To think this is a good financial investment

[Wife2b]

I’m not the most informed with this sort of thing.

Grandmother wishes to move closer to us as currently lives 3 hours away. Renting a 3 bedroom council property where she is.

My Dad is contemplating buying a 1 bed flat with cash local to us for her to live in on the premise that she will continue to claim housing benefit and pay rent to him (this money will go towards rebuilding his savings).

Am I right in thinking this is a good financial decision? He’ll have the value of the property which will hopefully increase over time plus savings accrued from the rent (subsidised by housing benefit minus tax).

I’m conscious that he has £72k in the bank, intends to buy the property for £70k assuming offer is accepted. Grandmother will pay for stamp duty (as second property of Dad’s) and the legal fees/survey. Don’t want him to be making a poor decision but it sounds a good plan to me. Are there pitfalls we might be missing?

Thanks

You can't claim hb when renting from a family member. For this reason.

lots of people commit benefit fraud though

People have bought houses for a £1!

£70k flats are ten a penny.

It’s more because he’s looking to move in 10 years time when he retires so was hoping to put that money to the sale of his current flat for a bungalow. We are hoping she will be with us for another 10 years at least, she is in good health 😊 well she is now the cancer has been removed (as of last week!!).

because when she makes a new claim for housing benefit with the new council she come sunder they specifically ask on the form if you rent from a close relative.

You can rent from a family member, it has to be declared and there has to be a proper tenancy agreement in place. The property will also need to be up to the various different laws and regulations that you might not think of when you are buying a property to live in.

I dont think he has enough money to do this. Also, your solicitor is going to want to know where the funds are coming from, so your gran paying for the stamp duty, she would also have to be checked as a giftor. Which you might also have to declare to the council, as she may then have a stake in the property.

She will have been asked by UC whether the property she rents is owned by a close relative. It can be allowed if the property has ben previously rented out to other tenants but if bought solely for the purpose of renting to a family member it can be seen as contrived.

OP, you most certainly can rent to a family member and use your HB or UC to pay the rent.

Myself and DH rent a flat to my parents, my mums had a stroke and required a home more suitable to needs. We charge them £15pw above LHA rate, the rent covers the mortgage, ground rent, service charge, etc and is still £200 below market value.
The council are aware that I'm their landlord. We own the property via a limited company, we own two other properties, we're fully registered and compliant (based in Wales). All paperwork is water tight. The council were absolutely fine with this being a commercial agreement.

Whether it's good investment for your father, I don't know, I'm not in a position to advise

It is not benefit fraud if Uc are aware of this and if the property was previously rented out before it is likely to be fine.

This. There are often more over 55's properties available than larger 3 bedroom properties. I have never heard of the like for like issue, sounds bonkers given the shortage of family properties.

This could have huge implications if the mum had to go into a care home though ? She would own the property and it could all go on paying for care leaving op's dad with nothing !! dreadful idea !

Yep I spoke to the council myself. She’d have to live in the property for at least a year, like for like. Then obviously a waiting list to downsize. It’s silly. She can’t just register as a new tenant either as she will have needed to have lived in the area for 6 years!!

Could she get around that by stating family connections to the area?

What if he buys the flat, she lives in it and transfers some cash into an account held jointly with your dad?

Doesn't sound like she's be able to afford this without claiming Housing benefit though ? People have to have a pretty low income to need HB.

Sadly not - as a grandparent it’s not considered close enough. (My Dad is in her area but will move privately when he retires).

She’s almost 80 so only on a pension, she doesn’t have a lot of money at all. She would have enough to cover stamp duty and legal fees but it would wipe her savings out.

@Babyroobs yes it has always been a property rented out. We have has 2 previous tenants for 2 years each.

Ah, so she would be reliant on HB to rent anywhere

So this plan will wipe out both your gran's and your dad's savings?

What will they do if a big maintenance eissue comes up - broken boiler etc.. Has your dad factored in paying service charges for the flat - they can be a couple of thousand a year and in addition there may be extra demands from the freeholder to fund big things like new windows or roof repairs.

One of my sister's friends used to rent her btl out to her sister and niece after her marriage broke down. At some point her sister told UC she was renting a house from her sister and BiL and was told by the benefits office this is not permitted if she wants to claim housing benefit. She had to find somewhere else to rent and pay more too. Her sister then rented it out to someone else. Her sister and BiL actually gave her previous tenants notice so her sister and niece had somewhere to live. Any way her sister and BiL gave her a good reference and as surnames were different it helped her sister and young niece secure another tenancy that they probably wouldn't have managed without reference.