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I have a couple of clients who are living in a two bed-room private-rented flat. They are both on Incapacity Benefit. Their Housing Benefit is paid under the local reference rent rules and there is a size-related rent determination as they only need a one-bed property and so there is a rent restriction on the Housing Benefit. They also get a top-up through a discretionary housing payment which they got by arguing that they need 2 bedrooms on medical grounds.
The parents of one of the couple have offered to buy a property and rent it to them. The parents already own other properties (in a different area) which they let out privately. Their rents tend to be below market rates on the understanding that tenants sort out small problems themselves. The parents want to do this so that their son and his partner have accommodation which is better suited to their medical needs, and also have a more secure future (because there would not be the same danger of the landlord deciding to sell the property etc).
My clients want to get a property that is as large as possible (possibly up to a 3 bedroomed house) and the parents are proposing a rent which is about the same as they are currently paying, and about 10% more than the LHA for a one-bedroomed property.
Being a cautious adviser, I have told my clients that their application for HB on this new property (which would be under the Local Housing Allowance rules) could fall foul of ‘commercial’ rent requirement or even the rule about the liability to pay rent being created to take advantage of the HB scheme. This has thrown them into a panic because they will need HB to pay the rent.
I am looking for suggestions as to how far I can go in reassuring my clients? What sort of things would the local authority take into account in deciding what is a commercial rent (would things like the Council Tax band or the purchase price of the property be relevant for example?) Would the fact that the rents on the parents other properties are lower than the market value be relevant? How big a factor would the size of the property be? Would a bigger property in a cheaper area be more problematic than a similar priced, but smaller property in an expensive area?
Sorry for long post - thanks for reading; any suggestions/comments welcome!
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