Letting house to friend on LHA

New_User

Any advice welcome. I have no experience in the social / welfare field, so keep it simple as possible please..!


I am a single man aged 37. I work full time and own a 4 bedroom house. The mortgage is paid off. I currently live in the house.


I am friends with a woman, Lucy, aged 26. She is a contact from a previous job I did. She is now getting divorced.
Lucy has a 4 year old daughter, who will be staying with her (full custody).


Lucy is now stuck for somewhere to live.


Obviously she can move in with me as a guest - but can she move in full time and claim LHA to pay me rent?


I told Lucy that as I would be staying in the house also, she will be classed as a lodger, not a tenant. So can lodgers also claim LHA?


Will Lucy be entitled to the '2 bedroom LHA rate'?


My plan would be to keep this away from the tax man, using the 'Rent a room' rules. Would this be allowed, as she has a child with her?


I spoke to a friend recently, who thought that as Lucy would become a 'social tenant' on LHA, then she could not move straight into a 4 bedroom house - as she would be ''jumping the queue''.


I thought this ''queue'' was only for social tenants, in council houses. (Well, waiting for council houses) Am I wrong?


I spoke to another friend, who thought the benefits dept would classify Lucy as my girlfriend / common law wife - and so not allow her to claim benefits.


We would be sleeping in separate bedrooms, so would that be allowed? I have been advised not to fit bedroom locks, as this would stop her being classed as a lodger.


Also, in case it is relevant, Lucy will not be getting much in way of a divorce settlement. Her soon to be ex-husband is on PAYE, so I presume will be paying a small amount of child support. He earns about £17K a year.


Any advice gratefully received.


Thank you.


Dave

pmlindyloo

New_User wrote: »

Any advice welcome. I have no experience in the social / welfare field, so keep it simple as possible please..!


I am a single man aged 37. I work full time and own a 4 bedroom house. The mortgage is paid off. I currently live in the house.


I am friends with a woman, Lucy, aged 26. She is a contact from a previous job I did. She is now getting divorced.
Lucy has a 4 year old daughter, who will be staying with her (full custody).


Lucy is now stuck for somewhere to live.


Obviously she can move in with me as a guest - but can she move in full time and claim LHA to pay me rent? Yes


I told Lucy that as I would be staying in the house also, she will be classed as a lodger, not a tenant. So can lodgers also claim LHA?
Yes

Will Lucy be entitled to the '2 bedroom LHA rate'?
Yes

My plan would be to keep this away from the tax man, using the 'Rent a room' rules. Would this be allowed, as she has a child with her?
Yes

I spoke to a friend recently, who thought that as Lucy would become a 'social tenant' on LHA, then she could not move straight into a 4 bedroom house - as she would be ''jumping the queue''.


I thought this ''queue'' was only for social tenants, in council houses. (Well, waiting for council houses) Am I wrong? No


I spoke to another friend, who thought the benefits dept would classify Lucy as my girlfriend / common law wife - and so not allow her to claim benefits. Maybe. They might do an investigation.


We would be sleeping in separate bedrooms, so would that be allowed? I have been advised not to fit bedroom locks, as this would stop her being classed as a lodger. True

Also, in case it is relevant, Lucy will not be getting much in way of a divorce settlement. Her soon to be ex-husband is on PAYE, so I presume will be paying a small amount of child support. He earns about £17K a year.
Child support is not taken into account when assessing means tested benefits. I am assuming that she is not working and now claiming Income Support? HB is based on income/savings/capital so her award will depend on her circumstances. Where was she living before?

Any advice gratefully received.

You would lose your council tax single person's discount. It is possible that Rent a Room scheme would not cover this - would depend on the amount of HB awarded. Check by looking on local council website - local housing allowance rates
Thank you.


Dave

Answers in blue

Housing_Benefit_Officer

New_User wrote: »

I spoke to another friend, who thought the benefits dept would classify Lucy as my girlfriend / common law wife - and so not allow her to claim benefits.

Irrespective of sleeping arrangement why would your friend think 'Lucy' would be classed as your girlfriend/common law wife? Just curious.

New_User

Thank you. That is very helpful.
Lucy is currently living in rental accommodation, provided by her (soon to be) ex-husband's employer. Obviously, she has to leave that soon.


So I'd have to pay 25pc more council tax.
The LHA rate for 2 bedrooms is just over the Rent-a-Room allowance.
So could I just charge a bit less rent, in order to avoid getting involved with tax?
Or would the LHA dept only pay the full amount they can?

New_User

Because I am not related to Lucy and neither of us will have another ''partner'' living in the house. So it will look as if we are a couple.


I can see why the benefits dept would be suspicious. Otherwise, what's to stop anyone just claiming their girlfriend is their lodger and asking for LHA money? (unless she is working, obviously).


They are welcome to come and count the number of beds if they like.
I have nothing to hide.
Not sure how else they could settle the issue? Maybe they will ask me to sign something?

Nada666

You can charge any rent you like. The LHA will be limited to only what you charge if you charge less or capped at the two-bed allowance if you charge more.

The couple issue is not an issue if you are not a couple.

New_User

Thanks.
So it seems like we can just go ahead and get things sorted then.
Good news!

Icequeen99

The couple issue will be her issue. I suspect she will be claiming tax credits and maybe some other benefits. Tax credits are likely to pick this up, probably not immediately. They will flag it because you will be both registered at the same address.

You need to do what you can to make sure things are a lodging arrangement and you have a paper trail. A written agreement (presumably you will have that anyway) as well as something that clearly documents how the bills be shared and clear separation of payments so that if she needs to she can show payments from her bank to yours that match the tenancy agreement. Separate shopping etc.....

IQ

HappyMJ

Do not allow her name to be on any household bills....including the council tax. It's all your responsibility. Charge her an all inclusive rate including all the bills. She buys in her own food for herself and her child and you buy your own. If she has any sense she should be keeping the receipts to show the food she is buying only covers herself and her child and no more. You can cook each other meals using the food you've bought for yourself on a reciprocal basis i.e I've cooking some pasta would you like some, and she returns the favour the following week that is allowed and quite sensible thing to do occasionally to save money but try not to make it an every night thing...not that it really matters.

nannytone_2

i wouldnt charge an all inclusive amount!
if you do that then the council will not pay thhe total amount as they wont pay for her share of utilities, only rent

New_User

Thanks very much for those further replies.
The food shopping was not something I'd thought about at all. It's been a while since I last kept food receipts!


Maybe it's best if I charge a lower rent (GBP 4249) to stay below the tax level and ask Lucy to pay more towards bills instead?


Presumably, if she pays a bill directly, that doesn't count as ''income'' for my tax?


What would be the problem with putting Lucy's name on a utility bill?


From past experience, I have kept loads of receipts etc for HMRC, but they've never been interested at all. They've always just believed what I've quoted them (for expenses against work).
Maybe because I'm PAYE - not self-assessed?