Letting to family member

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    Letting to family member

    Hi,

    My Dad's niece (my cousin) lives at his house, and has been unable to secure work for almost 2 years now. She cannot claim housing benefit as she lives with a family member.

    However, I now own my Dad's house, and he has a lifetime lease in there which is fine. Once I have the gas, electric and smoke alarms checked - I understand that I can charge the niece (not my dad) rent, in line with government rates.

    I am keen to understand the process, and whether or not she is allowed to already be living there before I take them on for rent? If anyone can elaborate on the process, that would be great.

    Thanks,
    Bob.

    #2
    Letting your dad live there rent free while charging your niece rent will be a problem. The local authority may also want to confirm ownership of the property and your Dad’s ownership of the lease will probably work against you. Your niece (not you because of the data protection act) may be asked a series of questions like ‘what will the landlord do if benefit is not paid?’, or ‘will any difference between benefit and rent be charged?’

    There are also now set limits paid to people depending on their circumstances so a solitary person will not be paid enough to rent a 3 bedroom house for example. If you don’t charge your niece the full market value of the property then it’s likely this will be viewed as a contrived tenancy.

    You need to think about what is considered to be a contrived tenancy and be honest and hard with yourself. If you can’t convince yourself that the let is a commercial one then you probably won’t convince the local authority.

    Your Dad isn't necessarily exempt from benefit just because you own the house, but may be ruled out if he was not forced to sell or has a large amount of savings for example.

    Don't make any attempt to decieve the local authority.
    I also post as Moderator2 when moderating

    Comment


      #3
      Bob: I agree with Mars Mug. Also, you yourself cannot let the house. Your father's lease means that he is a lessee entitled to occupy, so it would be he who sub-lets.
      JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
      1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
      2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
      3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
      4. *- Contact info: click on my name (blue-highlight link).

      Comment


        #4
        Should I let to family member? Dangers?!

        Dear All

        I have found this excellent forum by net-searching, as I am in need of the expertise of those who have been LL for way longer than I have (strictly speaking I'm not one yet anyway....)

        I've just bought a second/holiday home. It's unfurnished, and I was intending to put it on the unfurnished lettings market for six months, until the summer, when I'd like it back for myself. I was going to do this via a local agent in the holiday town the property is in. via (I assume!) an AST (I'm learning the jargon slowly!)

        But, a family member and their partner is now looking for accommodation, and the question is - do I let the property to them for six months?

        If I do - I have a swathe of questions and worries.

        Firstly, I take it I need to let it on a formal (AST) tenancy basis (though do AST's apply to holiday homes???)(it's not restricted occupancy by the way - it's just my holiday home, but I could live in it permanently as a 'normal' home if I wanted).

        What I am very nervous about is letting them move in, and then I can't get them out in the summer when I want to stay in it for the holidays.

        What makes me even more nervous is that the partner (ie, my niece's boyfriend), so I understand from my brother, can't rent via a lettings agent as he knows he will not pass the credit checks!!!! I believe he still has outstanding debts, but don't know to whom/what, or how much, or how long ago they are, etc etc etc.

        I don't need to make money (ie, market rate rent) out of the arrangement, (I can afford it for six months or so!) but I do need to ensure the following:

        - they pay the council tax
        - they pay the utilities bills
        - they don't damage the property
        - they are good neighbours (no parties etc!)
        - they don't move his children/other relatives in
        - they vacate by July-ish (I know that depends on the date the AST kicks off?)
        - if my neice decides to leave him, he can't stay on indefinitely, or bring in another woman, etc etc etc.
        - if he decides to leave her, she can't move in another boyfriend, girlfriend, whatever.


        And, in particular, I need to ensure that HIS poor credit status is NOT ATTACHED TO MY PROPERTY!!!!!! That's the thing that's really worrying me at the moment - and it could just be a deal breaker. I do NOT WANT my property to come up in any future 'bad credit' search that anyone undertakes for any reason whatsoever.

        By this point, I think you can see that alarm bells are ringing very loudly in my ears - but family is family, and my brother is under a lot of stress as right now these two are living with him and his wife (rent free and unemployed....) in their very small family home, and he really wants to get them out and living somewhere else. But would that just dump them on me and make them my problem, not his? (Yes, I know he just needs to kick them both out and let them fend for themselves, but...family....etc etc)(sigh...)

        Many thanks for any info. Or am I just totally mad even thinking about letting them move in?? (Brother lives near the holiday home)(which is why I bought it where it is!)

        Helena.

        Comment


          #5
          Yes, you can let to a close relative. The only problems peculiar to this would be:
          a. your difficulty as to what you would do if he defaults; and
          b. his difficulty in lodging any HB/LHA claim, given the familial relationship.

          Whether it's a good idea is doubtful.
          JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
          1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
          2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
          3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
          4. *- Contact info: click on my name (blue-highlight link).

          Comment


            #6
            Thanks for replying!

            I won't be asking for rent (or only peppercorn), but by defaulting does that mean defaulting on council tax, utility bills, etc? (Again, I do not want 'bad debts' attached to my property address, or go down in the council/utility companies' bad books on account of them!)

