Am I the only one that thinks this is highly suspicious

[SSuspicioumum]

Hi, so my mum is converting our home into individual flats. She is 65yrs old and she had a few builders come along to price up the works. She knows she won't be able to get a big loan at her age, but wont listen to reason. One builder that she is really drawn to, has offered not to accept payment and pay himself from the rent once the flats are occupied when he finishes building the works. Am I the only one that thinks this is highly suspicious even with a contract in place? Who works for free in this day and age.

Does she realise she won't get any income from the flats for years? He will be receiving all the money. She will be responsible for the management and the costs.

It's a total disaster.

Get her an appointment with an accountant to run through it with her.

Frame it as 'the responsible thing to do, when you start a business/go into business with someone'.

She thinks she's going to be a business person- expect her to behave like one. Business people get contracts checked by lawyers, accountants, have legal representation before committing to things.

If you describe it as normal business practice for professional people, use phrases like due diligence, partnership, business, contract, investment, etc, she may be more inclined to take it seriously and behave appropriately.

This.
For the love of god please don't let this happen.
Show her this thread and get advice from a property solicitor. They'll put her straight.

a blind man on a galloping horse would see right through this blatant scam

😆

Sounds like the builder wants to own the freehold. You mum really needs to understand who will own the property and not sign anything.

She'd probably make more income from taking in a lodger or two under the rent-a-room scheme (up to £7,500 tax free).

https://www.gov.uk/rent-room-in-your-home/the-rent-a-room-scheme

Or sell the house with the PP for someone else to do the work.

Exactly.
Is it likely that the plan is for the builder to add 3 ensuites so the house actually becomes 3 or 4 ensuite rooms with all the tenants sharing the downstairs dining kitchen /living space and separate parking spaces are created in the front garden?
Can you look on the Council website at the approved plans?
I know someone who lives in this kind of arrangement and is charged circa £800 a month to include bills and Council Tax.
It would just take about 15 minutes to do a quick spreadsheet for her and know for sure whether she is going to hit trouble fairly quickly.
Being a Landlord is not easy if she has no previous experience and has to keep finding people to 'fit' the house and do all the admin and money chasing.

@Chewbecca after protracted, expensive, frustrating then daunting negotiations with planners, architect/s, builders, family have done this as you suggest, sold with hard earned PP, side garden, moved to somewhere which suits them better, fd up with protracted negotiations and abysmal offers, as though they would not know the value of land in Greenwich ! always people out there ready to rip off the unwary, this is not a new phenomenon

I have family that are builders, they often end up with quite large amounts of cash that didn't go through the books to hide it from HMRC. I suspect the builder is planning to " launder" this cash by using it to pay for the materials and possibly some labour and then have nice clean rental income coming in. It sounds like the kind of thing my FIL would try but he would only involve family!
Don't involve your Mum! She might end up in trouble with HMRC! Or worse.

Bedsits?

What kind of people does she think want to live in a bed sit?

The kind that move in and won't pay and will trash the place.

Your mother is being stupid and greedy.

Money of course! Who knows what he had in mind, but you can guarantee he intends to end up owning some/ all of those flats.

This sounds dodgy. Is your mum intending on living in the house during the building work? Afterwards? In a house full of bed sits? Has she ever been in a house of multiple occupation? Because that's what it'll be,and they don't have good reputations.
If she won't listen to you,can you be with her when she next sees the builder? She may not listen,but if he thinks that you know the score and are not going to be conned like she is,and may possibly become 'difficult',he may back off and look for an easier ride elsewhere.

Good luck with this,it was the potential to be a complete nightmare.

Sounds mad to me. Pretty sure his quote would be the most expensive by a country mile 🙄
Why doesn’t she just downsize?

She's going to be left with no home and everything signed over to this guy

Your Mum needs to talk to a solicitor specialising in buildings etc. If she does this she needs to get a watertight contract written up by a solicitor (although I think any legal person would question the sanity of the idea).

I'd be concerned about

1. costs being significantly higher than quote
2. dragging work out to get her to sell to him at lower than market
3. interest above market rate being included in the fine print of the contract
4. how your mum will pay expenses if all income is going to the builder
5. the term over which to pay not being defined and never ending
6. confusion over ownership of the property and potential registered interest
7. confusion over who will keep the profit if the property is sold. Would the builder be entitled to capital growth on top of the cost of the building work?

What’s going on here is that the builder will register a charge against your house (RPI interest rates) to be paid from the rent. If there is a death then he will own a portion of the estate and until that time he will get an income that your capital will be paying.

Why on earth doesn’t she just sell the house, buy a smaller one for herself, and invest the rest of the money (with advice from a financial advisor as she sounds like my mum in terms of making terrible financial decisions 🙄)? It would quite possibly be more profitable and she’d have none of the hassle.

DO NOT UNDER ANY CIRCUMSTANCES ALLOW HER TO DO THIS SHE WILL LOSE EVERYTHING !!!! She is being scammed and is too stupid to see it and she's going to lose the lot

Do not do this and just tell the builder no yourself and block his number in your mum’s phone.

how will she get an income if the builders are taking all the rent. She will need to pay tax on the income and then they get it potentially tax free.

start power of attorney before she loses everything.
why not just sell the house and invest the money

Please don't think I am being cheeky, but is there a possibility of dementia?
This idea is so crazy, I can't believe anyone would fall for it.

It’ll reduce his tax or vat fees so could be why! As long as she has an ironclad contract in place and gets full authority over the agrees to pay him the rent when it’s occupied rather than rent going to him etc

contractor put lien on the house
www.investopedia.com/terms/l/lien.asp

I don’t mean to sound morbid….

How much will this renovation cost, what’s he quoted?

how much rent would she get for each of the properties?

How long will this work take?

if all rent is going to this builder to pay the cost of the build how many years would that take based on the figures above? She will still be paying the income tax on the profit she isn’t then seeing. That’s a cost to her too. Would she then be retired and not see any of that income but still be liable for any damage as she would be a landlady? She also has the additional insurance she has to fund without that added income to pay for it.

How will she fund retirement whilst all profit is still going to the builder? Whats the interim plan?

if she dies (sorry) before this is paid off where does this legally leave ownership of the property? If you inherit the property you’ll get inheritance tax and presumably still owe this debt. Can you afford to pay the shortfall.

I wouldn’t entertain this.