Chapter 11: Contrivance and Abuse of the Benefit System

Managing Housing Benefit Claims in Supported Housing | Part B: The Case Law

The law

11.1 Regulation 9(1)(l) and the evaluative judgment

The wording. Regulation 9(1) of the Housing Benefit Regulations 2006 lists circumstances in which “a person who is liable to make payments in respect of a dwelling shall be treated as if he were not so liable”. Sub-paragraph (l) applies:

“in a case to which the preceding sub-paragraphs do not apply, [where] the appropriate authority is satisfied that the liability was created to take advantage of the housing benefit scheme”

If it applies, the claimant does not satisfy the basic condition of liability in section 130(1)(a) of the Social Security Contributions and Benefits Act 1992 and is not entitled to Housing Benefit (FYE, para 8).

What “take advantage” means. The case law is consistent:

• there must be “something in the nature of an abuse of the scheme. The scheme must have been taken advantage of in some way unfairly or improperly” (Salford, para 53, following CH/39/2007, para 19 and CH/136/2007, para 47, both exempt accommodation cases)
• “It is not sufficient merely that a landlord has deliberately arranged matters so that the more favourable housing benefit regime will apply” (Salford, para 53)
• “take advantage” is used in the sense of “an improper advantage being taken” (FYE, para 16)
• abuse is not the same as bad faith on the part of the claimant (R v Solihull MBC HBRB ex p Simpson [1995] 1 FLR 140 (CA), as cited in R v Sheffield HBRB ex p Smith (1994) 28 HLR 36)

When the test is applied. The focus is on “the creation of the tenant’s liability, which means the time when the tenancy was made”. Later evidence can be used if it helps to show that the liability was a contrivance when it was created (FYE, para 16).

A judgment, not just a finding of fact. Most of regulation 9(1) identifies a fact, such as living in residential accommodation. Sub-paragraph (l) asks whether the authority “is satisfied”, which “reflects the element of judgment involved” (FYE, para 26). The decision-maker first finds the facts. They then decide whether, taking all relevant facts and circumstances into account, the liability was created to take advantage of the scheme (para 25). The balance of probabilities applies to the findings of fact, not to the evaluative judgment (para 35).

The consequence. Where the exempt accommodation rules do not apply, or the rent can be reduced under regulation 13, the effect is a lower eligible rent. Where regulation 9(1)(l) applies, the claim fails altogether, and “no question whether some other available method of control would be more appropriate can arise” (Salford, para 58).

11.2 FYE v Middlesbrough City Council and GPZ v Sunderland City Council [2026] UKUT 157 (AAC)

The decision. Upper Tribunal Judge Jacobs decided the two lead cases, from a block of 34 appeals, on 20 April 2026 (FYE and GPZ). He upheld the First-tier Tribunal’s decision of 29 April 2024 that the claimants’ liabilities had been created to take advantage of the scheme.

The model. A company acquired and adapted properties, which were let to a charity, My Space Housing Solutions, which provided accommodation and support to claimants. The Upper Tribunal said there is “in principle nothing objectionable about that model” (para 11). “The ultimate issue in this case was whether the way the model was used involved a contrivance” (para 12).

The facts found. The properties were bought by one company and immediately sold to another “at a huge profit”, then let to the charity “with no break clauses and full repairing responsibilities” (para 14). The First-tier Tribunal’s reasons included the following, quoted by the Upper Tribunal at para 15. References in this chapter to para 15(a) to (i) are to this list:

• a close and controlling relationship between one individual, the charity and his profit-making companies
• “unconscionable lease arrangements” which were probably influenced by that individual to inflate the value of the assets
• a preferential loan from the charity to set up a profit-making company owned by the same individual
• a yearly “support income” donation from that company, on which the charity depended to avoid trading insolvently, and without which there was no funding for the support that made the accommodation exempt
• significant profits apparently made by that individual and his companies at public expense
• a charity run “a lot like a private company”, including unlawful payments to trustees
• base rents set by dividing the head lease rent by the number of units, instead of by reference to social rent levels

One factor alone was enough. The First-tier Tribunal found that the charity never had an income source for support other than money from the individual’s company, which depended on the company continuing to buy properties for the charity to lease. “This fact alone strikes us as being sufficient to demonstrate that the liability has been created to take advantage of the housing benefit scheme” (First-tier Tribunal, para 114, accepted by the Upper Tribunal at para 59).

