Selling home to get Housing Benefit??

I saw a client today for a totally unrelated issue, who during our appointment mentioned that she had just put her house on the market with the intention of privately renting and claiming Housing Benefit instead. She explained her reasons for this as being that she knew that there were due to be changes in the rates used to calculate the mortgage interest payment rate within her benefit and is concerned that she won’t be able to afford her mortgage.

I advised her re: the issues that may arise it is beleived that she created a rent liability with the main purpose of getting housing benefit. In her favour, she is having financial difficulties and was made bankrupt last year (however didn’t lose the house as was in negative equity) and says she is having difficulty paying the remainder of the mortgage that isn’t currently covered by mortgage interest payments within Income Support. However, she did mention that she knew that if she rented privately that the local housing allowance rules would mean her HB entitlement wouldn’t cover the full cost of the rent and she would need to make a contribution, but that it would still work out about £100.00 a month cheaper than she is paying at the moment.

Aside from checking that the figures that she has in her mind are correct etc which I am yet to do, alarm bells are ringing and although there are points her favour, I can’t see how this would not be perceived on the whole as creating a rent liability for the pupose of saving money by claiming housing benefit.

Does anyone else have a different opinion on this or have expereince of any similar cases?

Your client might also want to be aware that LHA levels are likely to be reduced from next year - the £100 improvement now may be relatively short-lived.

NB:  If she sells the property and rents it from the new purchaser, she will only be entitled to HB if the purpose of relinquishing ownership was to remain in occupation.

... and if there was no other way to keep the house..

There are a number of CDs which include references to finding jobs, using credit cards etc. as possibilities to be considered.

The SARB calculation is not a simple one to do properly.  She also needs to understand that SARB is now regulated, since June, by the FSA and there are a number of rules that they have laid down for the sales process and the tenancy agreement.

Gareth Morgan - 02 September 2010 02:52 PM

... and if there was no other way to keep the house..

There are a number of CDs which include references to finding jobs, using credit cards etc. as possibilities to be considered.

If the credit card(s) in question are subject to high interest, it could quite properly be argued that the use of those to retain ownership would be the “...height of irresponsibility…” - CH/2340/2008.  In turn, the refusal / failure to use such an avenue wouldn’t necessarily be a bar under HBR 9(1)(h).

Thanks for the responses. Yes, capital from the sale of the house wouldn’t be an issue because it is currently in negative equity.

I agree with all the points you make Tony, my biggest concern is that my clients first response to me as the reason why she was selling her house to rent instead is that she would save £100.00 per month through getting housing benefit rather than help through mortgage interest. I am worried how this would could not be interpreted by a decision maker as taking advantage of the housing benefit scheme, even though not typical of the cases you have described. It’s not like she is not keeping up with the repayments at the moment or is going to be evicted, her reason given was clearly that she would be better off financially.

I have only ever had expereince of deprivation of capital cases and HB being refused, but from my expereince of those decision makers are quick to apply the notional capital rule until challenged otherwise, on the grounds of very little evidence in my opinion, which is why I am concerned in this case.

....and of course the client wants an answer by the end of next week…....‘so is it safe to sell my house or not then!?’

Contact your Local Authorities Homeless / Housing Advice Unit for information on the governments “Mortgage Rescue” schemes.

If she meets the criteria she could sell the property to a Housing Association and remain in the property as a secure tenant.

and if she is in negative equity, how is she going to be able to sell anyway, as there will not be funds to clear the mortgage?