to have their names on the agreemen. If the youngest son marries in the future then we shall have o find a way to obtain a residential mortgage and then my oldest son will be out of the equation. Thank you everyone for your advice - it is much appreciaed

          Comment


            #6
            Lawcruncher's post is prefaced by "Ignoring possible problems with the mortgage".

            You can't ignore possible problems with the mortgage in real life (it's fine on a forum because he had other points to make).

            One of the owners (or indeed any family member) living in a BTL property will breach the mortgage terms and conditions.
            If the lender finds out, the consequences are likely to be horrible and long lasting.
            When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
            Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

            Comment


              #7
              Many people go into "family" arrangements without proper advice and regret it. You are aware of possible problems and are therefore looking into how to proceed.

              Bear in mind:

              1. There are basically two types of lawyer: those you go to when a problem arises and those you go to to stop problems arising. On the whole the former work out more expensive than the latter.

              2. Unless you are wealthy or doing a major deal the rule of thumb is: keep things simple.

              The first choice is between (a) youngest son and girlfriend occupying property under some arrangement and (b) youngest son and girlfriend renting elsewhere.

              If you go for (b) there is no possiblity of girlfriend claiming an interest in the property because she lives in it.

              If (a) is the preferred option then you need either to do it properly or not at all. This is where 1 comes into play.To ensure you do it properly you need to instruct a lawyer because you are ignoring 2.

              If going for (a) several things need to be taken into account and they include: (i) protecting your eldest's son's investment (ii) ensuring the girlfriend gets no interest in the property other than a tenancy or some other determinable right to occupy (iii) your youngest son's tax position. There are various ways in which the arrangement can be structured and which work from a conveyancing point of view, but which is best is for a lawyer to advise when he knows what the parties want to achieve and having regard to each of their personal circumstances. At least three documents are required: (i) if you do not already have it, a joint owners' agreement between your sons setting out how they hold the property and how they are to proceed if one wants out (ii) a document granting a tenancy or some other right to occupy (iii) a document signed by the girlfriend confirming she will have no interest other than that granted to her by document (ii).

              You hint that it could all get a bit political, but there is no fudging it if you want your sons' interests fully protected.

              Comment


                #8
                Originally posted by jpkeates View Post
                Lawcruncher's post is prefaced by "Ignoring possible problems with the mortgage".

                You can't ignore possible problems with the mortgage in real life (it's fine on a forum because he had other points to make).

                One of the owners (or indeed any family member) living in a BTL property will breach the mortgage terms and conditions.
                If the lender finds out, the consequences are likely to be horrible and long lasting.
                And all that too.

                Comment


                  #9
                  Originally posted by Lawcruncher View Post
                  You hint that it could all get a bit political, but there is no fudging it if you want your sons' interests fully protected.
                  I love you and think we should live together, here's a contract to sign which I've had drawn up so you can't steal any of my property while my brother and I commit mortgage fraud.

                  Perfect basis for a relationship.
                  When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                  Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                  Comment


                    #10
                    Thank you again for your responses.
                    " I love you and think we should live together, here's a contract to sign which I've had drawn up so you can't steal any of my property while my brother and I commit mortgage fraud."
                    This comment is so outdated and out of touch with reality which you would realise if you read the Daily Mail. The problem with most men is they won't enter into a pre-nuptial agreement before marriage or any other agreement under differen circumstances in case they offend the girlfriend - and as we know she has the tools to talk him out of anyway - "you can't love me if you want me to sign an agreement - sleep on the sofa". In reality the girlfriend should be saying - I realise I am not putting anything financial into this relationship at this point and because I love you and want to protect your interests I think we should clarify where we stand as regards your assets". Some hope of that.

                    I asked for advice and feel we have been given sufficient information to realise we shall have to insist my younger son finds somewhere else to live. I have suggested he goes to our solicitor for advice but he is worried about offending his girlfriend - see what I mean. Taking everything into account the only option is to live elsewhere as suggested.

                    The posts have been interesting and enlightening so thank you for your time.


                    Comment


                      #11
                      Originally posted by jpkeates View Post
                      I love you and think we should live together, here's a contract to sign which I've had drawn up so you can't steal any of my property while my brother and I commit mortgage fraud.

                      Perfect basis for a relationship.
                      Obviously the mortgage is a problem. If it is decided that letting to youngest son and girlfriend is not on it can be advanced as a good reason why the letting cannot take place.

                      Apart from that there is a stark choice. Risk offence or risk a problem down the line.

                      We do not know the girlfriend and how prickly she is and accordingly the best way of presenting any proposal.

                      Comment


                        #12
                        Originally posted by mulberry49 View Post
                        if you read the Daily Mail.
                        Only after making a sign against the evil eye.

                        Comment


                          #13
                          Originally posted by mulberry49 View Post
                          Thank you again for your responses.
                          " I love you and think we should live together, here's a contract to sign which I've had drawn up so you can't steal any of my property while my brother and I commit mortgage fraud."
                          This comment is so outdated and out of touch with reality which you would realise if you read the Daily Mail. The problem with most men is they won't enter into a pre-nuptial agreement before marriage or any other agreement under differen circumstances in case they offend the girlfriend - and as we know she has the tools to talk him out of anyway - "you can't love me if you want me to sign an agreement - sleep on the sofa". In reality the girlfriend should be saying - I realise I am not putting anything financial into this relationship at this point and because I love you and want to protect your interests I think we should clarify where we stand as regards your assets". Some hope of that.
                          I appreciate that this is a landlord forum and not a relationship group - but I would never ask someone for a prenuptial agreement and certainly not some kind of agreement before simply cohabiting. Nor do I know anyone who would.

                          Relationships are partnerships built on trust.

                          If my wife (or any previous partner) had asked for the kind of document prior to moving in together, the relationship would have cooled and probably ended.

                          Ask your solicitor how many agreements he's ever drawn up to protect the assets of a cohabitee prior to cohabiting?

                          The Daily Mail is messing with your head - the woman as money grabbing floozy notion is what's out of date!

                          When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                          Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                          Comment


                            #14
                            Originally posted by jpkeates View Post
                            Ask your solicitor how many agreements he's ever drawn up to protect the assets of a cohabitee prior to cohabiting?
                            If we are talking about when unmarried couples buy a property, the answer should be: "I recommend it in every case."

                            Back in the seventies when I started this was not considered an issue. The law was straightforward: if one of joint owners wanted to sell there had to be a sale. Apart from that most couples buying were married. The Trusts of Land and Appointment of Trustees Act 1996 changed the law to allow the courts discretion and to take into account the wishes of the parties recorded before any dispute arose. After 1996, whenever acting for unmarried couples I always recommended they set out their wishes, pointing out that they can always be changed if both agree. Broaching the issue requires tact as you do not want to be suggesting even the remote possibility that the relationship will break down. You say it is a good idea to set out what they want in a formal document so that if anything happens to either of them their family know what they wanted. You also take the opportunity to suggest that now they are about to become property owners it is a good time to consider making wills.

                            Comment


                              #15
                              Originally posted by jpkeates View Post
                              Ask your solicitor how many agreements he's ever drawn up to protect the assets of a cohabitee prior to cohabiting?
                              Also could be the mortgage company insisting. Know of a couple where one partner can get a mortgage on their own, but the couple together couldn't. The mortgage company insisted there be a signed agreement by the other partner that they would have no interest in the property.
                              I am not a lawyer, nor am I licensed to provide any regulated advice. None of my posts should be treated as legal or financial advice.

                              I do not answer questions through private messages which should be posted publicly on the forum.

                              Comment

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