Renting two properties and the treatment of income from subletting the property she does not occupy.

Currently, there are 0 users and 1 guest visiting this topic.
Viewing 15 posts - 1 through 15 (of 16 total)
  • Author
    Posts
  • #40030
    Jan Talbot
    Participant

    We have a situation where a lady has rented a HA property in another authority (for several years), and now rented a second private rented property in our area (last 4 years). She has claimed HB in our area. We are satisfied that her main residence is in our area.

    However she has sublet the first rented address. The rent she is receiving from this property is significantly higher that the HA rent she has to pay. We are unsure how to treat this rental income as she does not OWN the first property. All the regulations steer towards owners of second properties, not renters.

    * Where the property’s value is disregarded as capital – we count the rental income less the mortgage payments as income

    * Where the property’s value is counted as capital – we count the rental income less the mortgage payments as capital.

    She doesn’t own the property, so it cannot be owned, but disregarded under schedule 6 and it won’t be counted as capital either.

    We are steering towards the first scenario, where we disregard the capital value. However the next question is whether we can take off the rent she has to pay. The table suggests that just mortgage, Council Tax and water rate can be deducted. There is no mention of any rental payments.

    However we assess this undisclosed income (or capital) with or without her rental deductions, we are looking as a substantial overpayment as she has had this rental income for a number of years.

    Any ideas on how we should be treating this income would be greatly appreciated.

    #114265
    Kay_Tade
    Participant

    Agree with Kevin, not sure on the ctax bit cos I find a lot of LAs differ in their approach. The only disregard I can see is the £20 sub-tenant disregard, becuase in essence, that’s what the occupier of the HA property is.

    #114267
    Kevin D
    Participant

    The £20 disregard doesn’t apply because the LL & ten are not in the same dwelling.

    #114268
    Jan Talbot
    Participant

    Thank’s guys. Dear me, because I cannot take the rent that she pays off or use the £20 disregard, she’s looking at several thousand overpaid.

    #114264
    Kevin D
    Participant

    {Edited}

    In my view, no capital disregards are engaged on the HA property – it isn’t capital because it isn’t owned by the clmt**.

    The rental income is income, pure and simple. In my view, expenses are only allowable if the clmt is operating as a self-employed landlord. If the HA property is the only one being let by the clmt, I wouldn’t regard that as being self-employed. I definitely wouldn’t be allowing CTAX – that should be chargeable to the person renting the HA property on the basis of CTAX hierachy – irrespective of whether the sublet is lawful. Water rates is trickier because plenty of LLs include such charges in the rent. But, as far as I can see, there is no provision to allow water rates to be disregarded from the income received by the clmt.

    ** Peter Barker may offer a different view on whether there is any capital value / asset – he may or may not post if he has time.

    #114269
    Kevin D
    Participant

    Jan, see my edit re a potential different view about whether there is a capital value. I don’t think there can be such a value but PB has a take on it that is interesting.

    #114272
    Anonymous
    Guest

    I am not saying this is correct, but it’s worth thinking about.

    If the claimant owned the freehold of the other place, you would say it was capital in the form of premises and the income from the tenants was income from the premises, which would be treated as capital.

    If the claimant owned the other place on a long lease, you would probably take a similar view.

    Legally, is there any distinction between a long lease and what the claimant has? At what point does a long lease with a capital value become something that doesn’t have a capital value? Perhaps the threshold is seven years, because that is the minimum leasehold term that has to be registered with the Land Registry – at seven years plus it becomes an official asset if you like; but then again social housing tenancies do have a “street value” as capital assets. Not easy to value though.

    I offer this as food for thought rather than a definitive solution. If it were my case I would probably go with pure income as Plan A.

    #114275
    Jan Talbot
    Participant

    Thanks Peter. I like the idea of plan A.
    This case has tested my knowledge of PFAs, students, disabilities and main residences, – and failure to disclose this income or property, so a little bit of fraud thrown in to the mix.

    #114285
    nickkeogh
    Participant

    As a side issue should she be sub-letting the other HA property anyway?

    #114293
    Jan Talbot
    Participant

    Erm No. Not only is she in deep trouble with us. She is now in a spot of bother with the HA too.

    #114311
    esmith66
    Participant

    we had a similar case a couple of years ago, the claimant owned a property in our area but for many years her parents had been occupying & getting ctb, whilst she had a HA tenancy in another authority. her parents became ill so she moved in with them to provide care, sub-let the HA property & made a claim for ctb with us. the rent charged to the sub-tenant was only enough to cover the HA rent but we had to treat it as income

    #117365
    Abigail_Harvey
    Participant

    Hi there, I have a similar situation to this. I have a Spanish clmt that was renting a state owned property in Spain on a long term (5 year) lease. She moved to the UK in January 2011 and made a claim for HB on a property she was renting here from 1/1/12. Her lease on the flat in Spain was not due to expire until July 2012 and so she allowed a friend to move in to the flat and take over paying the rent until the lease expired. No rent was paid to my claimant by the subtenant, it was all paid direct to the landlord but we chose to include it as rental income on her claim here. She has now relinquished the tenancy in Spain and claimed again but wants her claim backdated/for us to reconsider our decision to include the rental incoem on her last claim. As she was still legaly the tenant of the property but did not actually receive any rental payments from the subtenant, I am unsure whether our decision was correct or not. Any ideas?

    #117368
    Jan Talbot
    Participant

    this is just my opinion – i could be wrong.
    If the legal rental liability of the spanish property was between the sub tenant and the landlord then fine, she has no rental income. You would need to see some evidence of tenancy agreement or equivalent between those 2 parties.
    But if she remains the tenant responsible for the rent to the l/l, then sublets it and tells the subtenant to pay the l/l direct, then the agreement is between her and the sub-tenant – so count the rental income.
    Also who would the l/l legally be able to evict? I suspect her as she has the TA with them. So although no money came her way, she does have an income from rent. I would say your decision was sound.

    #117369
    Abigail_Harvey
    Participant

    Yes, she was still legally the tenant until she relinquished the tenancy recently, there appears to be no formal agreement between the LL and the subtenant, he is just living there and paying rent on the tenant’s behalf.

    #117370
    Jan Talbot
    Participant

    I’d say your decision was correct. no need to review it

Viewing 15 posts - 1 through 15 (of 16 total)
  • You must be logged in to reply to this topic.