Claiming Universal Credit if you have a second home you rent out

clairelmurphy

Hi, My Mum is in her early 60's and was made redundant earlier this year. She has struggled to find another job since in the current job climate. 
She has a second property that she still has a mortgage on (about 50% of the property value) but she rents out. The rental income covers the mortgage cost with a small amount left over so not enough to live on. Will she be entitled to Universal credit as the amount left over after paying the mortgage does not cover her living costs. I assume because her savings are over the £16k threshold (if the second property is taken into account) she will not be eligible? Is her only option to sell the other property? If so this will not be a quick process...what is she supposed to live on in the meantime? Her husband receives PIP which covers the mortgage and some living costs for their main property but not all living costs. Thank you. 

[Deleted User]

clairelmurphy said:

Hi, My Mum is in her early 60's and was made redundant earlier this year. She has struggled to find another job since in the current job climate. 
She has a second property that she still has a mortgage on (about 50% of the property value) but she rents out. The rental income covers the mortgage cost with a small amount left over so not enough to live on. Will she be entitled to Universal credit as the amount left over after paying the mortgage does not cover her living costs. I assume because her savings are over the £16k threshold (if the second property is taken into account) she will not be eligible? Is her only option to sell the other property? If so this will not be a quick process...what is she supposed to live on in the meantime? Her husband receives PIP which covers the mortgage and some living costs for their main property but not all living costs. Thank you. 

 She can't claim universal credit if she has that much capital 
she needs to sell it ASAP if she has nothing to live on. 

calcotti

The second property will be taken into account. The value is the open market value less the mortgage less an allowance for sales costs (I can’t remember the percentage offhand). If she puts the property on the market it can be disregarded for six months, or longer if a Decision Maker decides it’s reasonable to  do so.

if she has paid NI between April 2017 and April 2019 she can claim new style JSA which pays £74.35/week for six months.

Alternatively, if husband gets the Daily Living part of PIP and she provides 35 hours of care for him per week she could claim Carer’s Allowance for looking after, £67.25/week. She can continue to get this for as long as she meets the care requirement and does not earn more than £128/week from employment or self employment. 

poppy12345

If there's equity in the property and it's more than £16,000 then it will exclude them from claiming UC. If it's up for sale then it maybe possible to have it disregarded for up to 26 weeks.

If she's paid enough NI contributions in tax years April 2017 to April 2019 then she could claim New style JSA. It pays £73.35 per week for 26 weeks.

Or if her partner is claiming daily living PIP and she looks after him for at least 35 hours per week she can claim Carers allowance, which is £67.25 per week. It can be backdated for 3 months, providing she wasn't earning more than £128 after deductions per week during that time. https://www.citizensadvice.org.uk/benefits/sick-or-disabled-people-and-carers/carers-allowance/

TELLIT01

The big problem for the OP's mother may well be getting the tenants out if she needs to sell the property.  If the tenant agrees to leave they will get no help from their local council in obtaining other accommodation as they will be deemed 'deliberately homeless'.  If the tenant refuses to move it will take months to go  through the courts process and I think the ban on evicting tenants has been extended.

Her savings currently exclude her from claiming UC anyway.  I don't know if Decision Makers can order the 2nd property to be disregarded in the situation outlined above.  Even if it is, the rental income will be taken into account either in full or in part.

calcotti

TELLIT01 said: ...Even if it is, the rental income will be taken into account either in full or in part.

Rental income is not treated as income but as additional capital so if it is coming in but going straight out to pay the mortgage will make no difference to the UC claim. 
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/890315/admh1.pdf

H5094 The types of income which might be derived from capital include

1. interest

2. dividends and

3. rental income.

....

Example 2

Scoot owns a second property which he does not live in as his home. Scoot rents the property and receives rental income as a result. For UC, the capital (the second property in this example) is treated as yielding an income and the actual income derived from that capital (the rental income) is treated as part of Scoot’s capital from the date it is due to be paid.

pooh

She needs to find out how long it will take her to evict the tenants.
UC will not pay out to someone unless they are liquidating the asset that prevents them from receiving UC.
Has she spoken to them (UC).

pooh

Then when she does sell,anything over £16 000 will cancel out UC,so she will need to see what she can spend it on so she is not accused of deprivation of capital.

Basically the rainy day she was planning for has now come.