Claimant wins Upper Tribunal appeal over tenancy agreement and housing benefit

The London Borough of Sutton has lost a case in the Upper Tribunal over whether a tenancy arrangement was a sham to increase housing benefit.

‘MP’ appealed against a decision of the First-Tier Tribunal (FTT) that she was not entitled to housing benefit from 1 December 2018 because she was not liable to make payments for her accommodation and that £1,104.09 paid for 1 December 2018 to 28 February 2019 was recoverable.

In MP v Sutton London Borough Council (HB) [2021] UKUT 193 (AAC)  Mark Rowland, deputy judge of the Upper Tribunal, said that he substituted a decision that MP was entitled to housing benefit from 1 December 2018 for an indefinite period, calculated on the basis that her maximum rent under the Local Housing Allowance was at the ‘one bedroom self-contained’ rate. This also meant there had not been any overpayment.

MP moved to her home as the subtenant of another woman, who rented the whole house for £1,350 per month.

Under a tenancy agreement MP, who wanted her disabled daughter to be able to stay, was to occupy two bedrooms and have shared use of the rest of the house for £850 per month.

She claimed under the Housing Benefit (Persons who have attained the qualifying age for state pension credit) Regulations 2006 and was awarded £84.93 per week.

Judge Rowland said this was “rather less than she, the tenant and the landlord had been expecting".

They therefore entered new agreements whereby MP rented the whole house for £1,350 per month and then sublet one bedroom to the former tenant, with shared use of other rooms at a rent of £500 per month which the now-subtenant paid direct to the landlord

Following a new claim for housing benefit Sutton decided neither the claimant’s original subtenancy nor her subsequent tenancy were on a commercial basis and so, under regulation 9(1)(a) of the 2006 Regulations, she was liable to make the payments.

It further decided that the three monthly payments already made were recoverable.

MP argued that the FTT erred in the new tenancy agreement was created to take advantage of the housing benefit scheme.

The FTT also failed to address whether the revised tenancy agreements would have resulted in an increase of benefit because, if not, the arrangement would not amount to a contrivance, she said.

Sutton argued the second tenancy agreement was intended to increase the amount of housing benefit payable without either increasing MP’s accommodation or altering the portions of the overall rent she and the other woman were contractually required to pay.

Judge Rowland said: “Quite why she thought that that might lead to an increase in her entitlement to housing benefit I am not sure. The First-Tier Tribunal accepted that she was acting in the light of advice given to her niece by the local authority but clearly thought that she and her niece might have misunderstood the advice.

“In any event, the intention behind the new tenancy agreement was plainly to ‘take improper advantage’ of the housing benefit scheme through a legal device that conferred no other immediate benefit on anyone and so I am satisfied that, for the reasons given in both the decision notice and the statement of reasons, the First-Tier Tribunal did not err in finding that regulation 9(1)(l) was potentially engaged.”

But the judge accepted regulation 9(1)(l) should be read as applying only where a liability is created that could, but for the regulation itself, give an advantage under the housing benefit scheme.

He explained: “The point of the provision is to prevent a person from obtaining an improper advantage, rather than to prevent him or her from obtaining benefit to which he or she would have been entitled whether or not the particular liability in issue had been created.”

The judge said it was possible there had been an intention to gain an ‘improper advantage’ without evidence of dishonesty.

He concluded: “I am satisfied that the First-Tier Tribunal erred in law because it did not consider whether, on its findings of fact, the new tenancy agreement had in fact conferred an improper advantage on the claimant.

“Had the First-Tier Tribunal done so, it would have realised that the claimant’s housing benefit should have been calculated on the basis of the one bedroom self-contained accommodation rate from 1 December 2018 when it was first awarded and, as the correctness of that first award was in issue before it, it should have awarded housing benefit on that basis for an indefinite period from that date.

"This is because it would also have found that the new tenancy agreement was not capable of conferring any advantage on the claimant under the housing benefit scheme and accordingly would have found that regulation 9(1)(l) did not apply to her from 20 February 2019 or at all.”

Mark Smulian