The points of law. The Upper Tribunal held that:

• council decision-makers are not called to give evidence of their thought processes. They may make submissions, but evidence from them is irrelevant to the evaluative judgment (paras 24, 25 and 28)
• the First-tier Tribunal makes a complete reconsideration of entitlement (para 23)
• a financially qualified tribunal member can use their experience to assess the evidence, and that experience is given appropriate respect on appeal (paras 30 and 48)
• on the facts found, “there was only one judgment that it could properly make … there was a contrivance” (para 32)
• the parliamentary report on exempt accommodation was legitimately used as background, not as a statement of the law (paras 38 to 40)
• the support issue did not need deciding, because contrivance was decisive (paras 4 and 59)

The tenants. The claimants were all “disabled and vulnerable to some extent” and “were not involved directly or personally in creating their tenancies; this was handled by others on their behalf” (para 5).

11.3 Warning signs

The cases and the DWP guidance identify the features that call for closer enquiry. None is a finding of contrivance on its own. They are reasons to ask questions.

Area	Warning sign	Source
Financial model	No source of income for support other than payments from the owner or a connected company; a model that must keep growing to stay solvent	FYE, First-tier Tribunal paras 113 and 114
Financial model	The provider depends on loans or “donations” from the landlord or developer	FYE, para 15(c) and (d)
Rent setting	Rent derived from the head lease cost divided by units, not from the cost of providing the accommodation or local rent levels	FYE, para 15(g); Salford, paras 93 and 94
Rent setting	Rent significantly higher than reasonably necessary to cover costs	Salford, para 62
Rent setting	Rent justified by notional borrowing over an unreasonably short term or at an unreasonably high rate	Salford, para 63
Lease terms	Long leases with no break clause, full repairing and insuring terms, and uplifts that pass all the risk to the provider	FYE, para 14; DWP guidance, paras 126 to 128
Lease terms	Head lease rent that is very high relative to the property’s value	Salford, para 94 (more than 11% of capital value)
Lease terms	Property sold on between connected companies at a large uplift before being leased	FYE, para 14
Connected companies	The same people controlling, funding and profiting from the provider, the property owner and other linked companies	FYE, para 15(a); DWP guidance, para 131
Circular flows	Rent paid out under the head lease, with money coming back to the provider to fund support, which may mean support is charged twice	Salford, para 96; FYE, para 15(d)
Governance	Payments to trustees, or a charity or CIC run like a private company	FYE, para 15(f)
Support	Tenants without a genuine need for support, or support not properly provided, suggesting tenants were selected to unlock exempt status	FYE, para 15(h) and (i); Salford, para 68

Where to look. The DWP guidance suggests councils look into the relationship between the landlord and the owner, compare directors and people with significant control at Companies House, and examine the lease to see whether the owner has excessive influence (paras 130 to 132).

Two questions, not one. A landlord with no real control over rents and lettings may be a managing agent, in which case the owner is the landlord and, if it is profit-making, the accommodation is not exempt (DWP guidance, para 132; Chapter 5). That question comes before contrivance. Contrivance applies only where none of the other parts of regulation 9(1) do.

11.4 Profit is not required. The test is abuse.

Profit is not essential. In FYE, the level of rents was enough to show a profit from public funds. “Whether that profit went to the charity or ultimately to the head landlord does not matter. What matters is that the claimants’ liability was created to take advantage of the scheme” (para 41). The judge added that profit “will often, or even regularly, be a feature of a contrivance”, but need not be: “What matters is that public funds are spent unnecessarily or inappropriately” (para 42). He said he did not have to decide that point, so it is a strong indication, not a binding ruling.

