Should I let to family through my limited company?
As the title suggests, I’m considering getting a BTL via a limited company with the intention of letting it to family – who would claim housing benefit. The family already lives in a council flat and benefits from getting housing benefit.
The council flat is not fit for them anymore and I thought instead of council placing them in accommodation (which would be an AST and at risk of being temporary) I can provide a more stable home with no intention of eviction.
Is there anything I need to consider, legally or financially, or is this simply another BTL via LTD Co.? I appreciate the risk of non payment and any risk of arguments arising from working with family.
Many thanks
Jay
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Member Since November 2015 - Comments: 584
5:45 PM, 30th May 2020, About 6 years ago
Bill Irvine is the expert on Universal Credit, he runs educational courses on the subject for the RLA (one of which I have attended), so you can take his word as gospel on that subject!
As others have said, if you are borrowing for the purchase you may have a problem with the mortgage terms. The other issues are all personal and that is your decision to make. Just ensure that EVERYTHING you do is to the letter of the law in case things do go south, as they can with any tenant.
Member Since July 2013 - Comments: 1266 - Articles: 1
9:30 PM, 30th May 2020, About 6 years ago
Reply to the comment left by Bill irvine at 30/05/2020 – 11:33
Very amusing you have capitalised “Trumping”
I wish I had had this information previously, my relation was turned down flat by their local authority. This was several years ago, though.
Member Since September 2013 - Comments: 374
11:33 AM, 31st May 2020, About 6 years ago
Letting to family is so fraught that I would strongly advise against it under any circumstances.
We let one of our properties to a niece once. The problems began almost immediately. Amongst other things, she let her rabbit run free with the inevitable consequences for the carpets – which required expensive replacement as a result! Fortunately, she decided that she wanted to move out in pretty short order for various reasons. With hindsight we consider ourselves lucky but the resultant trauma surrounding the whole thing coloured family relations for some years.
Later, we made the same mistake again with another family member (and in the same property!). This one ended much less traumatically, but relations were still soured – albeit in a much more minor way than the first time around.
Bottom line: my advice – just don’t do it. Tempting though it is, the dangers of something going wrong are just too high and are not worth the risk.
Member Since August 2014 - Comments: 336
12:00 PM, 31st May 2020, About 6 years ago
Never let to friends or family. I let to a friend, and the chain of events that followed were worse than I could have possibly imagined.
The fact that they are on benefits suggests that they already don’t have surplus money. Either you charge them the full rent, or you let them off a little. In the second case, HMRC no longer recognise your maintenance and mortgage costs as tax deductible against the income as it isn’t a proper business, and you will be liable for tax against the entire rent.
Similarly for DSS rental income. If your tenants cannot prove that they pay you the full market rent every month, then the DSS will stop the payments. And where does that leave you?
You would be better advised to purchase a BTL and let it out on a purely commercial basis, and use the profit to help your relatives out.
But your replies to earlier advise suggest that you have already made your mind up, so good luck, and I hope I don’t see you back on here seeking remedies for the pickle that I anticipate coming your way 🙂
Member Since May 2020 - Comments: 2
10:50 AM, 1st June 2020, About 6 years ago
Reply to the comment left by Bill irvine at 30/05/2020 – 11:33
HI Bill,
Really appreciate all your input. I will go through the links and get in touch with the council at once.
Thanks again.
Member Since July 2013 - Comments: 1266 - Articles: 1
4:27 PM, 2nd June 2020, About 6 years ago
Let us know how you get on, good luck
Member Since March 2023 - Comments: 1507
8:56 AM, 13th April 2026, About 2 weeks ago
Aside from all the issues of having a family member as a tenant, most of which have been thoroughly explained in previous comments .. the BIG issue you will have is with your mortgage conditions. It also affects your property insurance as well.
If you own the property outright then this will not apply , but if you have any kind of mortgage (except for very old ones) there WILL be explicit conditions about renting to family members.
There are some mortgages available that will allow this but these are called ‘family BTL mortgages’ and they are far more stringent in affordability conditions and will almost certainly require guarantees lodged against your other or own property … and they are NOT commonplace.
How do I know this – because I am looking for one
Dont’t think you can just get a BTL mortgage and secretly put your relative in as a tenant. You might get away with it but woe betide you if the mortgage company finds out, and having working in computer systems for a large credit checking company I can tell you this information is not difficult to get if the mortgage company so wishes.