Renting from a family member and claiming housing benefits

yellowtuesday

Does anyone know if it would be ok to rent from a family member as an offical tenant but be able to claim any relevant housing benefit.

I need to sell my house because I just can't afford it anymore so I will need to rent. My sister is looking to get a buy to let and I have suggested if she were to buy one in my area (she doesn't live near me) I could rent it from her.

It would be all above board, with a proper tenancy agreement etc. She would charge the going rate for the rent.

Could it cause any problems? With the "powers that be" I mean not between my sister and I.

Thanks
YT

Alias_Omega

I would,

Rent the house through an agent, let them know that HB is accepted and you have a tenant lined up for them to use. Get the family member to apply, and accept them.

dmg24

Alias_Omega wrote: »

I would,

Rent the house through an agent, let them know that HB is accepted and you have a tenant lined up for them to use. Get the family member to apply, and accept them.

It is not nearly as simple as that!

OP, the LA will need to ascertain that the tenancy agreement is not contrived ie it is a commercial agreement. They will look at factors such as whether the property would be/ has been marketed, whether a market rent is being charged, and what would happen if you could not pay the rent. I would take advice from the LA before making any financial commitments.

drc

If you have over £16,000 in savings then you cannot get Housing benefit so unless your house sells for less than that and you have no other savings, I don't think you would be entitled to anything.

Nosht

Yes it is legal & possible.
H.B. is now paid to tenant, unless 2 months in arrears & tenant then pays owner, so no problem with similar names &c.

N.

Cissi

drc wrote: »

If you have over £16,000 in savings then you cannot get Housing benefit so unless your house sells for less than that and you have no other savings, I don't think you would be entitled to anything.

I think you mean if she clears more than £16k from the house sale - for all we know she could be in negative equity (more than likely in fact)?

Fire_Fox

yellowtuesday wrote: »

Does anyone know if it would be ok to rent from a family member as an offical tenant but be able to claim any relevant housing benefit.

I need to sell my house because I just can't afford it anymore so I will need to rent. My sister is looking to get a buy to let and I have suggested if she were to buy one in my area (she doesn't live near me) I could rent it from her.

It would be all above board, with a proper tenancy agreement etc. She would charge the going rate for the rent.

Could it cause any problems? With the "powers that be" I mean not between my sister and I.

Thanks
YT

You will probably not be able to claim housing benefit if you have income from letting your property or capital from selling it over £16K. You will also have to persuade the council that this is not a 'contrived tenancy' and that your sister would happily evict you for non-payment of rent or other breaches of contract.

Could your sister buy a part share in the house you are selling? That would save on estate agents fees. If you are eligible for housing benefit then aren't you eligible for Support for Mortgage Interest? If it is a house does it have a second bedroom that you could move into, letting the larger one to a lodger? The income would be tax-free up to £4K per year.

JayneJones

You have another issue apart from contrived which has been mentionned. You also have the issue of non commerciality. This is where the Council doesnt believe that the agreement between yourself and your relative is a commercial arrangement.

You are unlikely to get a decision from the council before you take the tenancy, although they should be able to give you general advice. However this area is a very complex one and each council will make a judgement based on a range of questions they are likely to ask both you and the landlord to establish whether it is either contrived or non commercial. However, if you disagree with their decision you can appeal to an independent tribunal who will make a decision.

Also I wouldnt suggest the letting agent route as a way to avoid these issues as most claim forms should ask whether you are related to the landlord so you would need to declare this anyway.

Hope this helps.

yellowtuesday

JayneJones wrote: »

You have another issue apart from contrived which has been mentionned. You also have the issue of non commerciality. This is where the Council doesnt believe that the agreement between yourself and your relative is a commercial arrangement.

You are unlikely to get a decision from the council before you take the tenancy, although they should be able to give you general advice. However this area is a very complex one and each council will make a judgement based on a range of questions they are likely to ask both you and the landlord to establish whether it is either contrived or non commercial. However, if you disagree with their decision you can appeal to an independent tribunal who will make a decision.

Also I wouldnt suggest the letting agent route as a way to avoid these issues as most claim forms should ask whether you are related to the landlord so you would need to declare this anyway.

Hope this helps.

Thanks for all the replies
As far as both my sister and I are concerned it would be a 'real' tenency with all the usual legal agreements in place. But I suppose getting the council to believe that might be difficult

We have had a previous situation where we have had a legal agreement over money so she knows I would stick to it. At least I hope she does. We both decided last time that we should have a written agreement just so we both completly understoood the arrangement.

I didn't realise that you had to declare if you were related to the landlord so that is obviously going to be an issue.

It's just an idea at the moment. It just seemed to me that is she was going to get a buy to let anyway and I need somewhere to rent it would make sense

Not sure if I would want to go through a letting agent as they would then be taking money from the payment to my sister and they would not have really earnt.

The idea of her buying part of this existing house probably wouldn't work as I don't think me and my other half will be moving together when we do move.:( It also makes it a more complicated arrangement. This house is also more expensive than one she would be looking for so I can't even suggest she buys this and rents it back to me (That would have been good though; I have moved house 6 times in the last 10 years and I am not looking forward to doing it again)

And as far as equity is concerned there should be a bit in the house so I might not qualify for housing benefit anyway.

