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Frugal Git

The Most Abhorrent Buy To Let 'scheme' Yet

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Upon browsing another forum, I found a person asking about the possibility of buying a BTL, and then renting it to their son, who is currently in receipt of full housing benefit. In effect the tax payer would be paying of the debt on a property that the occupant would eventually inherit.

Pretty much all the replies said this is OK, and not one could see an ethical objection to it. Beyond belief.

So, we have a system where someone could in effect kick their 18 year old out, get a BTL and tell their child that they shouldn't get a job that pays above the level they would start to lose HB. There would be nothing stopping the parent then gifting the child some money in cash, and getting the whole thing paid for by the state.

Nice work if you can get it eh.

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If single person under 25 LHA can pay the mortgage then the main obstacle will be the local council working out it's a relative they're paying rent to.

I think council's can refuse to pay if they suspect its not a valid tenancy (ie: eviction wouldn't happen for non-payment)

Mortgage company might be interested too.

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Don't think you can rent direct to family but id 2 mates rented out flats to each others sons, no issue.

How come he isn't restricted to under 35s HMO rate?

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I think council's can refuse to pay if they suspect its not a valid tenancy (ie: eviction wouldn't happen for non-payment)

Agreed. It would be very difficult to claim housing benefit for a relative.

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Agreed. It would be very difficult to claim housing benefit for a relative.

shelter FAQ

It looks to me that provided the rental is 'proper' - i.e. ask for market rent, no reductions because of occupant being out of work, you would get away with it. Basically, the landlord puts on a front saying he's a hard faced businessmen to the council.

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shelter FAQ

It looks to me that provided the rental is 'proper' - i.e. ask for market rent, no reductions because of occupant being out of work, you would get away with it. Basically, the landlord puts on a front saying he's a hard faced businessmen to the council.

I knew a mate in Leeds in the 90's who's dad was that hard nosed - he had a BTL empire even then and charged his own son much more than market rate until my mate rumbled it :lol:

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shelter FAQ

It looks to me that provided the rental is 'proper' - i.e. ask for market rent, no reductions because of occupant being out of work, you would get away with it. Basically, the landlord puts on a front saying he's a hard faced businessmen to the council.

But LHA an 18 year old can get is only the shared house amount ... So asking for more than that and not getting it will equate to a negative rent balance which a real landlord wouldn't ignore.

Shared Accommodation Rate:£65.00 per week <<<<<<<<<<<<<<<<<<<<< 18 year old will only get this

One Bedroom Rate:£97.09 per week

Two Bedrooms Rate:£114.23 per week

Three Bedrooms Rate:£126.92 per week

Four Bedrooms Rate:£187.50 per week

If he let a one bed (or more place) for less than the one bedroom rate then any wise council would construe that as a phoney tenancy. Because that's one of the ways a lot of landlords work out what they can get as a minimum.

Whilst being an altruistic landlord and charging less might be on many HPCers wishlists it would ring alarm bells with councils and they'd look into the relationship between landlord and tenant.

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As far as I know as soon as they know you're renting off a relative they're likely to put your housing benefit claim on hold until you can prove you've not contrived the tenancy just to claim HB. And whilst it might get passed eventually it causes a lot of problems.

Edited by oldsport

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Agreed. It would be very difficult to claim housing benefit for a relative.

My friend does it, and when she recieved HB, they had to prove the rent was a market rent and that it was paid.

It took months to get the council to agree to it...This wasnt a planned scheme either...the friend had to move to the other end of the Country to escape the violent partner, subsequently divorced...

The parent had just moved out and was waiting to sell the place at the time...so it all fell good for my friend...who now works in Social services..the irony.

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Ive though of doing this, but through a company.

If I set up a BTL 'business' cant I just buy a place, appears on LR as owned by a business, but claim HB as a private individual, live rent free in the place, and get a free house after a couple of decades.

Its a sick indictment of the system, but the only way the system will collapse as it needs to is if we all abuse it.

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Ive though of doing this, but through a company.

If I set up a BTL 'business' cant I just buy a place, appears on LR as owned by a business, but claim HB as a private individual, live rent free in the place, and get a free house after a couple of decades.

Its a sick indictment of the system, but the only way the system will collapse as it needs to is if we all abuse it.

