Parents claiming Housing & Council Tax Benefit

mraghvani

Hi All,

I new here so please understand if I make any mistakes.

I live in a seperate house with my wife and my parents have been living in my other house rent free for 5 years. Im now having difficulties in paying the mortgage for the 2nd house house. Whats the best way for my parents to start claiming housing & council tax benefits in order to pay the mortgage. Should it be noted that they will be renting from me ? Do you I need to draw up a tenancy agreement (if YES, are there any templates?)

What does anyone suggest, maybe you've been thru this, all help is highly appreciated

Regards
eM

christine_chris_chrissy

I don't think they will qualify as it is your house,you have 2 houses these are known as property or assetts can they move out (in with you) so you can sell your other property I may be wrong if there is no equity in your assets HB would only pay interest on a mortgage.?
you could sell as buy to let with sitting tenants then your parents would have a land lord do you have permission from your mortgage company to rent it out

mraghvani

I really dont want the option of them moving out or selling the house as they have settled in nicely now. Im hoping that by claiming the benefits, it would help us all out. Any other ideas/suggestions

Jowo_2

Google 'Contrived tenancy' - a landlord can let out property to family members and if the landlord doesn't live with them, the tenants can claim housing benefit if it is a proper tenancy on a commercial basis.

However, when it is considered to be a contrived tenancy, set up to take advantage of the housing benefit system, the claim will be rejected. The Shelter website provides an example of when the landlord doesn't charge rent when they are working but does charge rent when they are not as an example of a contrived tenancy.

If you are struggling to pay your mortgage, have a look at the Shelter website that tells home owners of the government schemes available.

Vader123

In theory there is nothing to stop someone claiming HB when they rent the house from a relative.

A formal tenancy has to be drawn up, become a registered landlord and pay any applicable taxes on the income.

Then you could claim LHA/HB as its a commercial tenancy.

However since they have not paid rent for 5 years you cant show thats its on a commercial basis.

I would be very surprised if they got LHA for the property, it fails on the basic test.

Vader

mraghvani

Thanks for that advice, I'll take a look at the shelter website.

My parents have been retired for over 15 years and I surely dont want to take advantage of the HB system and there receiving no benefits except a little pension

Would it be worth my parent filling out the forms and me drawing up a tenanacy agreement ?

Jowo_2

Speak to the local council who I understand deal with LHA to find out how you may stand with your application. Speak to Shelter if you want to appeal any turned down offer or to find out where you can get help for your current mortgage.

Look at the Entitled To website or get your parents to go along to the local Citizens advice centre to see if there are any benefits which they claim, including CT discount, as their income is low.

Use the Entitled To website to see if there are any benefits that you are missing out on.

HappyMJ

Nope because they will need to provide proof that they are and have been paying market rent something that they don't have. If you get them to pay you for a few months they will then have that proof so you could consider setting up a tenancy now gettting them to pay you and trying to claim in a few months. You actually have to keep the money you get from them you have to be careful not to give the money back as it will count against them in the claim in the form of income. The council check all bank statements to track the flow of money.

They should be able to claim council tax benefit now if their earnings are low enough.

seven-day-weekend

They have not been paying rent so you can't suddenly start charging them just so they can claim Housing Benefit. This would probably be classed as a contrived tenancy (in other words just set up for the purpose of claiming Benefits) and therefore their application will almost certainly be turned down.

Two of the tests for a commercial tenancy are 1) if your parents did not live in it, would it be available for rental on the open market and 2) if they don't pay their rent, would you evict them like you would any other tenant.

I don't know the answer to question 1, but question two is obviously no (because they have lived rent-free for five years). Therefore it would fail on the commercial tenancy test.

karenx

mraghvani wrote: »

My parents have been retired for over 15 years and I surely dont want to take advantage of the HB system and there receiving no benefits except a little pension

But you are trying to take advantage of the HB system, as you have already said you are struggling with paying 2 mortgages and you want your parents to claim HB so you arent struggling anymore. If thats not taking advantage of HB then I dont know what is!!!

When you apply for HB you need to supply 3 months bank statements, so where on their bank statements would it show they have been paying the current market rate of rent and not a reduced amount? Nowhere. On the forms it also asks you date you moved in and previous adress. Im guessing the previous adress would be from 5 years ago, HB would ask how they have afforded the rent for the past 5 years??

Macro_3

HappyMJ wrote: »

Nope because they will need to provide proof that they are and have been paying market rent something that they don't have. If you get them to pay you for a few months they will then have that proof so you could consider setting up a tenancy now gettting them to pay you and trying to claim in a few months. You actually have to keep the money you get from them you have to be careful not to give the money back as it will count against them in the claim in the form of income. The council check all bank statements to track the flow of money.

They should be able to claim council tax benefit now if their earnings are low enough.

That's fraud - charging them rent for a few months to make the tenancy look legit so that they can claim LHA?

The OP states that his parents only have a 'little' pension. The LA may well want to know how the parents have paid market rent for the property on a small income for the last fifteen years.