Private-sector leasing
A briefing about an arrangement in which a private landlord lets their property to a third party housing provider who in turn lets to the disabled tenant.
What is it?
Private Sector Leasing is where a private landlord lets their property to a third party housing provider (usually a registered provider but not essential) who in turn lets to the disabled tenant. Lease periods usually start at 3 years and may go up to 25 years or more.
How does the money work?
The Private Landlord might say that the rent for the property payable to them would be £100 per week. This would be called the lease fee. The Housing Provider agrees to pay this amount to the landlord. They may also agree to carry out housing management and day to day repairs and provide furniture , which might cost £50 a week.
The tenant signs a tenancy agreement with the Housing Provider with a rent set at £150 per week. The tenant pays the rent to the Housing Provider , claiming Housing Benefit if eligible. The Housing Provider then keeps the £50 required for the direct services they provide, and passes the remaining £100 to the owner of the property to settle the lease fee.
Why use this option?
This option is commonly used when one or all of the following is an issue:
- The property rent charged by the private landlord exceeds Local Housing Allowance and the tenant can’t afford to top up the difference.
- Because the tenancy agreement is between a Registered Provider or Not for Profit the Housing Benefit claim can be assessed as either exempt accommodation or as an excluded tenancy.
- The insecurity associated with the standard 6 month or 12 month assured shorthold agreement offered by the Private Landlord is a an unmanageable risk to the tenant.
- The tenancy agreement can be granted for the life of the head lease agreement, subject to any termination clauses included in that agreement.
- The property has been bought/is owned by a family member and they don’t want to act as their relatives direct landlord or they aren’t able to take the risk of Housing Benefit being refused.
- Because the tenancy agreement is between the Housing Provider and the tenant, the landlord is not the family member, therefore the tests of commerciality and contrivance should not be applied
Any difficulties?
It can be hard to find a landlord or a housing provider willing to get involved. It often needs a certain amount of negotiation in terms of explaining the benefits to the landlord (guaranteed rental income, no direct housing management) and agreeing mutually acceptable lease terms. This problem has been overcome in areas where Adult Social Care and Housing Departments manage the market in some way, evidencing demand, recruiting good quality landlords and housing providers – generally supporting the process.
Alternatively, Golden Lane Housing offer a private sector lease management service. You can
download a pdf about this.
Because of the two cost layers property owner, housing provider) rents can be higher than if rented directly. Tenants who start the tenancy claiming Housing Benefit and their supporters need to asses any risk around complete or partial future loss of Housing Benefit (eg capital gain, getting a job, changes in eligibility criteria) and make sure the rent would still be affordable if that were to happen.
Although we try to ensure that statements as to the law and other facts are accurate this report gives general guidance and does not aim to cater for individual cases. The Housing and Support Alliance and its sponsors cannot accept responsibility for any loss incurred as a result of relying on such statements, specific advice should always be obtained on individual cases.
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