No you cant because as a company director your use of an asset owned by the business is classed as benefit-in-kind and you would be taxed on the imputed rental value. You could of course actually pay your company a market rent, but that would appear as profit on the company accounts and be subject to corporation tax.

Edited by goldbug9999

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I know a family with an adult disabled child.

They have bought a very nice flat for cash and rent it to their child on HB.

The rent is much less than the market rate, but enough to cover expenses.

The tenant also receives council tax relief.

AFAIK both the LHA and the family's solicitor have OK'd the arrangement.

The parents want to do their best for their child and ensure that the accommodation is of a high standard.

The LHA would be paying out at least as much, but for way inferior accommodation, if the tenant was housed without parental involvement.

A tricky moral dilemma.

Edited by The Spaniard

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I have thought about doing something similar for my mother.

She is disabled, and requires a bungalow and a garage or somewhere to store a suitable offroad powerchair (quality of life thing). She would also require modifications in the bathroom. Where she is there is NO suitable properties for long term rental, an occasionally bungalows come up to buy. So I had considered buying a house with enough down stairs space to put in a bathroom, bedroom and leave a living room for her. The upstairs could effectively be cut off and would only be used for family visitors or, should it come to it, a carer.

The council will not/can not provide for her requirements from council or HA stock, so this would seem like a viable option. The problem is she nor I can afford it alone, and we would be reliant on the HB and DLA she receives to cover the mortgage and cost of adaptations. Unfortunately the rules surrounding her HB are vague when it comes to renting from family, which she would be in effect, and getting a straight answer on where we would stand is impossible, not that a straight answer now couldn't be ******** in a years time when they change the rules. So its a none starter, she's still looking desperately for somewhere to live while the current house is up for sale by the LL and is wildly unsuited to her needs in any case (the condition has progressed since she moved there).

Anyone who does this is at the mercy of the council even more so than a normal BTL...

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I know a family with an adult disabled child.

They have bought a very nice flat for cash and rent it to their child on HB.

The rent is much less than the market rate, but enough to cover expenses.

The tenant also receives council tax relief.

AFAIK both the LHA and the family's solicitor have OK'd the arrangement.

The parents want to do their best for their child and ensure that the accommodation is of a high standard.

The LHA would be paying out at least as much, but for way inferior accommodation, if the tenant was housed without parental involvement.

A tricky moral dilemma.

Your Mission, should you choose to accept it, is to devise a tickbox decision tree to enable a Local Authority Housing Officer to make the correct decision morally case by case.

My Brain will self destruct in 10 seconds

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No you cant because as a company director your use of an asset owned by the business is classed as benefit-in-kind and you would be taxed on the imputed rental value. You could of course actually pay your company a market rent, but that would appear as profit on the company accounts and be subject to corporation tax.

Yes - but that can be easily circumvented. Those BVI owned houses around MayFair/PallMall/Chelsea are unlikely to have to pay taxes on their rental value. Further, it would be the cost of providing the accommodation services that is BIKed, not the market rent.

With the right support and money to pay fees, everyone can do a [ ] (fill in the blank with your favorite tax avoiding company).

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Ive though of doing this, but through a company.

If I set up a BTL 'business' cant I just buy a place, appears on LR as owned by a business, but claim HB as a private individual, live rent free in the place, and get a free house after a couple of decades.

Its a sick indictment of the system, but the only way the system will collapse as it needs to is if we all abuse it.

I think the value of the company would be treated as your capital - if so you wouldn't get any housing benefit.

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I think the value of the company would be treated as your capital - if so you wouldn't get any housing benefit.

The capital would be the net asset value which can be manipulated.

With the right structure, the company can even be turned into a housing charity..

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The capital would be the net asset value which can be manipulated.

With the right structure, the company can even be turned into a housing charity..

Yes, I'm sure it can!

I bet there's a clause to sign though that says you're not renting it from a company that you or a close relative has an interest in.

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It's just another bunch of boomers extending the unsustainable favour to their offspring in a typically boomer-esque, cynical way.

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I know a family with an adult disabled child.

They have bought a very nice flat for cash and rent it to their child on HB.

The rent is much less than the market rate, but enough to cover expenses.

The tenant also receives council tax relief.

AFAIK both the LHA and the family's solicitor have OK'd the arrangement.

The parents want to do their best for their child and ensure that the accommodation is of a high standard.

The LHA would be paying out at least as much, but for way inferior accommodation, if the tenant was housed without parental involvement.

