I have a client who wants to sell his house because he can't cope with his debts. It all seems rather dubious - he is selling to an estate agency that have said that they will then let him rent the house off of them.
They are witholding six months rent from the money they pay him and calling it rent paid in advance. Aside from the morality of this (he is a vulnerable man with mental health problems) could this be classed as a contrived tenancy? It could be seen as a sale of the house with intent to then claim HB.
Also, would there be an issue around deprivation of capital? He is selling due to his debts but has not been compelled to by re-possession or bailiifs. He says that all of the proceeds of the sale will be paid out to get rid of his debts, but will this be seen as deprivation?
Thanks

A good starting point for you would be to have a look at page 182 - 183 of CPAG "People treated as not liable to pay rent" bullet point 12 and take it from there.

However, see reg 2(1) of the HB Regs for the definition of owner as a “person being entitled to dispose of the fee simple”. So if a person is a leaseholder and has no power or right to sell the freehold then he is not an owner for the purposes of HB. See the commentary to the reg and to reg 9(2)(h) for a good discussion of the case law as it is not as simple as might first appear.

However, I think he is going to hit huge problems with contrivance/deprivation issues anyway and if I were he I would think very, very carefully before doing this. I would advise him to see a debt caseworker at his local CAB before doing anything.

I overlooked the fact that reg 9(1)(h) was amended effective from October 2007 to bring leaseholders with long tenancies (leases of more than 21 years) into frame, so he might be caught by that.

I agree with Paul here and should have said this in the first place - i would strongly advise your client to go to CAB for debt advice, especially as he has mental health problems, there could be a really simple solution to his problems that may not mean he has to sell the property.

See also CD CH 3450 2006, reported as R(H)6/07.

I think this will be very relevant in your client's case regarding the sale of his house.

Thanks for your help with this. He is at the moment seeing a debt worker and I have asked them to see if they can find out how pressing was his need to sell the house.
Not related really, but it is also of concern what will happen to him when his tenancy runs out in a years time. I'd wager it won't be renewed and the estate agents will have got a bargain house from him.

Herbert - your last point. Yes, there have been quite a lot of cases where firms or individuals have bought & rented back a property - always on a shorthold tenancy of 6 or 12 months. The tenant then has no security whatever, has sold the house at what is often an undervalue and ends up homeless.

He should be advised in the strongest terms not to go ahead with this.
There must be a better solution to his debt problems.

at least he's had the sense to ask before going through with it.

i have had some success, when consulted AFTER the sale, on getting HB for clients, where the client has been able to show mahoosive sized debts and to show the money going out to pay those debts....

but it's a struggle, and whislt I can understand selling your house to pay your debts off, i don't understand why they can't do it normally at a proper market value, rather than the massive undervalue these "companies" offer.

i can feel myself going into rant mode....