Is this a contrived tenancy?

marking_bad

I want to move abroad and rent my house, can I rent it to my sister and she claim HB? She is already renting my room (lodging) and just signed on the JSA. I used to claim benefits but obviously won't when I am working abroad. She is going through a difficult period in her life and can't see her getting a job anytime in the near future. The rent will be paid through a proper AST.

RAS

Hi

Post this up on the Hoursing forum for more help.

The issues are going to be:

What is the LHA rate for someone of your sister's age? Is that enough?

If you rent out the property for less than the market rent, then it will be a contrived tenancy.

if you have already been renting to her and she is claiming rent already, she will not be allowed to increase her rent because you have moved abroad.

Caz3121

You will need to satisfy them it is a genuine commercial contract. If you have a mortgage this will need to be changed to a BTL or have approval from your mortgage lender to rent it (they may increase your %), you need to have proper landlord insurance and have gas checks etc done. If you were unable to rent it to your sister would you rent to a stranger. If your sister did not pay the rent would you evict her?

Jowo_2

I do not believe that renting it for less than the market rate causes it to be a contrived tenancy but your local council will advise you. If you have never charged her rent from the outset, that could potentially be an issue, as one factor in determining if it is contrived is when the landlord does not charge rent when the tenant is working but does when they are eligible for benefits. In other words, sometimes giving them free accommodation and then charging them when the public purse picks up the tab. Again the local council can advise on this.

She will not receive any LHA while you reside in the property - HB is never payable when the tenant lives in the same property as the landlord who is their landlord, and a close relative.

Remember the problems that can come from mixing the personal with business - if your sister defaults on rent, you face the unenviable task of eviction her and ruining family relationships, ditto if she thinks you aren't fulfilling your responsibilities as a landlord.

What is the shortfall between the rent you charge and the LHA she could receive? (see the LHA direct website for this and remember that the shared accommodation rate will be increased from the age of 25 to the age of 35 in the future and rates may get depressed, too, because of the move in how it is calculated from local market rents).

paddedjohn

Not too sure on the details but i read on another thread that if the landlord lives abroad then the tennant has to deduct tax before paying the rent and then forward this onto the taxman..............please correct me if this is a load of rubbish

seven-day-weekend

paddedjohn wrote: »

Not too sure on the details but i read on another thread that if the landlord lives abroad then the tennant has to deduct tax before paying the rent and then forward this onto the taxman..............please correct me if this is a load of rubbish

This is correct unless the landlord is a non-taxpayer, in this case the landlord will have to sort this out with the HMRC.