A tricky moral dilemma.

Dooesnt strike me as a tricky moral dilemma at all, strikes me as them taking the pish, They can clearly afford to buy a place for their child to live, since when has being able to look after your kin been about extracting as much from the taxpayer as possible under the system, is their no such thing as family in the UK any more? Has everything been reduced to how much i can get out of someone else for mememe. So what if the state would pay if the family didnt have the means, they do have the means, the fact you highlight this as a dilemma is a symptom of just about everything that is wrong in the uk in every tier of society, its a sick symptom of state is everything, does everone whether they need it or not want the state to wipe their ass

Edited by georgia o'keeffe

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Dooesnt strike me as a tricky moral dilemma at all, strikes me as them taking the pish, They can clearly afford to buy a place for their child to live, since when has being able to look after your kin been about extracting as much from the taxpayer as possible under the system, is their no such thing as family in the UK any more? Has everything been reduced to how much i can get out of someone else for mememe. So what if the state would pay if the family didnt have the means, they do have the means, the fact you highlight this as a dilemma is a symptom of just about everything that is wrong in the uk in every tier of society, its a sick symptom of state is everything, does everone whether they need it or not want the state to wipe their ass

We have pretty much the exact situation in reverse, one of our parents live in our place in the UK, entitled to housing benefit to pay for the privilege, but we dont have a mortgage to pay on the place, despite being spanked on the place via taxation over here, but the kicker is we arent hard up neither are your morally dilemmad family, we dont need the rent so why would we charge it to them or the UK taxpayer? Is everything a balance sheet equation dependent on who you can fck over in the UK?

Seems to me your familys moral dilemma is should they abuse the taxpayer and your answer is yes, because they can

So should HB be means tested to include tenants’ families? Should disability/incapacity benefits also be means tested likewise? Should the state evaluate families rather than individuals when considering certain benefits?

Should HB qualifying tenants from well-off families voluntarily forego their claim to HB, as some wealthy pensioners choose not to claim winter fuel allowance, assuming that their families are able and willing to accommodate them in some other way?

I find these and similar questions tricky, though I appreciate that some might think that I am just morally confused.

BTW, what makes you think that I am in favour of the arrangement? My intention was to pose the moral question in a neutral manner.

Edited by The Spaniard

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So should HB be means tested to include tenants’ families? Should disability/incapacity benefits also be means tested likewise? Should the state evaluate families rather than individuals when considering certain benefits?

Should HB qualifying tenants from well-off families voluntarily forego their claim to HB, as some wealthy pensioners choose not to claim winter fuel allowance, assuming that their families are able and willing to accommodate them in some other way?

I find these and similar questions tricky, though I appreciate that some might think that I am just morally confused

i dont have answers to the above, special flowers in govt will do what they want, the dilemma you are asking in your original post is should people abuse state retardation because they can, well thats up to them, but if you are willing to dismiss the abuse as a moral dilemma rather than plain immorality which it is (as they arent hard up) then its no wonder the UK is borked, "its ok , the state said we could do it" theres no need for personal responsibility when we have dotted our i's and crossed our t's

What your penned family are doing is collecting economic rent, plain and simple, and you are trying to justify it as a dilemma rather than the simple legal theft it is

Edited by georgia o'keeffe

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http://england.shelter.org.uk/get_advice/housing_benefit_and_local_housing_allowance/housing_benefit_if_renting_from_a_family_member

Housing benefit if living in a property owned by a family member

If you live in a property owned by a family member and pay them rent, you may be entitled to housing benefit. The council will want to take a detailed look at your agreement with your landlord. You won’t get housing benefit if:

  • you're not paying rent on a commercial basis
  • the arrangement has been set up to take advantage of the housing benefit system – this is called a ‘contrived tenancy’. For example, if your landlord only asks you to pay rent when you are not working (and so are eligible for housing benefit), but not when you are working (and earning too much to qualify for housing benefit), this would be a contrived tenancy.

The catch is proving the contrived bit. There will be some worthy cases out there but I also bet there are many more who do break the rules.

There was a case in NW London a few years back where a number of families bought houses (mortgaged) then let them out to each other with pukka tenancy agreements. Dozens of them. Great little scam where they got the HB to contribute towards their mortgages.

I bet to an extent that scam goes on today still.

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  • 238 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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