Hi Mike,
My client Belinda has a learning impairment. She lives with her parents.
The parents are hoping to buy a small house close to the family home, for Belinda to live independently.
They will need to borrow money to buy this, and to repay the loan they will have to charge Belinda rent.
The jobcentre said that you cannot have HCE if you rent from a close relative, but is this true?
Can she get UC Housing Costs Element if she rents her home from her parents?
Kathy
Hello Kathy.
To get UC-HCE you must be liable to pay rent for the property.
Liable means that there is a legally binding agreement between the landlord and the resident.
And Universal Credit has three rules about liability for rent that are important to Belinda and her parents.
Living With and Renting From a Close Relative
You are treated as not liable for rent, and so you can’t have UC-HCE, if you live with and rent from a close relative.
A close relative means a parent, parent-in-law, son, son-in-law, daughter, daughter-in-law, step-parent, step-son, step-daughter, brother or sister; or the partner of any of these.
The Tenancy Must Not Be Contrived to Get a Housing Costs Element
If you and your landlord set up your hosing costs element so that you will get the HCE, or a higher HCE, you will be treated as not liable for rent.
This exclusion should only be used where the the housing arrangement is an abuse of the HCE scheme.
The Rent Liability Must Be On a Commercial Basis
To get UC-HCE your rent liability must be legally enforceable.
If your landlord is a relative, the DWP may ask them: If the tenant doesn’t pay the rent, would you start possession proceedings?
If the landlord says no, the DWP will conclude that the tenancy is not on a commercial basis.
The DWP should look at the all relevant factors including the amount of the rent and the terms of the tenancy agreement.
A low rent does not automatically mean that the arrangement is non-commercial.
Although you don’t strictly need a written agreement, it’s going to make it much easier to show that your arrangement is a commercial one, if you have a written tenancy contract to share with the DWP.
A standard tenancy agreement with a realistic rent should generally be seen as a commercial arrangement.
Applying This to Belinda’s Situation:
The living with and renting from a close relative rule is probably what the jobcentre worker was thinking of, but the whole point of Belinda’s plan is that she won’t be living with her parents, so this exclusion won’t be a problem for her.
The contrived arrangement rule should not be a problem, because the purpose of this plan is to ensure that Belinda has somewhere to live independently.
Yes it’s true that they know in advance that Belinda will be claiming HCE, but there is no abuse going on here.
Everyone has to pay for where they live, and Belinda would be claiming HCE for independent accommodation regardless of who the landlord is.
The commercial arrangement rule is more likely to cause difficulties.
If Belinda has the capacity, with support, to manage her own claims and to enter into a tenancy then all should be well.
But if the parents are her appointees and/or if they have to sign the tenancy agreement on Belinda’s behalf this might be more problematic.
UC has rules that say that you are not liable for rent if you rent from a company or trust in which you are an owner or a trustee; so you cannot get HCE if you rent from yourself.
Because she won’t be a company director or trustee, this isn’t directly relevant to Belinda, but DWP may get bothered by the fact that the parents have entered into a tenancy on her behalf, with themselves.
We can strongly argue that the arrangement is still for a commercial rent on standard terms; but there is no way of getting clearance in advance from the DWP.