Letting to a housing benefit claimant

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  • Letting to a housing benefit claimant

    Hi,

    I am letting out my (two bedroom) flat for the first time (moving into rented accommodation elsewhere with my boyfriend).

    I have been made an offer of my asking price by an single mother who is six months into her paid maternity leave. She plans to return to work in December. She will be claiming various benefits/allowances for the tenancy including housing benefit.

    A family member has agreed to act as a rent guaranteur. I have met the tenant and her mother and my gut feeling is positive. However, my concerns are two-fold:

    1. Am I in any way responsible for any fraudulent benefit claims (such as housing benefit). I have been told by other agents that the council *could* claim back any fraudulent/erroneous payments directly from me up to six years later. If this is the case I am not sure what I am expected to do to prevent this.

    2. What are the risks to me with regards to late processing of my tenant's benefit claim.

    I intend to take out legal and rent insurance, and I am carrying out referencing as we speak. The tenant/agent also assures me that due to this new housing benefit system I will not have any dealings with the council directly, instead benefit will be paid to the tenant who will subsequently pay me the contracted monthly rental.

    I am not opposed to letting to someone receiving benefits, but from what I've read there seem to be a lot more complications in this route. This is my only property and I cannot really afford problems here.

    Thanks for any help you can give me.

  • #2
    Originally posted by judithh View Post
    Hi,

    I am letting out my (two bedroom) flat for the first time (moving into rented accommodation elsewhere with my boyfriend).

    I have been made an offer of my asking price by an single mother who is six months into her paid maternity leave. She plans to return to work in December. She will be claiming various benefits/allowances for the tenancy including housing benefit. It's now known as Local Housing Allowance (LHA) and works differently from Housing Benefit

    A family member has agreed to act as a rent guaranteur. I have met the tenant and her mother and my gut feeling is positive. However, my concerns are two-fold:

    1. Am I in any way responsible for any fraudulent benefit claims (such as housing benefit). I have been told by other agents that the council *could* claim back any fraudulent/erroneous payments directly from me up to six years later. If this is the case I am not sure what I am expected to do to prevent this. No, as you will not be able to have rent paid directly to you.

    2. What are the risks to me with regards to late processing of my tenant's benefit claim. The tenant might not have funds to pay you on time.

    I intend to take out legal and rent insurance, and I am carrying out referencing as we speak. The tenant/agent also assures me that due to this new housing benefit system I will not have any dealings with the council directly, instead benefit will be paid to the tenant who will subsequently pay me the contracted monthly rental. Just as I said

    I am not opposed to letting to someone receiving benefits, but from what I've read there seem to be a lot more complications in this route. This is my only property and I cannot really afford problems here.

    Thanks for any help you can give me.
    Your main problem will be when you want the premises back, as you will normally have to apply to the court to obtain a possession order otherwise the tenant would be making themselves voluntarily homeless if they were to comply with a S.21 Notice immediately. Local Authorities routinely tell tenants to wait for a court order otherwise they have no obligation to re-house them.
    The advice I give should not be construed as a definitive answer, and is without prejudice or liability. You are advised to consult a specialist solicitor or other person of equal legal standing.

    Comment


    • #3
      Make sure the tenant pays a deposit and the 1st months rent upfront. (dont forget to protect it).

      Make sure the the tenant knows they have to pay the rent on the due date regardless to when their council payments come in or you will be requesting it from the guarantor. Make sure the guarantor is a home owner (check on the website, £3 i think) and make sure the guarantee form they sign is a deed and they are given a copy of the contract. Also make sure the guarantor knows you will be asking for the rent if it is not paid.

      Comment


      • #4
        Originally posted by judithh View Post
        Hi,

        I am not opposed to letting to someone receiving benefits, but from what I've read there seem to be a lot more complications in this route. This is my only property and I cannot really afford problems here.
        Without sounding rude, or disrespectfully to Dhss tenants ( i was one once ) you don't need any hassle if this is your only flat and your first time renting out.

        You have already defined your criteria as :-
        "I cannot really afford problems here"
        Therefore don't go the route that can give you the most upsetting problems if things go wrong.

        For your very first rent, you must choose someone who is working full time, for above reasons. You don't have to accept the first person that comes along. Also, if you are in a Flat, do you want complaints from others about being woken up at 2am and 5am every morning by a newborn screaming it's head off for 6 months solid ??

