Robin
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My grandma lives in a flat which is currently owned by the council, she's lived in the building for about 12 years, maybe more, and moved flats (3rd floor to 2nd, to avoid the steps) about 2 years back.
She's been offered the right to buy thing on the flat, which works out at a 70-75% discount on the overall price.
At the moment, she pays £200 a month rent, and the flat is decorated annually by the council.
Now, my mum is considering 'lending' my grandma the money to buy the flat, and renting it to her for the same rate, decorating when she wants etc.
Is this a good idea or not?
I can't see a problem with it, other than the fact that we don't know the asking price of the flat, so can't work out how much it would be after the discount...
Would there be any hidden bills etc?
Has anyone else done this?
Thanks.
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Cosmo
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My Dad did something very similar to this when his parents house was offered to them years back. He lent them the money and they bought it, and then after so many years (there was some clause in how long they couldnt sell it for or something like that) he bought it back for an inflated price and charges them the current rates of rent. Means he will avoid a big inheritance tax bill in future years.
So it is worth it, but look into what clauses there are on the resale. And also understand the rules involved in renting the property back and dodging inheritance tax (it cant be rented for a nominal fee but a standard market price, etc.)
As for costs its just the standard as having your own house. You may also be charged a yearly maintainance charge by the property owners for upkeep of the grounds, etc. so just check that aswell.
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Robin
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I see, so the money would need to be lent, then repaid, then the flat bought at a later date?
I think mum was planning on giving my grandma the money to buy the flat on her behalf 
Financial advisor is coming on Friday, I suppose he'll know all the ins and outs of it?
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Cosmo
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It depends why you are doing it. If your wanting to do it and then bypass certain taxes in the future then there will be ways round this (such as my dad did).
If your just wanting to lend her money then it might just be a case of just lending it her, simple as. Really depends what clauses the council are putting on the sale seems they are offering it for a very reduced price.
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Robin
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Basically (makes it sound a bit harsh, but bare with me ) my mum is looking to buy it for the reduced rate (say £35k) then when my grandma dies, rent it out to someone else for £500 a month or whatever, or sell it for the full asking price.
I see there is a slight problem with the inheritance tax this way though, not sure how to combat that, as I can't see my grandma having £35k laying about
[Edited on 21-03-2007 by Robin]
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Colin
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I 'think' the way round it is to get her to buy the house with a mortgage, pay that for a few years then settle the outstanding amount with your mothers money, then after a few years transfer ownership to her. Something like that anyway!!
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Colin
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Although apparently your only hit with inheritance tax if the estate is worth more than £285,000.........so by all means you could keep it in her name, paying a mortgage, maybe even part mortgage (low payments for gran) & some of your mums money(less to put out upfront just now for her), then get the house left in her will.
Ask on moneysavingexpert Rob....they will know all the in's & out's.
[Edited on 21-03-2007 by Colin]
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Cosmo
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As Colin said, if its (and the rest of her estate) will be lass than £285k then you'll be OK anyway.
The way my Dad did it was to get around inheritance tax, but it was a long long term plan as it had to stay in his parents ownership for a number of years after they bought it for the reduced rate, and then he had to have owned it for a number of years (whilst charging them full rental value) until the tax was down to 0%.
Im not sure if those loop holes have now been closed or not, but thats how it can be done!
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Robin
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The estate won't be worth anything near that tbh.
With it being under 285k, would that mean my mum could 'lend' her the cash to buy the house and just be left it in the will, with no repayments or anything?
CBA to sign up to moneysavingexpert 
Like I say, mum has a financial advisor coming on friday, so she can ask him in more detail, I was just curious really
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Robin
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Cosmo answered before I even asked 
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Colin
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I think the councils will be clamping down on folk buying parents council houses but there will be a way around it.
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Robin
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Yeah, my mum can't actually buy it, but she can 'give' the money to my grandma for her to buy it, the council would thing the money was hers, not my mum's.
A lot of the flats in the block (only 12 in total) are privately owned now, but obviously we don't know who bought them etc.
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Colin
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From MSE (you dont need to sign up to view the forums!) It is now 5 years in which discount has to be paid back & is worked out as a percent of the value of the property at the time it is sold. the Council does have the right of first refusal if the property is sold/transferred within 10 years
also if you draw up a legal agreement that the house will transfer to you this will be seen as a deferred sale agreement & if the Council find out your partner's mum will have to pay back the discount she got.
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Colin
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So in a nutshell she cant sell or transfer the flat to your mums name untill the 5 years is up, upon which the council have right of first refusal to buy it back & do so until 10yrs from the date she bought it. After than I think you can do as you wish.
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Robin
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Ok, so my grandma needs to not die for 10 years or so
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Colin
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Fuck theres lots of complications with this!! Like I thought they (council) wont want to make it easy otherwise everyone would be jumping on board!!
Read -
Let me see if I can cover all the possibilities:
Your money to your parents is a gift? I will assume yes.
They buy the property, which they now own in their joint names.
First potential problem, they can do what they like with it, it's their's. So it can be willed to the Cats Home, whatever.
You buy it back for a "nominal" amount. Are you going to rent it to them, or buy it back as a reversion?
If at some time after the resell, they need to go into care (and I think it needs to apply to both or the surviving partner if one dies), then the Local Authority can question whether they have "deliberately deprived" (?) themselves of an asset. The question can also be asked IMHO if Inheritence Tax is involved too.
Also, the question will be asked as to how come you bought it for your "nominal" amount? You're CGT calculation on the final sale will use the market value at aquisition, not what you paid for it, if you buy it for a "nominal" amount.
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Colin
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quote:
Originally posted by Robin
Ok, so my grandma needs to not die for 10 years or so
Something like that
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Russ
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do it, my nan was offered her old flat for 15k, i wanted to buy it, was gonna let her live there rent free and fix everything that broke, she wouldnt let me, she moved to supported accommodation, and the council had her flat back. everything thats been sold in the same block has been going for 80-90k 
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Cosmo
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That 5yr/10yr time limit is similar to the conditions on my grandparents as I mentioned before. My Dad bought that knowing they would be in it for well over 10yrs more though so that wasnt really an issue to have to knock down or work our way round.
If there is a way, your financial advisor will know best...aslong as he is good!!
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Mad Moe
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I bought my Nana's house from the council 8years ago for £15K and it's now worth £90K and certainly haven't heard of all these conditions everyone is talking about. As far as I was aware they offered it for that amount and we bought it for that amount, easy as that.
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Cosmo
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quote:
Originally posted by Mad Moe
As far as I was aware they offered it for that amount and we bought it for that amount, easy as that.
Id check if I were you 
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Mad Moe
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Well according to my solictor when my Nana past away last year the property was mine to do so as I wish, I am currently renting it to my uncle and plan to sell it later this year when he buys a property. I have been informed of no conditions and would hope given that I use a reputable multinational solicor that they have got it right.
[Edited on 21-03-2007 by Mad Moe]
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MarkM
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The Inheritance Tax threshold has just been increased to £350,000
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Robin
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Financial Advisor came today, and has advised against it.
It turns out that there IS a 70% discount on properties, BUT ONLY UP TO A CAPPED RATE OF £24k
So it's just not worth doing.
Anyway, thanks to everyone for the advice 
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Cosmo
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quote:
Originally posted by MarkM
The Inheritance Tax threshold has just been increased to £350,000
not yet it hasnt, it will be by 2010 though!
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