Renting to Niece

Loozee

Hello and Greetings to Everyone! I have been an avid reader of MSE and the Forums for some time now but this is my first post-and I am sorry but it's quite a long one!
I live with my partner but I don't have a share of the house so I have been toying with the idea of buying my first property and renting it out to my niece and her baby. At the moment she is renting a flat and is struggling to pay her rent as she didn't get as much housing benefit as she thought she would. I would charge her a lower rent. After paying a hefty deposit I would borrow the remaining amount off my parents ( who are willing to lend ) and pay it back to them with interest. There are three things I would like to ask, would my neice still get housing benefit if she rented off her Aunt, would I get any sort of tax relief on the interest, and as it would take most of my parents savings would they be eligable for Pension credit and Council Tax help or would they be refused?

Savvy_Sue

Sometimes the local council will allow people renting from family to claim HB, but it's not automatic. As for your parents, I think this would be seen as Intentional Deprivation of Capital. For a definitive answer, I think you'd need to do a lot more research ...

CIS

To rent to family , you need to ensure that their is a formal tenancy agreement and that a fair rent is charged.

I agree with savvy_sue, deprivation of capital rules would likely apply and your parents would be deemed to still have the money, they would also have to declare the interest repayments as income.

thereaper101

10 years ago my perants purchased a house and we rented it from them, through HB. We had a bit of a nightmare as the council stated that my father purchased the house for me (which was untrue) I then went on to say that I was eligible for HB and they would be obligated to pay HB to another landlord if I moved into another property. I also pointed out that my fathers rent was a lot less than others were asking.

After a bit of a battle they decided to award me HB, but all councils are different.

Nick

missk_ensington

There is no reason why you can't claim Housing Benefit when renting off a relative. When I had my son I rented off my Mum and they were quite happy with that.

Ted_Hutchinson

The guidance for renting from a close relative are set out here
The main consideration in this case is whether or not it is a commercial agreement? If the Decision Maker thinks it is simply a set up to take advantage of the HB system then you could have problems.

Agree with the others about the fact that the loan to you from your parents would continue to be regarded as their capital for means tested benefit purposes.

Loozee

Thank you to all of you for your replies, your helpful and sensible as always.
I appreciate what you say about the possible loan from my parents.
Would you mind if I asked another question then! If in the future I split up with my partner (having taken out a buy to let mortgage and then rented my property out to my neice) and needed a place of my own would I be expected to ask her to leave , or if I rented myself and struggled to pay the rent if I was on a low wage would I then get any help to pay the rent? What situation would I be in?

chugalug

If you split up with your partner and had the buy to let property you wouldnt be able to apply to the LA for housing. You would have somewhere to live as you would be expected to serve notice on your tenant.

If you didnt want to do this and found a privately rented place then your BTL property would be taken into account as capital and your rental income would be taken into account as income if you claimed HB.

Obviously, that's only general advice cos your situation might have any number of variables should the worst happen! HTH

Ted_Hutchinson

Don't forget also that HMRC have the right to share information with DWP and vis versa.

Loozee

Thanks All. Food for thought!