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Council tennant questions

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Hi everyone,
Just so you all know i am new here and have never let a property before so please excuse my ignorance!
Me and a friend bought a property in Huntingdon in May. We have re decorated it and done a lot of work to it and are now going to let it out. To start with we were going to let it through a local agent but while we were at the house one day we had a knock at the door from a lady who lives about 40 yards away with her nan asking if we were going to be letting it out. We got talking and she seems to be a really nice person and people in the local area speak well of her but the only snag is she is on the housing benefit scheme. We have made clear from the start that we want the rent paid direct to us from the council and we want the deposit up front. She has been in touch with the council and they have said she can have rent paid direct up to the value of £700 pcm. I have said before we get contracts drawn up and sign anything that i want something from the council in writing confirming that the rent will be paid direct to me for the full length of the tennancy and this is where the problems start. The council wont talk to me about specific details because of data protection on the tennants part. The lady who wants to move in has asked on several occasions but the council are saying they wont confirm anything until tennancy agreements are signed.
To me this seems a very difficult situation. Do i
1 - trust what they are telling us and go ahead in getting contracts written up
2 - play hardball and refuse to go any further until they confirm it
3 - give up and find another tennant

To me it seems like jumping off a diving board with a blindfold on and hoping there is water in the swimming pool!!

Can anybody help me find a way foward or has anybody else had similar problems

Thanks
Matt

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