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Lodger - council say new tenancy agreement needed

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I've recently moved into a friends spare room. I work full time, she's unemployed. She discussed the situation with the housing benefit people before I moved in, who said that as long as my share of the rent goes directly to the landlord rather than through her, it won't be counted as income for the purposes of her benefits, and all they need is a letter from the landlord confirming the situation, which she asked for.

At the same time as I moved in, the landlord has increased her rent by £20/month, and they confirmed this in the same letter where they confirmed that I was moving in. Because of this, the council have said that we need to set up a new tenancy agreement in both our names.

We are both very much against doing this - the landlords agent wants £120 to draw up a new tenancy agreement, and besides which, we don't want to be financially linked as joint tenants, because that's not the situation. The landlord is quite happy with the current tenancy agreement as long as he gets his rent, so I don't see how the names on the tenancy agreement has any bearing on the housing benefit situation.

Can anyone offer any advice about how we can sort this to the council's satisfaction?

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