Commercial profits by others are not, by themselves, an abuse. The not-for-profit test for qualifying landlords is about the landlord itself. Bona fide, arm’s length arrangements with contractors and lessors who make a profit do not defeat it (Wirral BC v MF [2013] UKUT 291 (AAC), [2014] AACR 12; Chapter 5). Wirral approved Salford and advised a sequential approach: check the landlord’s constitution and accounts, then other matters relevant to exempt status or anti-abuse provisions, then where relevant look outside the landlord.

Higher rents can be legitimate. The exempt accommodation rules were kept so that Housing Benefit “would continue to meet rents at levels that reflected the higher costs of providing this type of accommodation” (Salford, para 54, quoting the Social Security Advisory Committee). Supported housing may cost more because properties need to be larger, tenants may cause more damage, and more intensive housing management may be needed (para 60).

Where the line falls. Putting these together:

• a rent that reflects the genuine, higher costs of supported housing is not an abuse, even though Housing Benefit pays it
• a rent “significantly higher than reasonably necessary to cover costs” may be (Salford, para 62)
• an arrangement designed so that public money flows through the scheme to connected interests, or so that exempt status depends on funding that only exists because of the arrangement, may be an abuse whether or not anyone makes a profit (FYE, paras 41 and 42)

11.5 Valid paperwork does not prevent a finding of contrivance

The liability is real. Regulation 9(1) applies only to “a person who is liable to make payments”. It assumes a genuine legal liability, and asks whether the person should be “treated as if he were not so liable”. A properly drafted tenancy, a registered charity and a signed lease are therefore the starting point, not the answer.

What the tribunal looked at. In FYE, the leases, the charity and the support arrangements were real legal structures. The First-tier Tribunal looked behind them at the relationships between the people and entities, the lease terms, the flow of money, the accounts and the way rents were set (para 15). The Upper Tribunal found that it was entitled to make every finding relevant to contrivance (para 31).

What this means for councils. A council does not have to accept that a scheme is beyond challenge because the documents are in order. It does need evidence for the facts it relies on, and a clear explanation of why those facts, taken together, show that the liability was created to take advantage of the scheme.

What this means for providers. Providers should expect councils to look at the whole arrangement, including the accounts, the lease, the ownership chain and the funding of support. The answer to a well-founded concern is evidence of genuine independence, not a technical argument about the paperwork.

11.6 Fairness to genuine providers: proportionate scrutiny

Relying on Housing Benefit is not an abuse. Most supported housing schemes rely on Housing Benefit for their housing costs. “The mere fact of letting only to tenants who have a genuine need for support, and to whom the landlord will provide support, with a view to obtaining a higher rent eligible for housing benefit, is not an abuse” (Salford, para 66). A decision based only on the fact that a scheme is funded by Housing Benefit would be wrong in law.

Funding extra services is not in itself contrived. Many genuine providers fund services such as education, training and employment support from their own resources or fundraising. That is different from support funded through payments that only exist because of the property arrangement, as in FYE.

SHP’s position on “support charges”. Some providers charge tenants £15 to £20 a week for ineligible “support” in the belief that this is needed to qualify as exempt accommodation. It is not needed: intensive housing management and maintenance can be support and supervision (Chapter 7). Charging tenants for notional support to meet a mistaken expectation is wrong, and when paired with a high lease charge, it is a warning sign.

Fairness to tenants. In FYE, the tenants had no part in creating their tenancies (para 5). A finding of contrivance leaves them liable for rent with no Housing Benefit. Before refusing, councils should:

• tell the claimant and, with consent, the provider what the concerns are and give them a chance to respond
• involve housing options and commissioners early, so that tenants at risk of losing their homes are identified
• consider whether another tool, such as exempt status, service charges or rent restriction, deals with the concern more proportionately. If the evidence shows contrivance, though, regulation 9(1)(l) applies (Salford, para 58)

Proportionate enquiry. Councils should ask for information that is “reasonably required” (regulation 86; Chapter 12), starting with what is publicly available, such as Companies House and Charity Commission records, and the provider’s accounts and lease. Detailed enquiry should follow the warning signs, not be applied to every scheme.

