Best Way to End 'Renting' House to Family Member

[HedgehogDay]

We (DH and I) have got ourselves into a situation, with the best of intentions - there are a few issues I should probably put on the relationships board - just thinking about the legal aspects on this thread.

Just over 11 years ago DH and I) bought a 2nd property using my redundancy lump sum as a deposit - my daughter and her partner immediately moved into it paying us a monthly amount just covering the mortgage.

During the last 11 years DH and I sold the UK house we had been living in and used the proceeds to emigrate - renting in our new country.

We kept the repayment mortgage on the UK house going, occasionally paying the monthly mortgage from our own funds when my daughter and her partner were between jobs or tight on money and couldn't cover the payment. We also dipped into our own savings to carry out maintenance on the house and replaced the bathroom and gas boiler.

Then, just over 4 years ago DH and I decided to put down proper roots in our new country and wanted to purchase a property here - the locked-in deal on the UK mortgage was coming to an end so we decided to discuss my daughter and her partner getting their own mortgage to buy the UK property from us at an amount to cover the outstanding mortgage and the amount we calculated we were owed (our initial deposit and reimbursement of the amounts we had paid on the mortgage and on the new bathroom and boiler - plus the amount we would need to pay in Capital Gains Tax) - due to the rise in the housing market this would still leave a reasonable amount of equity in the property (approx 50K) (Property Value about 200K at this point).

My daughter and her partner couldn't get a mortgage due to their income still not being high enough - so we agreed to re-mortgage and release the amount of equity we felt the house 'owed' us (to use as a deposit on a new home for ourselves overseas) - but in order to keep the monthly payments affordable for them, we had to go for an interest only mortgage. The locked in rate comes to an end in 10 months time by which time there will be 18 years left on the mortgage.

We warned them that, due to our ages, we won't be able to keep re-mortgaging to get the best deals, especially as we live abroad now, and hope to retire in about 4 years time. So the latest mortgage fix is probably the last we can get. On a recent visit to see them we mentioned that in 10 months time, the mortgage will switch to the standard variable rate instead of the low fix we currently have - so the monthly payments will go up by about 300 pounds a month (in today's terms).

Despite both being in better jobs now, my daughter and her partner tell us that they can't afford to pay more each month and don't think they can get a mortgage either. The current mortgage is a buy-to-let mortgage and the bank asked us to get my daughter to sign a rental agreement when we entered into the current mortgage - the rental agreement was in her name only.

We envisaged the whole arrangement would end with my daughter and her partner buying the property from us for the minimum possible (once all fees and tax liability were paid) but it looks like they won't be able to borrow enough to do so.

We can't afford to fund the 300 pounds per month to keep my daughter and her partner paying the 700 pounds a month they currently pay (full market rent would be about 1,400 pounds per month in their area).

Setting aside the emotional aspects, how can we end this current situation as 'nicely' as possible?

Worst case scenario is they stop giving us money to pay the mortgage with - we don't have spare money to pay it, due to now having a mortgage ourselves. Presumably we would need to evict them legally or the bank would do so if we defaulted on the mortgage and it would be our credit rating taking the hit.

Any ideas please?

If you wanted to make things fair between all the siblings really any equity that is split between them should go to the 3 who haven't benefited from cheap rent for several years

Definitely this ^^, your eldest DD is taking the p…, no wonder your other DCs are furious!

You would be better to send them a standard Section 21 letter. Of course you can pop it in with a personal note saying "we have to send you this Section 21 letter to keep everything properly in order before the sale of the house".

Dear X

We would like to inform you that, by virtue of Section 21 of the Housing Act 1988, we require possession of the above property after [date].

If convenient, I would like to do an initial check of the property, and the inventory, with you on [date]. At this time we can also discuss the hardback of the property on or before [date].

This should allow us time to sort out any discrepancies before the end of the tenancy.

Yours etc

(not "hardback"! HAND BACK!)

She is a massive piss taker, in fact the both are, regarding the equity she has had her share and some more.

Sell up and try and repair relations with the three non piss takers.

I understood how difficult this was till I read you have 4 kids. I’ve no idea what you’re thinking with such blatant favouritism. And am actually quite shocked at how you have behaved and are still behaving. You are only stopping it as you can’t afford it any more. Not because it’s appalling to provide for one of the four only.

What you did was really nice, but they're taking advantage of you. She's hoping you just keep paying the mortgage difference, and sign it over when it's paid off. This doesn't seem fair on the other children. I'd actually put the house up for sale, and share out the equity amongst the children equally.

I'd put the house up for sale this month personally and share between the other children. She's already had her share in cheap rent.