        Or her boyfriend staying over, who you have no control over.

        Stick to your criteria of "I cannot really afford problems here" and hope all goes well with a different tenant.

        As regards the letting agent, they work for you, so don't let them bully you.
        Sorry I seem to be heartless, but it's your -first- rental, so make it a hassle free one.

        R-a-M

        Comment


        • #5
          If you have a guarantor then ultimately the payment of the rent is their responsibility in the event the tenant defaults.Make sure the guarantor is in a position to pay in that event.

          My experience of dealing with the Housing Benefit Office has been dismal so good luck with that.

          You will be required to provide proof of rent plus an AST for the council, and any other information they want.

          You will be told absolutely nothing about the tenant's claim and have no right to know anything. If the claim is suspended for any reason you will not know why and will never be told. However you will be protected by the guarantor. If not you could wait months to be paid and maybe not get anything even then.

          What fraud are you worried about?

          Comment


          • #6
            Presumably if local housing allowance is paid to the tenant rather than to you directly, there can be no question of money being reclaimed from you in the event of a fraudulent claim by the tenant. Any money fraudulently claimed could equally have been used to buy food from Tesco and you can hardly imagine a successful reclaim from Tesco

            Comment


            • #7
              Originally posted by Kathryn View Post
              If you have a guarantor then ultimately the payment of the rent is their responsibility in the event the tenant defaults.Make sure the guarantor is in a position to pay in that event.

              My experience of dealing with the Housing Benefit Office has been dismal so good luck with that.

              You will be required to provide proof of rent plus an AST for the council, and any other information they want.

              You will be told absolutely nothing about the tenant's claim and have no right to know anything. If the claim is suspended for any reason you will not know why and will never be told. However you will be protected by the guarantor. If not you could wait months to be paid and maybe not get anything even then.
              What fraud are you worried about?
              When I take on a T on HB I ask them to sign a letter which then goes to the HB dept stating they (the tenants) are happy with all apects of the claim to be discussed with the L/L. So if you get stories about why the HB hasnt been paid you can find out for yourself.

              I manage dozens of HB Tenants and have very few problems.

              Comment


              • #8
                Tax man

                As this is your first rental, dont forget about tax.

                Taxation of Income from Land (Non-Residents) Regulations 1995

                Any landlord who is considered non-resident for taxation purposes is liable to pay tax on the rental income arising from letting his / her property.

                Ask letting agent for advice on this first.

                Ram

                Comment


                • #9
                  Many thanks for all your replies. I have chased the agent and the council and got further answers that what you guys are saying:

                  The tenant is going to ‘income’ checked at 2.5 x rental and the guarantor at 3x rental, it will also be written into the contract that the guarantor will be liable immediately if the tenant defaults on payment. The guarantor will also sign the contract. So I think I am covered with rent, and as guaranteed as possible.

                  ‘Sitting tenant’ is possible (of course), and nothing can be done to stop this according to council and agent, and it is just as possible as someone who is on benefits as a working professional to sit in a property after notice period. It probably is more likely, but I have met this person and her mother and she seems pretty trustworthy and full of good intentions and she understands this is my only property, which I have to pay the mortgage on, otherwise I will go financially ‘under’. Is it worth the risk I don’t know?!?

                  In regards to Tax: I only own 1 property? And I am going to live in a another rented accommodation in the uk? And the rent will cover the maintenance of flat, without me making any income. Would I still be liable for tax, stupid sounding question sorry. Do you have any idea what the tax percentage is?

                  Comment


                  • #10
                    you will have to declare the net rent as income but can off set the interest part of any mortgage against it. I think you can alaso have about 10% of the rent to cover wear and tear.

                    Comment


                    • #11
                      The prospects look good - a tenant who looks and sounds right and a Guarantor in place.
                      You can deduct all your costs from the rental income including things like insurance, maintenance costs eg boiler service etc. If you have a substantial mortgage interest to set against the income, your net profit will probably very low and the tax paid correspondingly low.
                      I think it makes much better sense to rent out your flat, rather than sell on the present troubled market.

                      Comment


                      • #12
                        Thanks very much to all. I've been spending the day researching and I feel like I understand the issues much better now.

                        Comment

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