Any advice with house purchase

[Burton]

My siblings and I have pooled together enough money to buy a house for our brother.
The house next door to me has come up for sale and would be ideal, he will be able to live independently, yet I will be able to support him with day to day issues.

We have looked into it and will be buying in cash, then I will be his landlord and issue a commercial tenancy agreement. His Housing Benefit will pay the rent and enable us to make the adaptations necessary to the property and cover the upkeep.

We are not sure about how best to protect his tenancy. There will be 4 of us contributing to the cost and we want to make sure when one of us dies their share is protected by the 3 remaining and not taken out as part of their estate.

Has anyone done a similar thing? Or can you point me in the right direction of how to find out our options. Our solicitor charges £220 per hour so I would like to research as much as I can before getting them involved!

[frances_is_a_sibling]

Hi @Burton , lovely to meet you - I am a sibling too and this is something my sister and I have considered for our brother who has Learning Disabilities. This sounds like a really well-thought out arrangement that shares responsibility between several people.

I agree - I’d have concerns about this part of the arrangement too. Have you considered putting the house into a family trust fund? My understanding is that a trust can have assets such as money and property etc placed into it with specific instructions on how those assets can be used. This would then protect them from being classed as part of one persons estate if they were to die. I think you would need to be very careful about the TYPE of trust that you decide to set up, and seek specialist advice from a solicitor who has experience not just of setting up trusts but of setting up trusts with this kind of family situation in mind (e.g. where a beneficiary is a person with LD who may/may not have the capacity to manage the money). Trust law can be quite complicated, and if you have a solicitor who is dabbling in it, you may end up with a trust that doesn’t fully protect your assets (e.g. potentially could be reclaimed by the council as it may count towards your brothers income etc).

Mencap has some great advice on Wills & Trusts, including a PDF guide that you can download and workshops around the country that you can attend. If you call the Learning Disability helpline, I think they can also give you list of solicitors in your area that they would recommend - who have experience of setting up a trust for a family of someone with LD. Sibs (www.sibs.org.uk) has a guide available for siblings on mental capacity which would be helpful for you to read around this topic,and a lot of other information for siblings of someone with LD.

Hope this helps - come back and let us know how you get on.

Best wishes,
Frances

[JohnVerge]

Dear @Burton,

I work at Mencap’s housing arm Golden Lane Housing and we have advised and supported many families in similar circumstances.

We also work very closely with Mencap Trust Company regarding family led solutions and some useful information is attached:

GLH_Housing_Options_2016-FINAL-v.pdf

I would be more than happy to set up a call to discuss this further. If you email me directly at john.verge@glh.org.uk .

Best wishes,

John

[DavidK]

If using a Trust, you need to be aware of the Housing Benefit rules which can catch you out.

If the tenant is also a beneficiary of the Trust then Housing Benefit is denied (Regulation 9 (1) (e)). This is not the case if the claimant ‘satisfies the appropriate authority that the liability was not intended to be a means of taking advantage of the Housing Benefit scheme’ (Regulation 9 (3)). This is difficult as the onus is on you to prove a negative to the Local Authority that probably wants to deny the claim.

There is case law around this regulation and not all of it is favourable to what you want to achieve. I have a HB claim on behalf of my son (who is a tenant and beneficiary of a family trust) that was refused (within 24 hours) and again on reconsideration even though he has been in receipt of HB for 17 years in other properties not connected to the family or our discretionary trust. I am taking the case to a Tribunal but, as I say, not all the case law is favourable. (I am told the waiting list for the hearing in my area is 49 weeks so I can’t tell you yet how my arguments are received.)

The other regulation you will have to watch is 9 (1) (a) which denies HB if the tenancy or other agreement is not on a commercial basis. In my experience Local Authorities will argue that the same terms and conditions wouldn’t be offered to any other tenant and that you (as relatives and trustees) wouldn’t evict the tenant. There are some arguments against these points in the case law but I don’t know yet how persuasive they will be.

You will want advice on the stamp duty implications of the purchase. The purchase of a property by a Trust falls within the definitions which trigger the additional 3% stamp duty land tax. I believe that this is not the case if the beneficiary is granted a life interest in the property. In that case, I believe also that if and when the property is subsequently sold Principal Private Residence relief from Capital Gains Tax is available to the Trust.

Of course, structuring the purchase in a tax efficient manner may have a bearing on how the overall arrangement is viewed by the Local Authority for the purposes of the above HB Regulations.

I would take up John Verge’s offer to discuss, which was recently posted.

Best wishes
David