I have considered renting out some rooms - but when I did a calculation on entitled to the benefit I would get was cut down quite a bit so it didn't seem worth it. I'll have to check that again.

Thanks again for all your help

Fire_Fox

yellowtuesday wrote: »

Thanks for all the replies
As far as both my sister and I are concerned it would be a 'real' tenency with all the usual legal agreements in place. But I suppose getting the council to believe that might be difficult

We have had a previous situation where we have had a legal agreement over money so she knows I would stick to it. At least I hope she does. We both decided last time that we should have a written agreement just so we both completly understoood the arrangement.

I am not sure why you are on benefits and don't want to pry so these are rhetorical questions ... if you fell ill/ pregnant/ injured and was unable to work or pay the rent would your sister evict you? Could she pay the mortgage if for any reason your benefits claim was turned down or put on hold and investigated? Whether she'd hesitate to serve notice to quit is the difference between a commercial and a family tenancy. If your answer is you'd move out mid-tenancy rather than let her down, that isn't commercial either as legally you are liable for the rent until your landlord finds another tenant plus all her costs in doing so.

yellowtuesday wrote: »

The idea of her buying part of this existing house probably wouldn't work as I don't think me and my other half will be moving together when we do move.:( It also makes it a more complicated arrangement. This house is also more expensive than one she would be looking for so I can't even suggest she buys this and rents it back to me (That would have been good though; I have moved house 6 times in the last 10 years and I am not looking forward to doing it again)

And as far as equity is concerned there should be a bit in the house so I might not qualify for housing benefit anyway.

I have considered renting out some rooms - but when I did a calculation on entitled to the benefit I would get was cut down quite a bit so it didn't seem worth it. I'll have to check that again.

Sorry to read your relationship isn't going so well ((((hugs)))). Didn't quite understand why that means your sister can't buy out your OH?? You may find for every £1 that you get in rent you lose £1 in benefits BUT you will only be liable for half the bills, trust me paying all the bills on benefits is tough. Staying put and letting a room means your equity stays in the house, if you sell up you may have to use some of your equity for living costs, rather than being able to claim benefits. To me that is a waste of equity.

Even if you don't have £16K of savings (and assuming you are over 25) you will only be entitled to a one bedroom rate of housing benefit - is your sister planning on buying a one bedroom house? If she buys a two bed, you won't get the full rent paid by the council so you'd have to let the second bedroom ... in which case you may as well take in lodgers and stay put. :huh:

yellowtuesday

Fire_Fox wrote: »

I am not sure why you are on benefits and don't want to pry so these are rhetorical questions ... if you fell ill/ pregnant/ injured and was unable to work or pay the rent would your sister evict you? Could she pay the mortgage if for any reason your benefits claim was turned down or put on hold and investigated? Whether she'd hesitate to serve notice to quit is the difference between a commercial and a family tenancy. If your answer is you'd move out mid-tenancy rather than let her down, that isn't commercial either as legally you are liable for the rent until your landlord finds another tenant plus all her costs in doing so.

I'm not working at the moment although I do hope to be getting a job soon.

She would be 'able' to pay the mortgage but I wouldn't want to put her in that position. I would get her to evict me.

Fire_Fox wrote: »

Sorry to read your relationship isn't going so well ((((hugs)))). Didn't quite understand why that means your sister can't buy out your OH?? You may find for every £1 that you get in rent you lose £1 in benefits BUT you will only be liable for half the bills, trust me paying all the bills on benefits is tough. Staying put and letting a room means your equity stays in the house, if you sell up you may have to use some of your equity for living costs, rather than being able to claim benefits. To me that is a waste of equity.

Even if you don't have £16K of savings (and assuming you are over 25) you will only be entitled to a one bedroom rate of housing benefit - is your sister planning on buying a one bedroom house? If she buys a two bed, you won't get the full rent paid by the council so you'd have to let the second bedroom ... in which case you may as well take in lodgers and stay put. :huh:

Thanks for the 'hugs' really appreciate it:)

IF my sister was to buy out my OH would that not get really complicated with the huoseing benefit. Also I don't know if the mortgage co would agree to that.

I would need a2/3 bed flat/house as I have three children although one is nearly 18 but planning on having a year off before uni so I supppose he wouldn't be counted as a dependant once he turns 18??

Thinking about it again (that's the great thing about actually telling someone about it rather than it going round and round in your head) It probably would be best if poss to stay here and rent out a couple of rooms. It is a bungalow conversion so there are bedrooms downstairs and upstairs and I could section off two rooms and a bathroom downstairs. They could have their own front door too! They idea of using the equity to live on is not good.

When you say 'only liable for half the bills' do you mean that the bills would be shared with the lodgers? I think if I go down this route I might include something for the bills in the rent.

I know I need to get this all sorted out. I am in this mess because I have been waiting for years for my husband to sort it all out but he has done nothing about it. I had that misguided idea that he 'could and would' provide for his family. Taken me a long time but i have finally realized that it is down to me.

Thanks very :Tmuch for your help