Bizarre Housing Benefit scenario – is this legal?

Some parents I know recently purchased a 3 bed detached bungalow for their severely disabled daughter to live in, and due to the need for 24hr care, she qualifies for the “2-bed HB rate” (one bedroom for her, and one for her carer). Her father charged her rent equal to the HB rate she is entitled to, so as to get as much money back as he could, whilst not requiring his daughter’s funds to be used for rent, and so that her accommodation security was assured and sustainable.

Her condition means that she simply cannot live with other people, hence, the parents had to make financial sacrifices to buy her her own property for life. So far, so good.

Here is the bizarre part: after a home visit from the local HB officer from the Council, her father was then told that he was not charging a sufficient rate of rent for his daughter’s accommodation and that he has to charge her more – about twice as much, in fact. Otherwise, HB would not be paid to her.

The father had to then give his daughter the additional rent money (on which he has of course paid income tax to earn that money in the first place), so that his daughter could then pay it back to him (along with the HB money), as total rent; the father had then to declare that total rent as income, and pay income tax (again) on that rental income.

He is now in a situation whereby his daughter’s accommodation is no longer financially sustainable after the demise of her parents, unless the parent’s house can be sold and the funds used to pay the extra rent for the rest of the daughter’s life.

I cannot believe this is legal; he has contested this with the Council, but they have stood firm and are refusing to change their position.

For what it’s worth; my advice to the father came too late, as he had already engaged the Council in the HB discussion, but I would have stated that she is renting a room in a three bed house, not the house overall, and that the additional bedroom may be rented to another disabled person in due course (one of the three bedrooms has to be assigned to the carer of course).

I appreciate this is a somewhat specialised area, but if anyone out there has had a similar experience or can help with disputing this ludicrous position taken by the Council, please let me know.

Steve