Housing benefit, inheritance and purchasing a property to live in

FallingLeaves

Hi I'm looking for some advice please...

Current situation

• Retired family member, age 70, with no capital or assets.
• Living alone in a rented flat from a private landlord.
• In receipt of pension credit, housing benefit and 100% council tax reduction.

Changes to situation

• Landlord indicated they may be selling the property (approx £200k).
• The family member is about to receive an inheritance of £100k.

They are happy and settled in the location and don't wish to move, as this would cause a lot of stress and disruption. The worry of the flat being sold by the landlord and them being evicted is causing anxiety.

The timing of receiving inheritance could be good - They would like to use the inheritance towards purchasing the flat from the landlord, avoiding any need to move, and having a somewhat more secure future.

I am exploring how this can / should be done and looking for advice.

The basics I am considering is that the inheritance would go towards the flat purchase, and the balance would go on a mortgage in my name. I would need to charge rent, to go towards the mortgage payments. Hopefully they would still be able to receive the same means tested benefits as before, housing benefit (to pay the rent) and council tax reduction being the key ones.

Questions

As a principle how does this stack up?

Disregarded capital - as the inheritance will be used to purchase a dwelling they will live in, when the inheritance is received and sits in an account prior to the purchase - will that affect current benefits? Is it considered 'disregarded capital' for a period (26 weeks?) ?

Deprivation of capital - the big one, how should this situation be managed with regards to deprivation of capital?

Continuation / resumption of benefits -  It will be key for them to receive the Housing Benefit and Council Tax reduction, as they would not have enough income from base pension to cover living expenses, rent on the 50% portion and council tax. Will this be possible? 

Ownership of the property - It seems like it'll be like a shared-ownership, situation. Any issues here?

I believe it would need to be a 'commercial based rental agreement' to avoid being a 'contrived tenancy' - how would this work, would them owning part of the property interfere with this?

I'm feeling out of my depth with this at the moment and would appreciate advice on how to proceed.

Thanks for your help.

FallingLeaves

Some other points that may be relevant...
They would continue to live in the flat on their own.
I already own my own home with a mortgage.

calcotti

The cannot give the money to you to use to purchase a property and then rent it back to them. That will be seen as deprivation of capital and they will be treated as if they still have the money.

if you become co-owners I can’t see how he be able to claim HB to pay you ‘rent’.

How much Pension Credit do they get? Do they already have some capital/savings?

elsien

Inheritance issues aside (and disregarded capital applies to where someone has inherited a property, rather than cash), I would query if they can get housing benefit for a house they own, even if they only own it in part? 
And even if they can, the local authority would need to be assured that it was a properly commercial tenancy, and that you would evict them if you needed to do so.  Can you evict someone who owns half the house they are living in?
And what happens if you need to realise the asset and sell - divorce, illness, bankruptcy? 

On the face of it, it sounds fraught with complexities. Do you really want to go there?

FallingLeaves

calcotti said:

The cannot give the money to you to use to purchase a property and then rent it back to them. That will be seen as deprivation of capital and they will be treated as if they still have the money.

if you become co-owners I can’t see how he be able to claim HB to pay you ‘rent’.

How much Pension Credit do they get? Do they already have some capital/savings?

If we become co-owners, would it not be similar to a shared ownership from a housing assoc? Where you own a portion of the property, and pay a rent to the housing assoc on the other portion?

They get about £60pm pension credit I think.

No capital or savings currently.

FallingLeaves

elsien said:

Inheritance issues aside (and disregarded capital applies to where someone has inherited a property, rather than cash), I would query if they can get housing benefit for a house they own, even if they only own it in part? 
And even if they can, the local authority would need to be assured that it was a properly commercial tenancy, and that you would evict them if you needed to do so.  Can you evict someone who owns half the house they are living in?
And what happens if you need to realise the asset and sell - divorce, illness, bankruptcy? 

On the face of it, it sounds fraught with complexities. Do you really want to go there?

Yes, it does seem rather complex. 

Can you see any other solutions we can explore that would provide some security?

Other than continuing to rent, stopping the HB and spending away then inheritance over a period of years on rent, and then getting back on HB when the money has all gone.

poppy12345

FallingLeaves said:

calcotti said:

The cannot give the money to you to use to purchase a property and then rent it back to them. That will be seen as deprivation of capital and they will be treated as if they still have the money.

if you become co-owners I can’t see how he be able to claim HB to pay you ‘rent’.

How much Pension Credit do they get? Do they already have some capital/savings?

If we become co-owners, would it not be similar to a shared ownership from a housing assoc? Where you own a portion of the property, and pay a rent to the housing assoc on the other portion?

No, not at all. When buying a share of a property, you're not sharing it with a family member and the rental is on a commercial basis. Not only that, you're asking for them to give you the money and then mortgage part of the property. A person can't just give away their money and continue with means tested benefit.

HillStreetBlues

poppy12345 said:

 Not only that, you're asking for them to give you the money and then mortgage part of the property. A person can't just give away their money and continue with means tested benefit.

My reading of it is the person isn't looking to give any money away, they want to use the inheritance to buy a percentage of house that they live in.
The OP would take out a mortgage to pay for the other percentage.

poppy12345

HillStreetBlues said:

poppy12345 said:

 Not only that, you're asking for them to give you the money and then mortgage part of the property. A person can't just give away their money and continue with means tested benefit.

My reading of it is the person isn't looking to give any money away, they want to use the inheritance to buy a percentage of house that they live in.
The OP would take out a mortgage to pay for the other percentage.

In my opinion that's giving the money away because the person then wants to claim help with the rent for the other half.

calcotti

FallingLeaves said:

calcotti said:

The cannot give the money to you to use to purchase a property and then rent it back to them. That will be seen as deprivation of capital and they will be treated as if they still have the money.

if you become co-owners I can’t see how he be able to claim HB to pay you ‘rent’.

How much Pension Credit do they get? Do they already have some capital/savings?

If we become co-owners, would it not be similar to a shared ownership from a housing assoc? Where you own a portion of the property, and pay a rent to the housing assoc on the other portion?

They get about £60pm pension credit I think.

No capital or savings currently.

As explained by elsen, to be accepted as a commercial tenancy the local authority would have to accept that you would evict them if they failed to pay rent. They probably will not accept this - this is always a risk of renting from relatives but more difficult if you are go-owners.

If he has £60 of Pension Credit he would lose this when he inherits along with the HB and CTR.

If the capital was used to buy a share of the property he would be able to reclaim Pension Credit and would get the Council Tax Reduction back but I can’t see a HB claim being accepted but it will be down to the local authority to decide.

HillStreetBlues

Being a flat is there a service charge to consider?