Housing Benefit: Renting to a Relative.

RAS

Please make sure that you understand Scottish rental law re registration etc. The fines go up to about £10K for failing to meet the requirements.

Olympicsspectator

fluffymovie wrote: »

This is a tricky area but simply being related to the landlord does not mean no HB.

If the property had been purchased specifically for a relation to live in, this is likely to be found a non-commercial arrangement. The information about Contrived tenancies is where we do not consider there to be a true rental liability (effectively a sham)

The reasons for the creation of the tenancy as it stands would be the issue. For example, if you were unable to stay in the flat yourself, perhaps you have disability needs that it doesn't meet, and wanted to find a tenant you were comfortable with, such as your neice, then this would probably be ok.

It doesn't have to have been let out before but we would use that as a test as to whether you are a true landlord or simply acting to look after family.

We would need to look at the whole picture, rent charged, length of tenancy etc before making a decision so best to speak to HB about what they would need to see before your neice / nephew sign on the dotted line.

What action would you take if rent went unpaid
Do you have a mortgage and is the rent covering that or are you susbidising etc?

I am about to complete on my second buy to let. I would like to rent it to my sister. She currently lives in a house where the rent is £995pcm. She gets housing benefit of £450 pcm. She makes up the shortfall herself. She goes without to do this and manages her own money. I don't subsidise her. I treat the children to holidays etc This is her 3rd private rented property and is always living under the threat of having to move at a months notice if the landlord wants their property back. ( as do others who live in rented property). She's had to move 3 times and removals cost £800 a time. The full market rent on the property I want to rent to her is £850 and I intend to charge her that as otherwise my buy to let will put financial strain on me. My buy to let mortgage will cost me £600 pcm plus income tax plus maintenance costs etc. I intended to issue her with a proper tenancy agreement. She's a single parent with cancer and has 1 child at home aged 13. I want to live in the property when I retire in 15 years time but can't do so at the moment as I need to live a bit closer to my workplace for the time being. Based on your post it looks like I won't be able to rent to her and her be able to claim HB. I can't afford to let her live there for free. If she couldn't pay I'd have to evict her and get her to live with my mum or in any other rented accom as i can't sustain the BTL mortgage myself. Sounds terrible to evict your own sister but the BTL needs to pay its way. Do you see anything in the information in my post that could help me meet the councils requirements so I can rent to her and that she can get housing benefit? My property is in England not Scotland. My other BTL has been rented out since 2007. TIA.

Tottyshouse

Olympicsspectator wrote: »

I am about to complete on my second buy to let. I would like to rent it to my sister. She currently lives in a house where the rent is £995pcm. She gets housing benefit of £450 pcm. She makes up the shortfall herself. She goes without to do this and manages her own money. I don't subsidise her. I treat the children to holidays etc This is her 3rd private rented property and is always living under the threat of having to move at a months notice if the landlord wants their property back. ( as do others who live in rented property). She's had to move 3 times and removals cost £800 a time. The full market rent on the property I want to rent to her is £850 and I intend to charge her that as otherwise my buy to let will put financial stain on me. My buy to let mortgage will cost me £600 pcm plus income tax plus maintenance costs etc. I intended to issue her with a proper tenancy agreement. She's a single parent with cancer and has 1 child at home aged 13. I want to live in the property when I retire in 15 years time but can't do so at the moment as I need to live a bit closer to my workplace for the time being. Based on your post it looks like I won't be able to rent to her and her be able to claim HB. I can't afford to let her live there for free. If she couldn't pay I'd have to evict her and get her to live with my mum or in any other rented accom as i can't sustain the BTL mortgage myself. Sounds terrible to evict your own sister but the BTL needs to pay its way. Do you see anything in the information in my post that could help me meet the councils requirements so I can rent to her and that she can get housing benefit? My property is in England not Scotland. My other BTL has been rented out since 2007. TIA.

The only way to know for sure is for your sister to actually apply for HB at the property. As a neutral observer it does sound to me as if it is leaning towards contrived from the information given.

Were you planning on buying it to let out to another tenant or was your sister always going to be the tenant? Also you are talking about your sister having to move at a month's notice (it's two - but I knew what you meant). Could you honestly say you would evict your sister who has cancer and your 13 year old neice/nephew? You help her out with the cost of holidays etc. would you really serve a section 8 as soon as 2 months rent was unpaid and owing?

I am a private landlord myself and hand on my heart if my own sister was having trouble meeting the rent I would be tempted to reduce it as much as I could to help her out - which I would not do with a "normal" tenant. I don't think the fact you having another property rented out would help. Is that property also let to someone on HB? If not I would say that is another flag to HB staff that they may want to look at this closely.

I am aware of one landlord in my landlord's association who was able to let to his own son who claimed HB - however his son had already been living at the property and paying his own rent for 18 months before losing his job and claiming HB.

You could ring and speak to your local HB department - but I would be wary of granting a tenancy to your sister purely on the basis of what you are told informally. People do make mistakes and it would be terrible if your sister who is already having a tough enough time ended up having to move even sooner than the end of the fixed term because HB was declined.

I don't accept HB so have only had personal experience of it through working in social housing which is an entirely different beast. I understand the argument that the government would be paying the same amount of HB for your sister whether she was renting from you or from a stranger. However you know with your other rental there is always an element of "real" risk trusting an expensive asset to a complete stranger. Renting to family appears to remove much of that risk - and it can look as though landlords are using public funds to bankroll their now risk free investments.

Whatever the outcome - I do hope your sister isn't put through the stress of another move to another short term let.

Olympicsspectator

Yes I can see your point - I'd rather not evict her irrespective of whether she as cancer or not. I am sad I don't have enough money to keep her as I've been lucky and don't have cancer. So if I don't rent to her then I'll never have to be in that position so I'm going to have to say to her that she needs to stay where she is. My other rented property has never been rented to anyone on HB. I think because no one has ever asked or applied I don't specifically exclude HB applicants as my sister is on it. I never intended to offer her my BTL. However when the right property combination of PP and rental value came up it ended up being within an area that she could potentially live. Sad but its too much for her to lose if she can't get HB. Thnx for your view.

fluffymovie

It doesn't have to have been rented to someone on HB. The test here is showing the HB officer that you are treating your sister as you would another tenant, in a commercial way.

If you would not evict her because the rent went unpaid, but would evict another tenant, this would suggest it is not a commercial tenancy.

The fact that you also pay towards childrens holidays etc, also doesn't sound like the action that a 'normal' landlord would take but there is some interesting caselaw just out about commerciality which is making HB offices think twice.

You could spend literally weeks googling contrived / non commercial but the real answer is to speak to your HB office. Sorry, this is a complicated area of law. You can find some old HB decisions here http://www.osscsc.gov.uk/decisions/recentHousingBenefitDecisions.htm
which is useful to make your case but again, they are what we use in HB so may not be written for those not working in the field but I think they are useful.

Olympicsspectator

Thanks for this. It's good of you to spend time giving info when you do this all day at work as well. I really would like my sister to rent my place as id know she's got a bit more security of tenure but as tottyshouse says I can't be a very good person if I would throw a sister out who has cancer if she didn't get HB and therefore couldn't pay. I will do as you say and read up on it and also contact the HB and see what they say. Thanks again.