Letting to Family Member

by Readers Question

4 years ago

Letting to Family Member

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Letting to Family Member

Letting to Family MemberI would really value some advice about letting to a family member please.

I have recently retired and purchased a “retirement home” for my wife and myself.

My intention is to let my current property to my daughter and I have consequently contacted my mortgage provider (Woolwich – Barclays) for permission to do this. Reading the application form that I received from them suggests that consent will not be given as my daughter is currently in receipt of Housing Benefit (£970 / month).

My mortgage situation is that I have an interest only tracker mortgage for which I am paying £46 per month, the mortgage completes in February 2016. I have for a number of years been overpaying and reduced the amount that needs to be repaid by £13,000.

My question is would the Woolwich / Barclays be likely to consent to my letting to my daughter given the minimal mortgage repayment amount, less than 3 years to completion and my having overpaid by £13,000?

The local council have agreed to pay the monthly £970 rent directly into my bank account.

Whilst I would wish to do things legitimately my daughters current tenancy expires at the end of July and with no hope of obtaining alternative accommodation at the LHA rate I feel that I have limited options.

Any advice would be most gratefully received

Many Thanks Dave

Comments

Mark Alexander

4 years ago

Hi Dave

The key to this is simplicity.

The more information you share, the more reasons you provide for the bank to say no. The bank already have plenty of information on your account conduct so there is no point mentioning that. Further, who you choose to let the property to is entirely up to you unless the banks consent to let suggests otherwise.

Therefore, I suggest the following letter to your bank.

Dear Sir/Madam

RE: Mortgage Account Number XXXXXXX - Address ...........

My wife and I have purchased another property for our retirement and request "Consent to Let" the property upon which you have a mortgage secured.

We look forward to hearing from you.

Yours sincerely

Jerry Jones

4 years ago

Irrespective of the LHA situation, do lenders allow letting to a family member? And, come to think of it, is LHA paid if someone is renting from a relative?

Mark Alexander

4 years ago

@Jerry Jones - when applying for a new buy to let mortgage the question is asked about whether the property is INTENDED be let to a family member as this affects whether the loan is regulated or not and hence the paperwork. Peoples intention can and do change and that's fine. All that's important is that the lender asks the right questions when setting up the mortgage. The fact that a person does not intend to let to a family member and subsequently changes their mind after setting up a mortgage breaks no rules unless the mortgage conditions strictly prohibit this, and I've not seen any with such conditions. This is not a new mortgage so the question is highly unlikely to be asked as it is not a legal requirement.

I do not feel confident enough to answer the second issue you have raised Jerry. I do recall there being a thread here which touched on this subject a while back but I can't find it. However, I do recall that it was a person in Housing Benefits with the Twitter handle of @Zeeblebum (heavens knows why I can remember that but anyhow, I will send a Tweet as I recall @Zeeblebum being very helpful with such advice.

Jerry Jones

4 years ago

Great big long thread here with some interesting views:

http://forums.moneysavingexpert.com/showthread.php?t=1201865

Dave Moore

4 years ago

Thanks for the responses - I can confirm that the Council have already agreed in writing that my daughter can rent my property and the rent will be paid directly into my bank account - not hers.
Regarding the advice given by Mark that I should offer the bank minimal information, unfortunately when I initially wrote to them asking for consent to let I did inform them that the tenant would be my daughter and that she is in receipt of housing benefit - that's what comes of being an honest chap!
I haven't completed the bank's application form yet and it's been over four months since they sent it to me so I'm wondering whether to risk not returning it at all - how would this affect the legality of obtaining Landlords insurance if I omit to disclose the banks interest?

Regards

Dave

Mark Alexander

4 years ago

@Dave - well done for getting agreement in writing from the Council.

Just for the record I wasn't suggesting dishonesty, simply sticking to the necessary facts.

If you choose not to complete the application form you risk the bank calling the loan in. As it's only such a small amount and such a small risk of that happening then only you can take a view on whether you want to take that commercial risk.

Please also consider taking tax advice on CGT on the sale proceeds of the property.

What form have the bank sent to you? The reason I ask is that they may have invited you to apply for a buy to let mortgage. This wouldn't be the first time I've seen this bank error in their own favour. All you actually require is consent to let.

Jerry Jones

4 years ago

Mark, you say that "The fact that a person does not intend to let to a family member and subsequently changes their mind after setting up a mortgage breaks no rules unless the mortgage conditions strictly prohibit this, and I’ve not seen any with such conditions"; are you aware of any restrictions on subsequently moving into a property after a period of it being a genuine rental property? Keeping a B2L mortgage running could be quite a useful strategy for the future, if I want to downsize and am not eligible for a residential mortgage on affordability grounds.

Mark Alexander

4 years ago

Hi Jerry, your related question is one which relates more to mortgage lenders terms and conditions than to the law. I am not aware of any law but that doesn't mean it can't be in your mortgage T&C's. Therefore, this is far more of a grey area and I would recommend that you take professional advice to be absolutely certain what your mortgage conditions do and do not allow. The fact that thousands of people do decide to live in properties which they have a BTL mortgage on and never have a problem may add comfort to some but still can't be condoned as being good practice. I suspect the bottom line is that very little would happen in most cases unless the mortgage fell into arrears. That's when the lender would be pointing the T&C's out to the judge and insisting on possession being granted. The greater risk is where a mortgage lender needs to exit the market, e.g. Mortgage Express. They are far more motivated to tackle none compliance more aggressively. I hope that helps, sorry it's a bit of a wooly answer but it's a bit of a grey area.

Jerry Jones

4 years ago

That's pretty much my guess, other than the possibility that the lender may automatically flag a borrower's correspondence address being changed to that of the mortgaged property.

Mark Alexander

4 years ago

@Jerry Jones - I've spoken to quite a few landlords who have subsequently chosen to reside in properties with BTL mortgages on them. I've never spoken to a landlord who has had a problem. Obviously I need to point of that means absolutely nothing and that people should not construe this as advice.

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