Another commercial vrs non commercial rent agreement

I have a customer who has just retired and has only a basic state pension & very small occupational pension. With his lump sum he wants to buy a small property to rent out to give him some extra income. His sister is on JSA & is living alone in the family home which is rented from a housing association & she gets full HB.
Come April she will have to pay 25% of her rent (£17 wk) and 10% of her CT ( £3 wk) out of her   £71.70wk JSA. She has been looking for an exchange to a one bedroom property for over 12mths now without success.
If my customer buys a one bedroom property & rents it to his sister what do advisers think of the probability of his sister’s claim for HB being accepted?
The problem is that once this is done, if HB is refused & an appeal is unsuccessful his sister would have given up her social housing & is unlikely to get it back without years on a waiting list. My client cannot afford to keep the property without getting an income from it but would obviously not want to have to evict his sister.
Any thoughts would be welcome.

I agree with Tony, there is a risk, but I have successfully represented in appeals in similar circumstances.

The profit motive is not a pre- requisite to a commercial agreement [(see R(IS)11/98 para 9]

“In paragraph 7 we referred to a number of matters which Ms. Perez had contended were relevant to “commercial basis”. We disagree with her contentions. We do not think that profit is a necessary element of “commercial basis” at least in the context of this provision. In saying that we take account of the fact that there are charities and other organisations operating in the social services field which could be said to carry out their activities on a commercial basis even though they have no intent to make a profit and we see no reason to take a different view in relation to a family situation. Of course, using the lodger test, it is appropriate and indeed necessary to take account of what a lodger might be expected to pay for the accommodation and facilities provided. And, in any event, Ms. Lieven pointed out, in a sense in the family situation the payments are a profit, the accommodation in question would, apart from the payments, presumably produce no income.”

Thanks very much to both for your thoughts, they’re much appreciated. Sylvia