contrived (adj – /kənˈtrʌɪvd/)
- Deliberately created rather than arising naturally or spontaneously.
- Created or arranged in a way that seems artificial and unrealistic.
– Oxford English Dictionary
In British housing law, a contrived tenancy is a term that describes the non-commercial renting of a property to a family member for the purpose of receiving housing benefits. In other words: a tenancy that has been created to take advantage of the housing benefit scheme.
Letting to family members is tricky business. Some buy-to-let mortgage lenders won’t even allow you to let property to family. There’s no law against it, but when you purchase a property with a buy-to-let mortgage then let it to a family member in receipt of local housing allowance, then there is a risk of appearing as if the arrangement is only to commit benefit fraud. If the sole purpose of the purchase was only to let it to your relative, and you have no intention of becoming a landlord and letting the property to anyone else once the family member has moved out, then this is one example of a contrived tenancy.
There are a few questions that a buy-to-let landlord may be asked when a family member is renting from them, including:
- whether the property was specifically purchased for letting to the family member;
- whether the property was advertised publicly;
- whether you have any other buy-to-let property;
- what would happen if the tenant stopped paying rent, or vacated the property;
- and more…
These questions can determine whether or not you may have a “contrived tenancy”. Ultimately, benefit assessors want to know whether the tenant is treated just as any other tenant on housing benefits.
According to the law (section 130 of the Social Security Contributions and Benefits Act 1992),
A person is entitled to housing benefit if-
- he is liable to make payments in respect of a dwelling in Great Britain which he occupies as his home’.
Therefore, as a landlord, you may come across some difficulty when attempting to let to a family member who happens to be a benefit claimant. To avoid being contrived, you need to be able to disprove any claims of nepotism. You should collect a deposit and sign a tenancy agreement with the family member, as one normally would with any other tenant. If it happens that the tenant is only “liable to make payments” when they are out of work, and aren’t expected to pay rent otherwise, then this will obviously be seen as the landlord attempting to get “free money” from the government.
Does the landlord reside with the tenant?
There is additional difficulty with a tenant’s claim to housing benefits if they reside in the same property as their landlord. Evidence would have to be provided to demonstrate that your family member tenant has exclusive occupation of their bedroom and any other non-communal room or area. Housing benefits can be refused if accommodation is based on more of a “house sharing” or “lodger” arrangement, where the person lives with and pays rent to a close relative. (In this case, a “close relative” is defined as a mother, father, sister, brother, daughter or son. This includes in-laws, step-family, and half-family.)
Is the arrangement commercial?
For the tenant to receive housing benefits, there needs to be a legally enforceable tenancy agreement in place stating a regular rent payment, to make it a standard commercial tenancy.
To prove that the arrangement is commercial, not only should the landlord provide a copy of the tenancy agreement as proof but also bank statements to show the regular incoming rent payments the tenant is making. It can also help your case if the property has previously been let to a non-family member.
Is it a “contrived” tenancy?
If the two points above can be answered satisfactorily, but the assessors still hold some doubt as to the validity, they may further investigate the possibility of contrivance.
As for “family rates”, there is no law that states that you have to set the rent amount at market rate. But, typically with a contrived tenancy where the purpose is to defraud the benefits system, the landlord may charge way above market rate in anticipation of it being paid by the local authority. They may even charge higher rents for all tenants in receipt of benefits, than tenants who pay the rent themselves, or only ask rent from family members when the family tenant is out of work and eligible for benefits yet live rent-free when the family member is working.
If the tenant is rejected on the basis of a contrived tenancy, and you are absolutely certain that this is not the case nor your intention, then the applicant can lodge an appeal.
At Ashburnham, we provide both landlord insurance for family members and landlord insurance for housing benefit tenants.