            They are not after HB (Housing Benefit?) or any other state assistance. The idea is they go and get jobs to pay for their existence...(!)

            Helena.

            Comment


              #7
              I would certainly think twice about letting under the circumstances you give, but rest assured, provided you approach the utility companies, provide them with tenant's name and start meter reading, you cannot be held personally liable. The worst case scenario is that they default on their utility payments and the utility suppliers insist on installing a "rip off" pre-payment meter. It might cost you something to get this changed back to a credit one when you move in. Similarly, with council tax, provided you inform the local authority in writing of the tenant's name and move in date then you are not liable. The local authority might insist that you are as they will do anything that they can to get their council tax, but stand your ground over this one and they will persue the tenant as they should.
              Of course, if this tenant refuses to leave when promised, it is going to take you a few months to get your property back through the usual slow court action. (I am intentionally being vague as to how long it will take you to get your property back).

              P.P.
              Any information given in this post is based on my personal experience as a landlord, what I have learned from this and other boards and elsewhere. It is not to be relied on. Definitive advice is only available from a Solicitor or other appropriately qualified person.

              Comment


                #8
                A rent below £250 a year would mean it can't be an AST and would give you a bit more control.
                Dial 999 For a Landlord

                Comment


                  #9
                  Originally posted by Krispy View Post
                  A rent below £250 a year would mean it can't be an AST and would give you a bit more control.
                  Well, nearly. If any of paragraphs 3/3A/3B of Schedule 1 to the Housing Act 1988 [below] applies, it cannot be either an AST or an SAT.
                  For these purposes, 'rent' excludes elements paid for Council Tax or for services which L provides for T [para. 2(2)].

                  3. A tenancy under which for the time being no rent is payable.

                  3A. A tenancy—
                  (a) which is entered into on or after 1st April 1990 (otherwise than, where the dwelling-house had a rateable value on 31st March 1990, in pursuance of a contract made before 1st April 1990), and
                  (b) under which the rent payable for the time being is payable at a rate of, if the dwelling-house is in Greater London, £1,000 or less a year and, if it is elsewhere, £250 or less a year.

                  3B. A tenancy:
                  (a) which was entered into before 1st April 1990 or, where the dwelling-house had a rateable value on the 31st March 1990, on or after 1st April 1990 in pursuance of a contract made before that date, and
                  (b) under which the rent for the time being payable is less than two-thirds of the rateable value of the dwelling-house on 31st March 1990.
                  JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
                  1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
                  2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
                  3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
                  4. *- Contact info: click on my name (blue-highlight link).

                  Comment


                    #10
                    It will be an AST (I dont think even I could get away with this one as a holiday let!). Under an AST if you want them out for summer and they wont go you will miss the holiday season!
                    Also whatever you write in your agreement you could not force them to leave before 6 months if they do not stick to an agreed departure date - brings us to June 10, serve section 21, get baliffs etc - it will be this time next year before they are gone!
                    Unshackled by the chains of idle vanity, A modest manatee, that's me

                    Comment


                      #11
                      Originally posted by islandgirl View Post
                      Also whatever you write in your agreement you could not force them to leave before 6 months
                      ...unless L uses a s.8 Notice on any applicable grounds.
                      JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
                      1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
                      2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
                      3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
                      4. *- Contact info: click on my name (blue-highlight link).

                      Comment


                        #12
                        Also, if there was a recent holiday let (by V), OP could grant a non-holiday let:
                        a. for a term of up to eight months, beginning within twelve months of that holiday let's end;
                        b. preceded by a g3 Notice; and
                        c. giving OP mandatory grounds for possession.
                        JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
                        1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
                        2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
                        3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
                        4. *- Contact info: click on my name (blue-highlight link).

                        Comment


                          #13
                          If you have a mortgage there may be restrictions on letting to family members.

                          Comment


                            #14
                            Renting home to a family member

                            My brother needs to sell his house and my Mum has said he can move his family into her house until they can find a suitable alternative. In the meantime she is going to live with me. What are the tax implications for her if my brother pays her a nominal rent and all utility and council tax bills himself?

                            Comment


                              #15
                              Originally posted by Hebe View Post
                              My brother needs to sell his house and my Mum has said he can move his family into her house until they can find a suitable alternative. In the meantime she is going to live with me. What are the tax implications for her if my brother pays her a nominal rent and all utility and council tax bills himself?
                              Whatever she receives in rent will be added to any other earned income she has and taxed in the normal way, but there are various things she can offset against tax, such as mortgage interest payments on the property, maintenance etc. If he is paying a very low rent, it may be that she can offset all of it. She will still have too fill in a self-assessment tax return, even so.

                              If she has no experience of letting, it may be worth a half hour consultation with an accountant just to ensure she knows about everything she can claim for.
                              'Pause you who read this, and think for a moment of the long chain of iron or gold, of thorns or flowers, that would never have bound you, but for the formation fo the first link on one memorable day'. Charles Dickens, Great Expectations

                              Comment

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