[Placeholder: update this section when the licensing regime and National Supported Housing Standards under the Supported Housing (Regulatory Oversight) Act 2023 come into force.]

The guidance

The DWP guidance does not mention regulation 9(1)(l) by name, but its section on lease-based schemes deals with the same concerns (paras 126 to 133).

Para	What the guidance says	SHP’s view
126 to 128	Lease-based provision has grown quickly and carries risks for tenants, councils and landlords. The Regulator of Social Housing has highlighted the governance and viability risks.	Agreed. These risks are about how the model is used, not the model itself (FYE, para 11).
129	The same rules apply to lease-based claims as to any other.	Agreed.
130	Councils can look into the relationship between landlord and owner to see whether it is commercial, or whether the scheme may have been set up to take advantage of the scheme.	Agreed. This is the regulation 9(1)(l) question.
131	Councils can compare directors and people with significant control at Companies House, and ask how conflicts of interest are managed.	Agreed, as a proportionate first step.
132	Where lease terms leave the landlord without a landlord’s usual freedom, it may be a managing agent.	Agreed. Decide this before contrivance (11.3).
133	Lease-based schemes run with good governance and financial viability can be a legitimate and positive way to provide supported housing.	Agreed. SHP strongly supports this statement.

Good practice

For councils:

• Start with the right question. Decide whether the landlord qualifies and whether it is a managing agent (Chapter 5) before considering contrivance.
• Use public sources first: Companies House, the Charity Commission, the Regulator of Social Housing, and the provider’s published accounts.
• Ask for the head lease, the ownership chain, the rent build-up and an explanation of how support is funded. Explain why each is reasonably required.
• Record the facts you rely on, with the evidence for each, and then explain the judgment you draw from them taken together (FYE, paras 25 and 27).
• Focus on the time the liabilities were created, using later evidence only to explain that (FYE, para 16).
• Put your concerns to the provider and claimant before deciding, and consider their response.
• Never refuse a claim only because a scheme relies on Housing Benefit, or because a lessor or contractor makes a commercial profit.
• Plan for the tenants: involve housing options and commissioners before refusals take effect.

For providers:

• Be able to show genuine independence from the property owner, with arm’s length lease terms negotiated in the provider’s interests.
• Set rents from the actual cost of providing the accommodation and services, not from the head lease divided by units.
• Have a lawful, sustainable funding model for any support that is not eligible for Housing Benefit, and be able to explain it.
• Assess needs before tenants move in, and only let to people who need what you provide.
• Keep governance real: independent trustees or directors, managed conflicts of interest, and no payments that amount to disguised profits.
• If a council raises concerns, answer them with evidence, early and openly.

Evidence

Reasonable evidence where contrivance is in question will usually include:

Evidence	Purpose
Constitution, Articles of Association or charity governing document	Confirms the landlord’s type and not-for-profit status (Wirral BC v MF)
Annual accounts, including related party transactions	Shows how income is used, and any loans, donations or payments to connected parties
Head lease and any side agreements	Shows the term, break clauses, repairing obligations, uplifts and the owner’s influence
Ownership chain and recent sale history of the properties	Identifies connected transactions and value uplifts (FYE, para 14)
Companies House and Charity Commission records	Identifies shared directors, people with significant control and conflicts of interest (DWP guidance, para 131)
Rent and service charge build-up	Shows whether the rent reflects costs or the head lease (Salford, paras 62 and 93)
Explanation of how support is funded	Shows whether exempt status depends on funding created by the arrangement (FYE, First-tier Tribunal para 114)
Referral, assessment and support records	Shows tenants’ genuine needs and the support provided
Conflict of interest policy and board minutes	Shows independent governance

Appendix 11 provides a contrivance risk indicators checklist based on this chapter.

