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Advice about schemes allowing you to sell and rent back

Updated: 19 Mar 2019
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You may not be entitled to Housing Benefit under the "Former Owner Rule"
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We have been contacted by concerned owner occupiers who have been approached by companies offering to buy their homes and allowing them to stay on in the properties as tenants and pay rent to them.
These companies target people who have bought their homes from us, people who are in financial difficulties, older people and those who want a quick sale.
While these schemes may be appropriate in some circumstances and may appear to provide a simple answer to financial problems, there are a number of things homeowners should be aware of before entering into such arrangements and it seems that some of the companies concerned don’t make this clear in their advertising literature.

If I sell my home then rent it back, will I be entitled to Housing Benefit if I cannot afford the rent?

Usually you will not be entitled to Housing Benefit if:
  • you rent the home that you once owned, and
  • you claim Housing Benefit within five years of selling that home.
This is known as the former owner rule. This rule does not apply when you can satisfy us that you could not have continued to live in your home without selling it.
The former owner rule does not apply after five years. However after five years, we will consider other factors before we can decide your entitlement to Housing Benefit.

How do I show the Housing Executive that I had to sell my home?

You must give us the reasons for giving up ownership of your home and provide evidence of the situation that you were in that led to the sale of your home. This evidence may be:
  • letters from your mortgage lender about action they would take to collect any debts
  • proof of your income and outgoings at the time you decided to sell
  • evidence of other factors involved in your decision to sell.
You do not need to prove that keeping your house was completely impossible. However, you do need to show us that circumstances forced you to sell.
We will decide whether we are satisfied that you had no option but to sell in order to stay in your home. It will make this decision on the facts of your case and the evidence that you give.
If you sell your house when you had other reasonable choices, (see below) you will not be entitled to Housing Benefit.
When deciding whether you qualify for Housing Benefit the Housing Executive may take into account things like:
  • whether you could have claimed benefits to help with your ownership costs, such as Income Support, Jobseeker’s Allowance, Employment and Support Allowance and State Pension Credit
  • whether you had debts that were secured on your home and whether these debts were likely to lead to your mortgage lender taking back your home
  • other assets you could have sold.

If you don’t have to sell your home

If you sell your home and we decide you could have stayed in it without selling, then we will refuse your Housing Benefit claim. For example, we may refuse your claim if you sold your home to:
  • repay unsecured loans, such as credit cards or hire-purchase agreements
  • reduce your monthly outgoings so that you could follow an interest, such as being a student or setting up a new business

If I decide to sell my home, will its value affect my claim for Housing Benefit even if I rent another property?

This depends on the amount of capital that you have after selling your home. By capital, we mean money and assets, for example money in a bank or building society account, Premium Bonds, National Savings Certificates, stocks and shares and property.
Depending on how much capital you have, Housing Benefit may be reduced or not paid at all. The value of most types of capital is counted when deciding Housing Benefit, but some types of capital are not counted.
Even if you give away some or all of your capital, we may still count this when deciding your Housing Benefit.

When the value of your home is counted as capital

If we decide that the value of your home should be counted as capital, this will affect your claim for Housing Benefit. When deciding this, we must consider the facts of your case, including your knowledge of the Housing Benefit rules and why you are selling your home.
If we decide that the reason you sold your home was to claim Housing Benefit, then we will count the value of your home as capital. Depending on the amount, this may reduce your Housing Benefit or mean that you are not entitled to any.
We will decide whether you sold your home to get Housing Benefit based on:
  • your knowledge of the Housing Benefit rules
  • why you sold your home
  • when you sold your home
  • why you claimed Housing Benefit
  • when you claimed Housing Benefit
  • whether it was reasonable for you to sell your home, considering all the circumstances and evidence.

Will the value of my home affect my entitlement to other state benefits?

Any capital you retain from the sale of your home may be included in your assessment for state benefits and may affect your entitlement to:
  • Employment and Support Allowance
  • Income Support
  • Jobseekers Allowance
  • Pension Credit
  • Housing Benefit.