Renting from a family member and the hb element of UC...please help me

[lidlbitupset]

Hi, my niece was unable to rent anywhere to live. We tried lots of different ways to help and support her but we cannot act guarantors as we have no salaries. Also she has a dog, doesn't work and has quite severe mental health problems, including several hospital stays a year. It was impossible. We bought her a house and she said she could claim housing benefit and give it to us. She signed a shorthold tenancy agreement and has been sending us the lower amount but has applied for the full amount. Now the council have looked at her bank account they have seen a payment from her grandmother, my MIL, with the same name and are now questioning the family connection. They ahve sent her a form to fill in. The main problem I can see is that the house is rented to her at below market rent and also that I didn't bother taking a deposit and putting it in a scheme. I can of course do that now but the certificate will obviously show the date. Can anyone advise? We are not trying to claim unfairly, just help her...

When you say 'the council' can I assume you mean UC?

She'll need to show it's a proper 'arm's length' commercial agreement. As long as rent is not massively less than LHA she should be OK.

See what they say and come back for advice on challenging any adverse decision.

You say she has been sending us the lower amount but has applied for the full amount.

To be clear, she can't claim more from UC than what's on the agreement.

Hi,
i used to he on UC and rented from my aunt ! When I asked for the rent element I had to declare it at the time and then it went to a decision maker. They then called me and I had to answer a bunch of questions but I did get the housing element from them. It was at market rent though.

i did my research beforehand and knew that it had to be market rent for it to go through.

I'm confused. How did you qualify for a mortgage if you "have no salaries and can't act as a guarantor"? Did you buy the house outright from your savings? In which case you're not out of pocket, the HB/UC is just pure profit? If so then they are right to question this.

I'm guessing the OP's income is from pensions and they were able to buy the house outright from savings.

If you think there are no costs to them as a mortgage free householder you're missing stuff like maintenance & insurance for starters.

@Darragon , we bought the house without a mortgage, by mortgaging another property we own outright. Our income is not from pensions, we are not retired/

However much money you have, you cannot be a guarantor unless you have a an income. Just having money isn't enough.

Just because we are not paying a mortgage on a property does not mean we cannot rent it out.

@lalalalalala2024 , that's interesting, even though I will be truthful about the situation, if they call her she will completely breakdown. I don't think I can put her through that.

Yea they will ask for a tenancy agreement when trying to claim the housing bit.
On the phone they will ask if you have given a deposit ( I didn’t ).
Will your family member evict you if payments are late etc, I can’t remember all the questions as it was a while ago but I remember being stressed and I had a 1 year old at the time. It was the only way we could find affordable housing.
Luckily my rent has continued to stay the same for the last 5 years when prices are now £400 more in this area, I would not have been able to afford the extra £400 a few years ago

As @lalalalalala2024 says there is suite of questions they need to ask where landlord and tenant are close relatives. These are intended to allow a Decision Maker to conclude whether the tenancy is, or is not commercial.

Thanks this is really useful @Bromptotoo What happens if they decide the rent charged is not commercial? We are allowing her not to share the house for a year while she recovers, and would be able to get the full value of the house after that through the rental of the second bedroom. It is about half market value right now. Do you think they will reduce her payment, or refuse to pay her anything?

@lidlbitupset how old is she as that might affect LHA rate. Is she on PIP?

Does she look after her own UC claim or is there an Appointee?

If they decide it's non commercial and refuse the Housing Costs Element then you can ask them to look at it again. DWP calls this mandatory reconsideration.

Make sure you understand their rationale for any refusal then you can make a case why they're wrong. There's guidance on the CA website about the process.

Come back here and ask for more advice if she is refused.

I would plan as if this will fail. The fact you’ve bought it to let to her, and it’s never been previously let, is a heavily weighted factor.

It’s possible that it will go through, but I’d presume it won’t and plan around that.

Thanks @LittlePetitePsychopath , I agree. If we have to let it to her for free then obviously we will do. We did it with a previous house I owned but I declared it on the application and it was never mentioned again. Maybe they are just stricter now.

@Bromptotoo thanks, that's really useful. She is in her 30's and manages her own stuff. She does get PIP but it has been reduced several times I think.

Surely it's classed as a contrived tenancy if you purchase a house purely to rent out to a family member? It may be different if you'd rented the property out to someone else beforehand.

If you've bought the house outright for your niece to live in, do you need rent? Or just want it? Something feels a bit off. If you just want to help her not claim unfairly, then you've done that already. You're either a landlord or not and if you are then you have shit ton of rules to abide by including deposits, market rent, and all kinds of t&c. But if you're just generous aunts and uncles, fair enough but you don't get the state to refund your kindness. It's all a bit murky as is.

The amount of rent being charged is never an issue

What is the issue is that you expect it to be paid and will take action to evict your niece if she doesn't pay

Have you got gas and electric safety certificates issued her with the relevant documents done right to rent checks and landlord insurance?

Seems to be the thing to do ! There was another thread recently where someone was asking if they should sell their larger house and buy two smaller ones and get the two sons to claim benefits to rent the other one because they were fed up of adult kids living with them !! Again likely wouldn't be accepted as would be a contrived tenancy. These kids will likely inherit this property one day. I'm really surprised there aren't stricter rules.

Did you buy the house with the j tenting charging her rent or has this been seen as a source of easy money? All sounds dodgy.

Gosh me too. There's a strong whiff of 'but I've done a good deed' which is fine, but that's what families are for. Either do that good deed and house your family, or don't, but there can't really be this bit in between where you get paid for doing so. If the niece is as vulnerable as described, then she should either be living with family (parents/grandparents, OP as they seem to be v involved) or in a high band on the council list, with or without dog. Not sure there's a 'live in my aunt's house she bought for me but the council funds it'. Maybe there is, but feels like there's better uses of money for those without families who can step in.

I think this would be the issue. Why is she paying you less than the stated rent on ast? Does that mean she pockets the difference?

Yes I think i have to consider whether I should charge rent. To me it seemed fine to charge rent, as any landlord will charge her rent. She pays the amount on the tenancy agreement and has all the documents and checks. I have answered the questions honestly so will go with what they say.

I’m not sure i follow your argument here.

If OP has bought the house at e.g. £200k then that’s £200k not earning interest for her. Thats probably at least £8k per year. So she needs to charge at least £670 per month to break even (actually more than that with insurance etc).