Finding common ground

Agree that the model can be legitimate. Councils, providers and the Upper Tribunal all accept that lease-based supported housing can be legitimate and valuable (FYE, para 11; DWP guidance, para 133). Starting there keeps the discussion on how a particular scheme is run.

Share the concern. Genuine providers are harmed by the arrangements of a significant number of often property and/or investor-led landlords, which bring supported housing into disrepute. They have as much interest as councils in those arrangements being challenged.

Be open early. Providers that share their lease, accounts and funding model at the start of a relationship rarely face contrivance arguments later. Councils that explain what they need and why get better evidence faster.

Keep the tools separate. Contrivance is the most serious finding a council can make on a claim. Using it only where the evidence supports it, and using the other tools for other concerns (Chapter 10, 10.11), protects both tenants and public money.

Key cases and cross-references

Case	Point	Chapter
FYE v Middlesbrough City Council and GPZ v Sunderland City Council [2026] UKUT 157 (AAC)	Contrivance in a lease-based model; findings of fact and evaluative judgment; decision-makers not witnesses; profit not essential	5, 10.11, 11
Salford City Council v PF [2009] UKUT 150 (AAC) (CH/577/2009 and others)	Abuse required; letting to tenants with genuine support needs is not abuse; rents significantly above costs; head lease concerns	11
CH/39/2007 (with CH/55/2007 and CH/58/2007)	Meaning of “take advantage” in exempt accommodation	11
CH/136/2007	Meaning of “take advantage” in exempt accommodation	11
Wirral BC v MF [2013] UKUT 291 (AAC), [2014] AACR 12	Not-for-profit test applies to the landlord; Salford approved; sequential approach	5, 11
R v Solihull MBC HBRB ex p Simpson [1995] 1 FLR 140 (CA)	Abuse is not the same as bad faith	11
R v Sheffield HBRB ex p Smith (1994) 28 HLR 36	Anti-abuse provisions; look at the arrangement as a whole	11

• Related chapters: Chapter 2 (2.5, regulation 9(1)(l)); Chapter 5 (the qualifying landlord and lease-based models); Chapter 7 (IHM and maintenance as support and supervision); Chapter 10 (10.11, the right tool); Chapter 12 (proportionate evidence)
• Appendices: Appendix 1 (table of cases); Appendix 2 (extracts from the legislation); Appendix 11 (contrivance risk indicators checklist)

Sources

• Housing Benefit Regulations 2006, regulation 9: https://www.legislation.gov.uk/uksi/2006/213/regulation/9
• FYE v Middlesbrough City Council and GPZ v Sunderland City Council [2026] UKUT 157 (AAC): https://assets.publishing.service.gov.uk/media/69f216d7b0c3a4023e5d6e63/UA-2024-001199-HB_and_UA-2024-001252-HB.pdf
• Salford City Council v PF [2009] UKUT 150 (AAC): https://hbinfo.org/wp-content/uploads/ukut150-2009.rtf
• Wirral BC v MF [2014] AACR 12: https://administrativeappeals.decisions.tribunals.gov.uk/Aspx/view.aspx?id=3850
• R v Sheffield HBRB ex p Smith (1994): https://hbinfo.org/wp-content/uploads/caselaw/Smith%20Harrison%20Bodden%20%5B1994%5D.rtf
• hbinfo, contrivance cases: https://hbinfo.org/tag/contrivance/
• DWP guidance for supported housing claims, paras 126 to 133: https://www.gov.uk/government/publications/housing-benefit-guidance-for-supported-housing-claims/housing-benefit-guidance-for-supported-housing-claims
• SHP, The End of the Property-Led Exempt Accommodation Contrivance?: https://supportedhousing.blog/2026/04/24/the-end-of-the-property-led-exempt-accommodation-contrivance/

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