Family Let

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    Family Let

    We are in the process of purchasing an additional property and will be letting this to family. We are getting a 2nd residential mortgage for this property which allows for this purpose. However the mortgage does specify that a formal AST must not be in place. We are aware of the implications of not having an AST. However, as the family members are entitled to housing benefit, we would need to ensure that we can satisfy the requirements of the local authority to ensure that in their eyes this is a commercial arrangement. Any advice on how this can be achieved? In every other way we would be treating this as we would for any other let.

    #2
    Originally posted by gwlandlord View Post
    In every other way we would be treating this as we would for any other let.
    Other than paying the extra for the BTL mortgage? I think that's your problem isn't it?

    Either you pay little for the residential mortgage, and house your family at your own expense, or if you wish to claim public funds, you pay the BTL rate, and undergo the scrutiny of the benefits agency investigating a contrived tenancy.

    Comment


      #3
      Housing benefit or not letting to family is not recommended at any time. There have been many, many cases on this site of grief caused by letting to family - to do it without an AST is pure folly IMO.



      Freedom at the point of zero............

      Comment


        #4
        There are two aspects to this matter, Letting a property to an immediate member of the family places the loan under the Regulated Buy to Let category and indeed waives the requirement for an AST to be created. All members taking occupation will be required to sign a legal declaration that they surrender their rights to occupation in favour of the mortgagee in the event that the loan goes into default and possession is sought.
        The second brings the arrangement into conflict with the local authority who require an AST to be in place. If this document cannot be produced then I fear the benefit will be withheld. So if the intention remains to accommodate a member of the family then sacrifice the concessionary Regulated BtL rate and effect a Commercial BtL.

        Comment


          #5
          loanarranger,

          Thanks for your reply. We have been advised to go for a regulated mortgage, as lenders for a commercial BTL won't allow family tenants. We have looked at both regulated family mortgages and regulated BTL and there does not seem to be an advantage to the regulated BTL, other allowing a AST.

          Comment


            #6
            It is very difficult for a benefits recipient to get housing benefit if renting from a family member.
            It can be done, but it is difficult and subject to frequent interruption as the issue is reviewed by different people.

            You should check with your local authority that they will pay benefits in this situation.
            While common sense says that the property will house someone possibly at lower rent than might otherwise be payable, the regulations intended to prevent benefit fraud will probably trip you up (for a start, you probably wouldn't evict them if the rent wasn't paid).

            That's going to be more of an immediate problem than what kind of mortgage you want to put in place.
            If the local authority do say yes, you will have to meet whatever conditions they put in place - which will determine what kind of mortgage you can get (which I think is likely to be pretty difficult / impossible to do as well).
            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
              I will advise you on behalf of ALL members on here who have seen people lose their BTL property, / go bankrupt by letting to family members.

              NEVER, EVER let to family members, ever.

              BTL, needs 125 % rental, eg 25% more rent asked for than your mortgage repayments.
              The benefits won't give you that.

              Also, if the family members don't pay the rent, are you willing to evict them?
              If you don't evict, and you can't pay the mortgage, you LOSE your property to the mortgage company.

              If you don't pay your monthly mortgage fee because you are not getting it from the family members, one of the letters you will receive will be, Please pay the outstanding balance of your mortgage within 14 days or we will repossess.

              The family can apply to the council for housing.
              They must be living somewhere now, so why are they being evicted now ? ( Not paying their rent ? )

              Comment


                #8
                Wot RaM said: (We don;t always agree but I do on this).
                I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

                Comment


                  #9
                  ram,

                  This does depend a lot on the circumstances, which I have not fully explained. There would not be an issue in receiving rent (even if benefits were stopped). There would not be an issue in keeping up mortgage payments, even if no rent was received. The family members are not being evicted, but in fact relocating back to the UK from a property that they own. My issue is trying to ensure that they do not lose out on benefits that they are entitled to. i.e. the have worked all their lives, and never previously relied on any benefits.

                  Comment


                    #10
                    Originally posted by gwlandlord View Post
                    The family members are not being evicted, but in fact relocating back to the UK from a property that they own.
                    Then I suspect they aren't entitled to benefits. Problem solved!

                    Comment


                      #11
                      Originally posted by gwlandlord View Post
                      There would not be an issue in receiving rent (even if benefits were stopped). There would not be an issue in keeping up mortgage payments, even if no rent was received.
                      That essentially kills off the idea.
                      Good luck.
                      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


                        #12
                        Originally posted by JK0 View Post
                        Then I suspect they aren't entitled to benefits. Problem solved!
                        Not quite solved, but I suspect that this is the way it will fall. Just does not seem right that they can rent from someone they don't know and get housing benefit, but renting from family and they can't.

                        Comment


                          #13
                          Originally posted by gwlandlord View Post
                          There would not be an issue in keeping up mortgage payments, even if no rent was received.
                          With respect, can I marry into your family ? sell my house I have, pocket the money, keep that money away from the benefits department ( fraud ) and be given a free house by you and not have to pay rent !

                          If you want to give a family a minimum of lets say, £ 150,000 ( including interest payments ) house, and be comfortable that no rent could be paid, then each to their own, but let them rent someone else's house.
                          Why do YOU have to buy a house, when they can rent ANY other of the thousands for rent.

                          I have just saved you £ 150.000 , so a substantial cheque in the post would be welcome.

                          Hope you see that you will make yourself a charity.
                          But wait for these words in the future " But you won't throw your family out on the street, just for not paying the rent ? - we are family !
                          Yes, it happens all the time, and time again.

                          Comment


                            #14
                            Originally posted by gwlandlord View Post
                            Just does not seem right that they can rent from someone they don't know and get housing benefit, but renting from family and they can't.
                            Having property abroad would also debar them from housing benefit here.

                            Comment


                              #15
                              It would debar them from many benefits ...
                              I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

                              Comment

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