Is this a contrived tenancy?

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  • Is this a contrived tenancy?

    I am looking to buy a property to rent out and wish my neice and her family to be long term tenants.

    The person in question currently receives housing benefit or LHA and has been in receipt of this for 2 years. They currently rent from a private landlord in the same way as they would rent from me and due to the number of children involved the LHA they are paid covers the market rent of such a property.

    The property I am buying is a cash purchase and will be mortgaged to a BTL in 6 to 12 mths time. The property will be subject to all the normal tenancy checks - gas/ electric etc and will be rented at the market rent for the area to my neice and her family. They will be subject to a standard tenancy agreement like anyone else with a clear message that eviction will occour should the rent not be paid.

    It is not necessarily the case that my neice will be in receipt of LHA on a long term basis but it is a possibility.

    To date, I have had no property rented out - this is my first one and once it is up and running I shall be doing a second.

    Does the above fall into the catagory of being a contrived tencacy? Obviously I hope it doesnt!

    I have had an informal chat with the council who tell me the LHA application for this tenant will be looked at more closely due to the fact that it could be classed as a contrived tenancy but so long as there is a standard tenancy agreement in place there shouldnt be a problem.

    any thoughts on this one would be mucho appreciated!

  • #2
    Hmmmnn... sounds like you are only doing it so you get tax-payer ££££ to pay her rent/your costs.... (I could of course be wrong...)

    For general guidance see the experts here....
    http://england.shelter.org.uk/get_ad...amily_member#1
    Housing benefit if living in a property owned by a family member

    If you live in a property owned by a family member and pay them rent, you may be entitled to housing benefit. The council will want to take a detailed look at your agreement with your landlord. You won’t get housing benefit if:

    ** you're not paying rent on a commercial basis
    ** the arrangement has been set up to take advantage of the housing benefit system – this is called a ‘contrived tenancy’. For example, if your landlord only asks you to pay rent when you are not working (and so are eligible for housing benefit), but not when you are working (and earning too much to qualify for housing benefit), this would be a contrived tenancy.
    Sounds like the council might quite fairly conclude you are 2nd category...

    None of my business but IMHO never ever ever rent to family members or "friends", and certainly never do your 1st rental property to anyone other than boring-old in-employment, passes all credit & reference checks,you decide you like & trust them: Advice?? Get a bit of experience in B2L, evict a tenant & find out what fun it is & then, only then, then think about doing favours for relos...

    Your council will decide: It is interesting to ask views here but you won't get a definite answer - it's town-hall that will decide...

    You are really sure you are prepared for all those family arguments about evicting poor-little-susie-it-wasn't-'er-fault...

    It would of course be MUCH MUCH more clear cut if she got a job, moved in, paid rent for 6 months & then got fired & applied for HB/LHA... She is looking actively for a job?? e.g. flipping burgers at McD's????

    Cheers!

    PS re...

    Originally posted by john 1549 View Post
    .... .

    To date, I have had no property rented out - this is my first one and once it is up and running I shall be doing a second.

    .. ...
    So, no chance of the tenant-from-hell (or agent-from-hell..) or major repairs or interest rates rising...
    I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

    Comment


    • #3
      Based on whatyou have written, no it would not be a contrived tenancy.
      She fills out the housing benefit form the same as anyone else. Whether it is your niece or not is not relevant, bar that she ticks the box that asks if she is related to her landlord.

      If during the processing time of the HB claim you get a questionaire regarding the tenancy, ask here for guidance first.
      Allow tenants to protect their own deposits. I want free money when they do it wrong

      Comment


      • #4
        I do appreciate all comments so keep em coming! I guess the one thing I would say regarding the state paying my mortgage should it be mortgaged is that this is no different to any private landlord renting to LHA tenants except in this case, its someone I know.

        I'm not saying its right that this happens with taxpayers money but the fact is there are people on LHA and they need somewhere to live and private landlords are fulfilling a need.

        I know someone in my local council social housing dept who says the council is now relying very heavily on the private sector to meet the councils responsibility in providing accomodation which is just as well as they havnt got enough properties themselves to meet the need..

        Comment


        • #5
          I believe that any questions regarding how you would deal with the tenancy may well go to the Niece but will be asking questions like ‘what would the landlord do if …. ?’ at least that’s what happened in my case. Questions might be along the lines of ‘What would the landlord do if benefit payments were reduced or stopped?’ The correct answer is likely to be that you would take all the steps you would with any other tenant, ultimately you would be willing to evict.

          They want to be sure that you are treating the let as a business. They may in future check the Niece’s bank statements to see that there is a payment history, and if the Niece gets work and you reduce or stop rent at that time the tenancy might then be viewed as contrived.
          I also post as Moderator2 when moderating

          Comment


          • #6
            If the property had been previously rented at the same rent under the same tenancy agreement it would be easy to prove that you were treating your niece in the same way as any other tenant. Unfortunately, you don't have any other tenants for them to compare with, which will make their decision making less clear-cut.

            It is human nature that peer-pressure encourages us to treat family in a generous manner - quite the opposite of what you need to prove to the council. I do echo Artfuls fears about the difficulty of evicting 'poor little Suzy' in the face of family opposition.

            Comment

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