Non Commercial tenancy

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  • #32032
    fayemc
    Participant

    Can anyone help settle our argument with the following claim.

    We have received a new application from a young lady with a child. She moved into a 3 bedroom property on the 1.8.10. In July 2010 she had left her abusive husband and moved in with her parents. She had suffered extreme violence and had to flee. She lived with her parents for a few weeks but then moved into her own property.

    She receives incapacity benefit and child tax credit.

    The history of this is quite horrible but the problem that I have is the following:

    The property she is claiming for is owned by her parents. They purchased the property in April 2010 for an investment. The property remained empty until 1.8.10 when they moved her daughter in. They are only charging £60.00 per week, which is lower than a shared accommodation???. They state that they charge her a token rent as a contribution towards the cost of the maintenance of the property. They state that the CTAX and bills are the daughters responsibility.

    She has a rent book, which shows she has been paying the rent.

    I am struggling to pay the HB as I do not believe the tenancy is commercial. The fact that the parents bought this 3 months before as an investment and did not rent it until the daughter moved in. How can they treat this as an investment if they are only charging £60.00 p/w.

    However, others are happy to pay this due to the situation that the claimant was in and the urgency to find a property to live in.

    Can anyone help?

    Many Thanks

    #89509
    Nicky
    Participant

    Faye

    I don’t think the fact that the rent charged is below that which the parents could possibly obtain is on its own fatal to any claim – you have to look at all the factors surrounding the liability. Also, you state that the house has been empty for 3 months so surely getting any rental income is better than none?

    #89510
    Anonymous
    Guest

    Agree you need to look at the entire arrangement, not just the level of rent.

    However, this may be of use:

    CH 0663/2003 (paragraph 12): “not only does the term “on a commercial basis” connote a financially justifiable relationship, but also, as important, some generality as to who may take the benefit, and not merely an arrangement exclusively… set up for the particular benefit of a particular claimant.”

    That argument has been rejected in other commissioner’s decisions, but it does certainly seem that this arrangement is solely for the benefit of your claimant. Combined with a very low ‘token’ rent this may point towards a non-commercial liability…

    #89511
    Kay_Tade
    Participant

    Is there any liability at all? Is the liability, commercial or otherwise, actually rent? I would argue on three prongs of HBR 8, 9 and 12.

    #89512
    jmembery
    Participant

    Personally I would pay. If the claimant was not a relative of the landlords then would you have considered this to be non-commercial?

    A lot of people buy property as an investment (or at least they did pre-credit crunch) and put tenants in to generate income for the property’s upkeep.

    Here, it doesn’t appear that the property was bought specifically for the claimant. She just happened to have a need at the same time her parents had a property avalible to rent.

    If you refuse benefit on this property the claimant could just move in to a much more expensive property owned by someone else and you would happily pay out.

    #89513
    fayemc
    Participant

    Thank you for the response that I have had.

    The landlords’s have clearly said that this is a token rent. It is clear that they would not charge another tenant the same amount and are only charging her an amount to help with the maintenace of the property.

    #89514
    Anonymous
    Guest

    The exclusivity does not relate to the property, it relates to the liability.

    This couple clearly would not rent their 3-bed house to Anyone else for £60 per week…

    #89515
    jmembery
    Participant

    It doesn’t matter if the terms of any liability are more favourable to the claimant than they would be to other people. The only issue is whether the contract between landlord and tenant creates a genuine commercial liability.

    The tenant has been given a rent book which has been provided as evidence of a genuine liability. If the Authority is arguing that the liability is not genuine then the burden of proof falls on them to prove the liability is a sham.

    The fact that the level of rent is low and described as a “token” is not decisive here. There is an acceptance in English law that very low levels of rent (often known as a peppercorn rent) still creates a genuine commercial liability.

    Of more importance is the issue as to whether the parties have any genuine intention of enforcing the terms of the liability. If, for example, the landlords would continue to allow the daughter to occupy the dwelling if the rent is not paid, if they would require the daughter to pay the bills even if she did not have sufficient income etc, etc.

    Even here the failure to actually impose a requirement of the agreement to the full when circumstances arise is not decisive, as Commissioner Jacobs said;
    “[i:71ec4750ca]in deciding whether the term is a sham, the tribunal is entitled to take account of evidence of the way in which the alleged contract has been implemented by the parties: see the speeches of Lords Oliver and Jauncey in AG Securities v. Vaughan [1988] 3 All England Law Reports 1058 at pages 1072 and 1077. However, the tribunal must be careful not to give undue significance to this evidence. It is common experience that contracts are often not implemented to the letter in all circumstances. There is much give and take in the operation of contracts. In particular, the tribunal must bear in mind two distinctions.
    19. First, there is a difference between a term that will never be implemented and one that may never be implemented. Contracts contain terms covering many eventualities. It may be envisaged that a particular term will not necessarily be implemented if the eventuality with which it deals arises. However, that does not mean that the provision is a sham. It is possible that the term was included so as to be available if necessary or as a last resort. If that was the case, the fact that the term was not implemented does not mean that it was a sham.
    20. Second, even if it is intended that the term will be implemented, when the eventuality occurs it may not be enforced because of the circumstances at the time.” [/i:71ec4750ca]

    #42551
    Kay_Tade
    Participant

    [quote:8df728f9f6=”jmembery”]It doesn’t matter if the terms of any liability are more favourable to the claimant than they would be to other people. The only issue is whether the contract between landlord and tenant creates a genuine commercial liability.

    The tenant has been given a rent book which has been provided as evidence of a genuine liability. If the Authority is arguing that the liability is not genuine then the burden of proof falls on them to prove the liability is a sham.[/quote:8df728f9f6]

    I agree with Jeff that the onus will be on the LA but, the circumstances you have described, to me, should still be questioned by the LA.

    If you are not happy with the arrangement, after considering all the facts, then don’t pay.

    Just to add, from what you have described, I would not pay and let a Judge decide. I personally would take it all the way but that’s just my opinion.

    #42552
    walmslm
    Participant

    Have you also considered if the money that is being exhanged between your customer and the “landlord” is rent at all? Is this payment in exchange for exclusive possession of the property or does your customer have exclusive possession anyway and the payment is a seperate arrangement they have to cover the on-going maintainance of the property?

    It does seem that you have accepted that a liability exists. Before you consider if that liability is commercial in nature, consider if the liability meets the HB definition of rental payments. If it does not – HB is not payable

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