State Pension/benefits and inter-family rental payments

DiscoMaysie

Good afternoon all. This is my first post on here, so please be gentle. I have lurked for a long while and always found the site to be a mine of great information, but I now have a very specific query on which I would value some advice from those far more knowledgeable than me!

My In-laws,who are both retired, had a spot of financial trouble about 5 years back and to cut a long story short, we bailed them out of their spiralling debts by buying a 1/3 share of their house (that they still lived in) on which they paid us £200 PCM in rent. This cleared all of their debts and mortgage and allowed them to stay in their home debt free and survive of their low income. They have no private pensions, so just had their state pensions.

Unfortunately my father-in-law died around 3 weeks ago and we are now worried that without his pension income, my mother-in-law will not be able to afford to survive financially, as she only receives the minimum state pension. Clearly as she is family, we don’t mind helping her out by not taking her ‘rent’ each month, but my question is: Would my mother-in-laws income be bolstered in some way, eg some form of State benefit top-up or council tax rebate if we declared that she still needed to pay us £200 PCM rent – which has been the deal until now. Or are we unnecessarily opening a complex can of worms.

We are essentially subsidising her income by £200 PCM by not charging rent, but if she also misses out on some form of state assistance as a result of our help, it would seem like the wrong thing to do. I know that sounds slightly twisted, but I know sometimes these things do not work in obvious ways.

Any help would be gratefully received and if more information is needed, please just ask.

Thanks inadvance and sorry for such a long-winded first question!

Horseunderwater

If she only gets a basic state pension, then she should get at least Pension credit top of the single persons rate to £142 odd per week. That would also get her rent paid and majority of her council tax if not all of it. So that is the first thing you need to do. Your private arrangement re the debt is nothing to do with her income as such and should not be mentioned to the DWP re applying for pension credit. There may also be an assessed income period as well. Does she need any care or help in the home? If so Attendance allowance should be considered too.

pmlindyloo

Horseunderwater wrote: »

If she only gets a basic state pension, then she should get at least Pension credit top of the single persons rate to £142 odd per week. That would also get her rent paid and majority of her council tax if not all of it. So that is the first thing you need to do. Your private arrangement re the debt is nothing to do with her income as such and should not be mentioned to the DWP re applying for pension credit. There may also be an assessed income period as well. Does she need any care or help in the home? If so Attendance allowance should be considered too.

I agree that she should apply for Pension Credit and Attendance Allowance if she has care needs.

She should also get her Council Tax paid.

I am not so sure about her 'rent' to you.

When you purchased a share in the house was the 'rent' that she paid you part of a legal agreement?

I believe that she will have to produce 'evidence' in some form of a rental agreement in order for Housing Benefit to be paid.

hulltiger1969

HB will be investigated as a contrived tenacy, I believe there 5 year rule in which you cannot of owned the property in that time so hope you are just out of that limit, At worst they will refuse to pay so it is still worth claiming.

DiscoMaysie

Thanks for the fast replies.
At the moment, she is in good health - so no care needs at all.

The shared ownership has a legal deed attached to it and we are recorded as joint owners on the Land Registry. The rental side of things has always been informal however.

Does that make it more complicated or better?!

DiscoMaysie

Have just found a link regarding the 'Contrived Tenancy', but I am not allowed to post it here as a new user! Sorry.

The Gov webpage doesn't seem to mention a timescale for pre-ownership, but as my M-I-L still owns 2/3 of the property, it does seem to suggest that we may be viewed with great scrutiny!

I think based on the advice received, it would seem daft not to at least ask the question of the HB people, so many thanks for the help so far.

When I hear back I will report again with the outcome.

BigAunty

Owners cannot get housing benefit for the property they occupy, therefore your enquiry will be met with a blank refusal.

There is the Support for Mortgage Interest scheme for home owners who cannot pay their mortgage but as there isn't a mortgage on the property, this does not apply. There is another Mortgage rescue scheme where social housing landlords buy the property and allow the ex owner to live in it as a tenant but this also seems inapplicable to this situation.

Another alternative may be for your MIL to sell up and move to a smaller place that will cost less to run and can pay you back her debt, though obviously it's a very traumatic time for her and this may be the last thing she wants to consider at the moment.

To avoid issues around 'deprivation of capital' in the last scenario, (whereby the benefits authorities sanction those who apply for means tested benefits who have given away their capital), do you have formal paperwork to indicate the loan and share of property? This would be helpful in a future compliance review if she applies for council tax discount, housing benefit, pension credit or similar when she has been seen to give away tens of thousands of pounds to relatives.

DiscoMaysie

Big Aunty
Surely there must be some acknowledgement that my MIL does not own the property though, she only owns 2/3 of it, so it surely that would not meet with a total refusal would it?

We have a legal deed that proves that I own a 1/3 share of the property and my name is on the Land Registry title deeds also.

This isnt some sort of scam to try and fleece money out of the Governments back door, it is about trying to keep a traumatised old lady, who has just lost her husband in her own home, without creating a huge financial burden for me to cover her rent. The problem is, I am sure that is not how it will come across when the forms are filled out.

The unpleasant reality is that we (my wife and I) cant afford to subsidise her in this way and having just been through the MIL's finances, there isnt much scope for living in a more frugal way, even if she did sell her home, as it is only a small 2 bed bungalow anyway.

The finance we raised was done on our own property as an additional mortgage so was not tied to the MIL property in order to avoid unecassary complexity with the shared ownership and speed up the process. It would however be evidence of loan/property purchase and also tie up with when they started to pay us rent on a monthly basis.

I thought this was going to be an awkward one!

pmlindyloo

From what you have said I can see no way that this can be construed as rent.

In fact, what you have done is taken out a loan by remortgaging your property in order to pay off her mortgage etc.

Therefore, what you have been receiving from her is money for your extra mortgage payments.

I am not sure how you have come to this decision because in actual fact your capital is tied up in the house and would be released when it was sold. (or was there extra money involved - for debts etc?)

I am assuming that this was an informal agreement so that you could fund your remortgage payments.

Now that your father in law has died it seems to be impossible for your MIL to make these payments.

If I have got this correct and you say there is no way you can pay your mortgage without this extra money then you may have to consider selling the property, releasing your share of the money from the house and your MIL miving into privately rented accommodation (possibly sheltered accommodation) if there isn't sufficient to buy another property outright. She would then have sufficient savings to manage comfortably and you would have your money back.

Apologies if I have misunderstoond the situation.

DiscoMaysie

I am not sure why you think that it cannot be construed as rent?

We own a 1/3 share of their house, so thay pay a 1/3 share of its rental value to stay there.

The house was worth £210k, and we paid them £70k to clear their mortgage and other debts in exchange fpor the 1/3 share of the property. We are all registered on the title deeds.

How I raised the finance is surely irrelevant - unless I have now missed the point?!

terryw

You can prove that this is rent by showing the bills for income tax from HMRC surely?