A word of caution. Renting from relatives

[mikeymack2002]

Recently on this forum there have been one or two posts regarding renting from relatives. I was on Scoop and saw this story and thought I would share it to you all for more detail see here

 

A BENEFIT cheat has been ordered to pay back £42,000 after claiming benefit for a house she rented from her mum.

Terri Hanson, 41, of Milton Road, Westcliff, has been ordered to pay back seven years of housing benefit and put under a year-long supervision order after admitting ten counts of making false representations.

 

 

http://www.echo-news.co.uk/news/12945046.Benefit_cheat_ordered_to_pay_back___42k____after_she_was_caught_claiming_for_her_mum_s_house/

 

 

 

 

 

 

Story from here: http://www.scoop.it/t/lacef-news

[tomtom256]

However if you pass the rent on and the tenancy is a commercial tenancy then don't worry.

[mikeymack2002]

The point I was trying to make is the issues you may get if renting from a relative see here https://www.gov.uk/housing-benefit/eligibility

 

 

"Who isn’t eligible

 

Usually you won’t get Housing Benefit if:

 

• your savings are over £16,000 - unless you get Guarantee credit of Pension Credit
  
• you live in the home of a close relative
  
• you’re a full-time student - unless you’re disabled or have children
  
• you’re an asylum seeker or sponsored to be in the UK
  
• you’re residing in the UK as an European Economic Area jobseeker"
  

[mikeymack2002]

Having read this from here http://www.housingandsupport.org.uk/renting-accommodation-to-relatives

 

 

Commercial Arrangements

 

 

"Where a person is renting a property they are usually entitled to claim Housing Benefit if they have a commercial arrangement and the Local Authority is satisfied that the arrangement was not set up to take advantage of the Housing Benefit scheme.

 

This would mean that the agreement would need to be enforceable in law in order to show that it was a commercial agreement. You may find that some authorities want more information or evidence of the agreement from you before they are willing to accept that the tenancy is a commercial one particularly where you are letting to relatives. Please note it is for the claimant/landlord to prove the agreement is a commercial one and for the Local Authority to show that the tenancy is set up to abuse the system.."

Would it be advisable for the people involved to use an agency, as this would stop the possibility of fraud taking place? Since this would then be seen as a legitimate commercial agreement. Providing this was done at the incept of the tenancy.

[estellyn]

The important things to do are to be truthful about the arrangement to the LA at the beginning of the claim or tenancy (if contemplating moving into a relative's/friend's property mid claim then broach with the LA prior to moving), and once the tenancy has been approved by the LA, make sure there is a verifiable rent payment process - bank payments rather than cash payments, and no cash going the other way - it's still fraud if you pay £600 rent a month to your mum via standing order, and then your mum gives you £600 cash each month (had a case like this).

 

I wouldn't recommend an agency due to the additional fees involved.

[mikeymack2002]

estellyn Thx for the reply. The reason for this thread is to highlight the minefield involved by renting from a close relative. Even though the cost may be a little cost to the landlord it would appear in practise the best way forward?

 

 

I agree that informing the LA that the LL is a relative could save issues in the first place. But maybe looking at the bigger picture,even if the LA accept the arrangement, the LL could "share" the proceeds of the HB claim with the tenant.

 

 

As you can clearly see this is indeed a difficult one. Especially that some parents own more than one home, in some cases a large portfolio of property. As shown in this news story the fraud aspect can cause serious consequences for both the tenant and LL.

[SabreSheep]

Having gone through a period of esa and jsa before returning to work I have a bit of insight into these matter.

 

Some LAs will automatically accuse you of having a contrived tenancy

IN may case they refused my reconsideration and first appeal. Trying to say that because I had been allowed to live there rent free for a month as a trial basis (To aid my recovery) that it was not a genuine tenancy.

 

I managed to find case law showing that things that would exist outside of a normal commercial tenancy (In the case i quoted, a disabled son and Landlord being their mother) does not automatically make the tenancy non commercial.

 

After ripping apart their other evidence in my letter to appeal to the tribunal, they backed down and awarded full HB with backdate.

 

What i did do was organise that benefit be paid to the LL (mt Bro) instead of me so there could be no question of misappropriating of funds.

[SabreSheep]

The point I was trying to make is the issues you may get if renting from a relative see here https://www.gov.uk/housing-benefit/eligibility

 

 

"Who isn’t eligible

 

Usually you won’t get Housing Benefit if:

 

 

• your savings are over £16,000 - unless you get Guarantee credit of Pension Credit
  
• you live in the home of a close relative
  
• you’re a full-time student - unless you’re disabled or have children
  
• you’re an asylum seeker or sponsored to be in the UK
  
• you’re residing in the UK as an European Economic Area jobseeker"
  

 

 

You live in the home of a close relative.

