HB question where landlords would be family and a trust in clients name

hopefully it can be pointed out if i am missing anything here.

client has a trust which he is the beneficiary of but the trust is discretionary and he has to apply for funds to be paid.

clients family are looking at joint purchasing a property with the trust which the client would live in.

am i right in thinking here that the two issues would be the issue of the tenancy being contrived and/or a commercial agreement in determining if the claimant could get housing benefit on this house or am i missing anything major?

I have had a look at the numerous decisions on contrived tenancies/commercial agreements but it would appear that even the legally qualified judges at the upper tribunal have had some difficulty pinning these down!

I should also add that the family are trustees for the trust but it appears that this is fine as long as we can show that reg 9(3) applies..the old contrived tenancy argument again.

am i missing anything major here?

The only thing I would flag up is the ‘liability to pay rent created to take advantage of the HB scheme’ part. Is the trust (and his/her parents) purchasing the property outright, or taking out a mortgage? Playing devils advocate, I would question the creation of the client’s liability to pay rent. Why could the trust not buy the property and allow your client to live in it rent free?

Yes you have pretty much covered it there.

Because the claimant is a beneficiary of the trust whose trustees own the property Reg 9(1)(e) is engaged, so he has to get over the hurdle of Reg 9(3).  The trustees could if they wanted to buy a house and let him live in it rent free, so the onus is on him to show that the charging of rent is not a contrivance.

If he gets over that hurdle he still isn’t home and dry because the agreement has to be on a commercial basis and tenancies between close relatives very often run into difficulties there.  I always advise that the parties should maintain an audit trail showing that rent is paid regularly.  It is not possible to do this if the claimant cannot pay any rent until he gets his HB through, but it could at least be demonstrated to the Council that arrangements will be put in place.  Ideally you want something that is proved by official third party documents. A direct debit is best, failing that cheque or cash payments into the landlord’s account.

If HB is going to be paid to the landlord anyway, that evidence won’t apply.  But the landlord should keep a tally and be in a position to quote the current state of the rent account on demand.

Even then it won’t be nodded through without close scrutiny.  The closer the family relationship the more difficult it is to isolate a commercial tenancy agreement from it.  This is especially true when the tenant has a learning disability and the landlord has a caring role and/or acts for the tenant in other respects.  If it came to the crunch, would they make tough decisions as a parent or as a landlord?

Having answers ready for these questions will help.

Additional things to consider early on;

Type of mortgage - ie “buy-to-let” will imply a commercial venture, especially as these are often on a higher interest rate than a conventional residential mortgage. 

Tenancy Deposit - If a deposit taken it should be protected in a govt approved scheme.  It would be advisable to take and protect a deposit as this is general practice in the letting sector. 

thanks for the replies everyone.