Renting to family and HB

Poppy9

We have inherited a share of a house and are buying out the other party. They need the money to clear debts and are planning on selling their own house too. Neither are working due to disabilities and have asked can they rent the house from us as it's adapted for a disabled person so meets their needs which their current house doesn't.

I get the impression that after selling their own home, repaying mortgage etc. they will not have enough money left to buy a suitable home so I am guessing they will be claiming HB.

Can we rent the house to them if they are claiming HB as my OH will be the sibling of one of the tenants?

It would be subject to a proper tenancy agreement etc. All rent will be declared to the tax office etc.

Thank you.

BitterAndTwisted

Never EVER mix business with friends or family! In certain cases local authorities do not pay HB
where the tenant's landlord is a relative. Speak to the LA before you do anything

real1314

BitterAndTwisted wrote: »

Never EVER mix business with friends or family! In certain cases local authorities do not pay HB
where the tenant's landlord is a relative. Speak to the LA before you do anything

There are NO regulations that refer to or restrict HB when renting a property TO a realtive.

(There are some about renting to a relative if the landlord lives in the same property though).

However, to be eligible for HB a tenancy must not been contrived to take advantage of the HB scheme and must be on a commercial basis.

Some of the main quesions that arise are:-

1. Would you rent the property to others if the relative wasn't renting it?
2. What would you do if they couldn't pay their rent?
3. Would the tenant claim HB elsewhere if they were not renting from you?


:cool:

Poppy9

Some of the main quesions that arise are:-

1. Would you rent the property to others if the relative wasn't renting it? yes
2. What would you do if they couldn't pay their rent? make them move out!
3. Would the tenant claim HB elsewhere if they were not renting from you? I would assume so.


We are buying the house as an investment. We would need a small mortgage to enable us to buy them out but we want the rental income to help fund DD uni. fees when she goes off in 2 years time.

They are not my first choice for tenants for a number of reasons and I hope it doesn't happen as we would put tennants in as soon as we own it and they won't have sold their own house etc. in time as they haven't even put it on the market.

Catblue

Poppy9 wrote: »

They are not my first choice for tenants for a number of reasons...

There is your answer. Do not rent this house to them. It will end badly.

Poppy9

Catblue wrote: »

There is your answer. Do not rent this house to them. It will end badly.

Not that simple though IF the house is vacant when they are ready to move.

It's a big IF but if it was vacant then we would have to consider them!

Caz3121

Are you saying that they have also inherited part of this house and want to sell their share and their own house to clear debt.
There are rules about claiming housing benefit for a property you previously owned - not sure how it works if you part owned
Also if they are planning on paying debts of they may fall foul of deprivation of capital and may not qualify for housing benefit anyway

Poppy9

Caz3121 wrote: »

Are you saying that they have also inherited part of this house and want to sell their share and their own house to clear debt.
There are rules about claiming housing benefit for a property you previously owned - not sure how it works if you part owned
Also if they are planning on paying debts of they may fall foul of deprivation of capital and may not qualify for housing benefit anyway

Estate is in probate at the moment. They are severly in debt due to both having to finish work due to ill health (one 50 and other 55). They can no longer afford mortgage and have over £30k of unsecured debt. For over 30 years they've lived in a different part of the country but want to come "home" and living in this house will be ideal as it's adapted for the disabled.

So techincally they will own 1/2 the house for a few weeks!

dcems

The council will want to check:

• that you're paying rent on a commercial basis. In other words, that it's a proper tenancy, not just an informal arrangement between family.
• that the arrangement has not been set up in order to take advantage of the housing benefit system - this is called a 'contrived tenancy'. For example, if your landlord only asks you to pay rent when you are not working (and so are eligible for housing benefit), but not when you are working (and earning too much to claim housing benefit), this would be a contrived tenancy.The council will also want to check:
  • that you're paying rent on a commercial basis. In other words, that it's a proper tenancy, not just an informal arrangement between family.
  • that the arrangement has not been set up in order to take advantage of the housing benefit system - this is called a 'contrived tenancy'. For example, if your landlord only asks you to pay rent when you are not working (and so are eligible for housing benefit), but not when you are working (and earning too much to claim housing benefit), this would be a contrived tenancy.

From experience a lot of claims are turned down in my area when renting from family

Caz3121

they should take advice before they pay off lump sums of debt. If they are going to have more than £16k this will exclude them from means tested benefits whether renting from you or anyone else. Whilst paying off debt is no doubt a good thing they may find themselves being classed as depriving themselves of capital and will be treated as still having the money in which case they will need to find the rent themselves. Will they still want to rent if they receive no housing benefit?

neverdespairgirl

I'd be wary about renting to someone who runs up the type of debts that can only be paid by selling their own house and an inheritance!