The implication there is that you are living in the home of the close relative that would be your land lord. As far as I am aware, Home means that LL is actively living there.

In which case this would be correct.

 

It does not say "You live in a property owned by a close relative" which I put forward as being fundamentally different to the above.

[estellyn]

estellyn Thx for the reply. The reason for this thread is to highlight the minefield involved by renting from a close relative. Even though the cost may be a little cost to the landlord it would appear in practise the best way forward?

 

 

I agree that informing the LA that the LL is a relative could save issues in the first place. But maybe looking at the bigger picture,even if the LA accept the arrangement, the LL could "share" the proceeds of the HB claim with the tenant.

 

 

As you can clearly see this is indeed a difficult one. Especially that some parents own more than one home, in some cases a large portfolio of property. As shown in this news story the fraud aspect can cause serious consequences for both the tenant and LL.

 

fees to the tenant can also be high from an agency and it guarantees nothing - just an intermediary between one bank and another. It still doesn't stop landlord passing money back to the tenant.

 

In my experience, a large property portfolio can assist in proving a valid rental arrangement as one of the factors looked at by LA's is whether the property would be rented out to someone else if the relative wasn't renting it.

 

In the end all you can do is to try to do everything above board and do payments by bank, have a proper tenancy agreement and keep LA updated of all changes.

[id6052]

There is nothing inherently wrong with renting a property from a close relative.

 

The problems that generally arise in HB cases are either: -

1. the claimant actually lives with a close relative landlord - common example - grown up son or daughter living with parents - although the parents can charge them rent/keep/housekeeping money - it is not eligible for HB
   
2. there is no genuine rental liability - the tenancy is a sham
   
3. the agreement is on a non-commercial basis, the common problem here is where the arrangement is so specific to the individual that it would never be offered to a non-relative on a similar basis, e.g. unreasonably high or low rents, or absurd terms in the agreement
   
4. the agreement is contrived to take advantage of HB scheme - common example, the claimant is not charged rent when working and only charged "rent" for periods they are unemployed
   

 

to minimise the risk it is useful to

• declare any relationship between landlord (or their partner) with any member of your household
  
• draw up a proper tenancy agreement and rent book at start of tenancy
  
• set an appropriate level of rent based upon local market forces
  
• keep accurate records of all rent payments (avoid cash payments)
  
• (if hb is less than rent) pay the shortfall (and make sure there are records by paying through bank if possible)
  
• ensure landlord declares any rental income to HMRC
  

[impecunious]

I rent my home from my daughter and son-in-law on a purely commercial basis and am eligible for HB. Nomproblem at all. I have a legally binding tenancy agreement and both myself and my landlord regularly sign a statement confirming our arrangement.

 

I've had no,problems to date. Any shortfall between my monthly rent and my HB is met by letting my spare room. HB Dept is always advised of any change in circumstances and I get to keep first £20 of that income.

 

Imp

[tomtom256]

The point I was trying to make is the issues you may get if renting from a relative see here https://www.gov.uk/housing-benefit/eligibility

 

 

"Who isn’t eligible

 

Usually you won’t get Housing Benefit if:

 

 

• your savings are over £16,000 - unless you get Guarantee credit of Pension Credit
  
• you live in the home of a close relative
  
• you’re a full-time student - unless you’re disabled or have children
  
• you’re an asylum seeker or sponsored to be in the UK
  
• you’re residing in the UK as an European Economic Area jobseeker"
  

 

Sorry but I read it as "if you rent off your relatives, you'll be done for fraud" as the article you posted was just that.

[mikeymack2002]

The reason for this post was to try and fully understand the mine field as to renting from a relative. The other reason was to find out if there are other pitfalls due to the shortage of affordable rental properties as well on the open market, as some Councils are struggling to find cheaper accommodation to rehome those that have fallen in to the benefit trap, like it is in Brent London with the capping of benefits under the Welfare Reform Act.

 

 

With the children growing up and having to find accommodation from the open market, it makes sense to rent as cheaply as possible, especially if a relative owns the property. With this in mind and the fact some adult family members are taking the opportunity to move abroad for some period of time, therefore leaving the property unattended or letting it out for a short period of time. Or some other reason and a family member ends up renting it.

 

 

As you can see it appears that this renting from a relative could be much more wide spread than on first appearances. I think this goes to show that the cross agency data sharing seems to be working and they are now beginning to get some results therefore saving the LA's some serious money?