@HedgehogDay as @clarebear111 says I think you are in for a shock.

Your eldest daughter may need to be formally evicted in order to qualify for assistance with housing.

You really need to get legal advice now as getting it wrong can cost you a lot of money and heartache.

Your eldest is totally taking advantage. Sell and split the proceeds between the siblings.

OP you should consider what if (God forbid) you and your DH were to die tomorrow. Your estate could be in a frightful mess re dividing assets between your children. I assume you intend for your assets to be divided equally among your heirs? Do you have sufficient estate that DD could take the house as her "share"? If so the years of subsidised rent have really muddied the water.

Unfortunately I think only an ultimatum will do here. Say you need to sell by July 2024, that you are willing to sell to them for x price (market price-5% which takes into consideration that there won't be estate agents fees) but completely understand that they may not be able to raise a mortgage for that amount if so you will be instructing an estate agent in January to start the selling process. They have had a lot of support from you, don't feel guilty.

I think you need to sit down with your daughter and have a very honest discussion so that there is no room for misunderstanding on her part. After so long, she may not truly understand that you cannot afford for the situation to continue.

I’m not sure about going the legal route and evicting them. Would she really have any chance of getting a council house quickly? Wouldn’t they be put into temporary housing and be on a list for years?

@RoseMarigoldViolet no they won’t get a council house, yes they may be put in temporary accommodation.

If the daughter truly cannot afford market rent nor to buy this or any property then she will be advised not to leave but to wait until she is evicted. At that point the Council have a legal responsibility.

Unless you have been funding the other kids in the same way It's time to sell the house and split the money between the other kids to make it up to them. The one renting from you has benefitted for many years and doesn't seem to appreciate it.

I'd join the NRLA asap and use their advice line.

But I agree, sell and split the proceeds four ways. Adjust your will to reflect the rent help in the past.

Glitterfarts has the answer.. work out how much she has had from you in subsidies over the years and give each child this much.

Divide the lump sum you want to give by 4 and give to all children. This would ensure more harmony in the family as the others will benefit from your generosity also, in line with oldest child.

Interestingly, my BIL has lived rent free in PIL flat for 40 years- London. Neither my husband or his brother have enjoyed such a benefit and it has been the cause of much rancour over the years. However, now both ill and elderly PIL need care in their own home, and it has fallen to BIL ( geographically closer) to provide considerable support. What goes around comes around…

I feel so sorry for your other children to be honest, the sheer injustice of it is staggering?! They've had subsidised rent for years, at times you paying their rent? Have you done the same for the other three?!
It sounds hard but actually it's not. You need to give them warning that you are selling the house and tell them that they need to use the time to save a deposit to rent or possibly buy somewhere else. It sounds like they've enjoyed having a great life if they're paying so much below market value and you'd hope they've saved a bit?! It's going to be hard making it up to your other children but whatever you do, don't give her a lump sum on top of everything else!!

I bet your daughter and partner have taken holidays etc while living the high life on reduced rent by mum and dad. How entitled is she. You need to bite the bullet sell up and divide it up between your other kids to even up this favouritism that has been abused by your daughter and partner..she has had more than enough and you cant subsidise her anymore end of. Anyone with half a brain knows that thats fair and you will have zero tension from your other kids and maybe a bit from her for a while but She will eventually have to suck it up.

Seems pretty simple tbh.

Tell DD you can't afford the current situation to continue so the house will be sold.

Put it in the market now.

Work out if you will give her a little of the proceeds, but share the majority with the other kids who have been left behind.

At this point DD should simply thank you for all the help you have given her and start planning where she will go next. Any other reaction will be a disgrace.

You've been wonderful to her, now you need to make amends with the others.

Agree with previous posters. Calculate how much she has saved from you in cheap rent /deposits/ you covering mortgage payments. Sell the house. Give each of the other 3 children the same amount from the equity, or as close as you can if there isn't enough.

Each of your 4 children has then had the same amount of help from you.

She won't like it, as she's been promised the equity. But it's only fair on the others, surely?

I can see how she may have thought that you can afford it and so didn't think it was a problem. You just need to be really honest with her - don't try to sugar coat it but just spell the facts out

• the fixed rate is ending
• you can't afford extra amount
• you can't afford to subsidise her to buy house
• so the house will be put on the market

And then ask her how she wants to proceed. She can either downsize and stay in the area or move to another cheaper area. I realise it may be a bit of a schlep for school etc but that's just life. Lots of kids travel fair way to get to school (mine have a good 45 mins).

Just be honest, straight and spell it out