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Joshua
Joshua, Lawyer
Category: UK Law
Satisfied Customers: 26069
Experience:  LL.B (Hons), Higher Prof. Dip. Law & Practice
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I am buying my mother in laws council property, due to the

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I am buying my mother in laws council property, due to the rules regarding the discount I cannot put my name on the deeds for 5 years, how can I make sure that my money is secure in the event that my mother in law has to go into care etc. is it possible to make a legal contract with her in the form of a loan agreement with a charge against the property and also with interest over the five years to cover any costs etc.

Joshua :

Thanks for your question. Please kindly RATE my answer when you are satisfied

Joshua :

For the avoidance of any doubt from what you say the property is in your mothers sole name - is that correct please?

Customer:

yes it is in her sole name

Joshua :

Thanks. So she is presently a council tenant and she is seeking to purchase the same using funding from you? Will you need a mortgage?

Joshua :

Would you like to continue?

Customer:

yes see is seeking to buy her council house and no i do not require a mortgage, i will be paying cash for the property so in effect i am loaning her the money

Joshua :

Sorry for the delay in reverrting to you. Thank you.

Joshua :

As you will be aware the property has to be bought by your mother in order to obtain the discount and there is a penalty to pay if the property is then subsequently sold or transferred within 5 years of the date of the acquisiton from the council. Accordingly you will need to have the property purchased in your mothers name but in order to preserve your interest you will need to consider asking your solicitor to prepare a relatively simple bare trust deed for your mother and you to sign to record the fact that although your mother is the legal owner, you have a beneficial (money) interest in the property.

Joshua :

The trust deed can record such agreements you may have made such as for example that your mother can live in the property for as long as she wishes, or that she has to sell after 5 years or in deed any such other agreement you come to. By recording such agreements as you come to in the trust deed it protects your respective interests.

Joshua :

Under the trust you can register a restriction on the legal title to prevent the property from being sold or mortgaged for example without your consent.

Joshua :

By registering a trust in the above manner, it also means that any equity attributed to you under the trust cannot be touched by the local authority if your mother had to go into care. However you could have a capital gains tax issue if the property goes up in value when you come to sell it if it is not your main house. However there is possible way to avoid this if you wish to allow your mother to live in the property for example for the rest of her life as follows:-

Joshua :

You could for example decide that you wish to allow your mother to live in the property for life for example. If you wished to do this you could grant her a "life interest" in the above trust deed. This means that no one including you could force her out during her life against her wishes. In addition on her passing you take the property and for the purposesof capital gains tax you take it at the then market value. What this means is that when you come to sell the property capital gains tax will be calculated on the difference between the value at the date of your mothers passing and the date you sell it rather than the difference between the price you pay for it and the eventual sale price so the CGT position is likely to be perhaps substantially improved. However it would only be attractive if you were thinking of allowing your mother to stay in the property for as long as she wanted anyway.

Joshua :

Is there anything above I can clarify for you?

Joshua and 2 other UK Law Specialists are ready to help you