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Can rent arrears be collected from estate

Mother living in house gifted to children, but paying full market rent. Running out of money!

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My clients were gifted their Mother's house some 10 years ago.

She has been paying full market rent ever since, as confirmed in writing annually by an independent letting agency.

She is now running out of money to continue paying this rent.

Question: Can she default on the rent, and the children reclaim what they can of it from her estate after her death, and would they also still have to pay Tax on the rent they are not receiving? Their concern is the triggering of GWR with HMRC!!

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By DJKL
23rd Jan 2019 09:47

Can we presume she has other assets, just no money, otherwise claiming from her estate might be somewhat fruitless?

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to DJKL
23rd Jan 2019 10:31

Correct. Assets in stocks and shares, which currently are at a low value because of the BREXIT scenario. Has sufficient cash for day-to-day expenses only!

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By DJKL
23rd Jan 2019 11:01

I would be cagey then re GWR, whilst rentals are these days usually taxed on a received basis not receivable basis (up to 150k pa) her having assets but not paying rent but continuing to reside looks pretty problematic.

The family could document loans to her to pay them the rent, these would, of course, reduce her subsequent estate for IHT purposes but would be consideration for the rent bringing it into tax in hands of the family.

GWR and IHT are not my strongpoint (I actually do not have a tax strongpoint) so hopefully someone will turn up who does and can quote you chapter and verse.

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23rd Jan 2019 11:26

I also have no detailed knowledge at all of the GWROB regime but I did think that it required there to be arrangements which could be justified as being on arm's length terms. I don't think the proposal would pass that test (if, as I say, it is relevant).

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23rd Jan 2019 15:33

Is there a tenancy agreement. If so it will [or should] specify due dates of payment for rental and [probably vain hope] provisions for interest on late payment of rent.

If there is no such agreement then write one now, making sure it covers the question of arrears of rent- solicitdor adviseable.

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