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Entitlement to Housing Benefit when you are renting from a trust of which your children are ‘potential’ beneficiaries…..
Can anyone help me…I have a client who has been renting a property and claiming Housing Benefit since March 2008 - the story is complicated but in a nutshell the property is owned ‘partly’ (a half share) by a trust of which the tenant has a 3rd share, should the property ever be sold, her 7 children would receive £1,000.00 so are potentially beneficiaries.
My client has been informed that she has to repay in excess of £30,000.00 worth of overpaid Housing Benefit as, due to the fact that ” her children are beneficiaries of the trust that she rents from” she was never entitled.
I am trying to gather info to help me appeal this decision - although her children are ‘potential’ beneficiaries - there are no beneficiaries at this time, all monies received into the trust are used to pay for the clients Fathers care (it was his home but he has altzheimers and now lives in a care home).
I have a letter from the solicitor stating that the trust is a discretionary trust and that there are no named beneficiaries and I am trying to obtain copies of the trusts accounts to prove that there is no money held….
Does anyone have any experience or any ideas that might help me? Would there be any mileage in the fact that there is no way that a claimant could be expected to realise that they would not be eligible to claim in these circumstances? My client clearly stated on her application form that her Father was her Landlord..(he owns the other half share of the house).....she has never whitheld information….
ANY ideas would be much appreciated!
There are several issues here.
1) Is your client an “owner” (whether or not with others)? By this, does her name appear on the Land Registry? If “yes”, she is not entitled to HB irrespective of any other consideration - see HBR 12(2)(c).
If not an owner:
2) If your client is not a beneficiary of the trust (in law), then HBR 9(1)(e) doesn’t apply (that is presumably what the LA is relying on). If it is found that your client IS a beneficiary, HB is still payable so long as your client can positively demonstrate the liability was not intended to take advantage of the HB scheme - see HBR 9(3). However, that doesn’t necessarily stop the LA from revising its decision and relying on another “bar” (e.g. not on a commercial basis (HBR 9(1)(a) / taking advantage (HBR 9(1)(l)) if NEW evidence to support such a decision has come to light since the original awarding decision.
3) The o/p. If it transpires there was no entitlement, the recoverability of the o/p depends on the facts. For HB, the starting point is that ALL overpayments are recoverable UNLESS the overpayment was caused by an error on the part of the LA (or DWP or HMRC) AND:
a) the clmt did not contribute to the cause of the overpayment; or
b) the clmt could not reasonably have been expected to realise she was being overpaid at EITHER the time of the payment(s) OR at the time of any notice relating to the payment(s) - “any notice” includes notification letters.
As to whether the LA made an error will depend on all sorts of facts. Did the claim form ask the right questions? Did the claimant fail to disclose a material fact (doesn’t matter whether it was honest or dishonest)? Did the clmt have an appointee or an attorney; in which case
that individual may also be responsible for the overpayment.
NB: If your client is “an owner”, she is duty bound to inform the LA AND the Tribunal of this.
Thank you for that…unfortunately, she is one of the owners and her name DOES appear on the land registry…....in your opinion is it a waste of time trying to find straws to clutch? : (
In light of that, it is very difficult to see how an appeal could be successful on the entitlement issue. The leading case on the meaning of “owner” is Burton v New Forest DC [2004] EWCA Civ 1510 and this explored arguments about the limitations, or otherwise, of the term “owner” in the context of the definition in HBR 2(1). In short, based on the information given so far, your client has the right to dispose of the “fee simple”, whether or not with the joint owners’ consent, and is therefore an “owner” for HB purposes.
However, even if the “entitlement” issue appears hopeless, that doesn’t necessarily mean an appeal against the recoverability of the overpayment is so futile. As explained above, that will depend on whether or not the o/p was caused by an error on the part of the LA (et al) and, if so, whether your client falls within the exceptions outlined.
Burton: http://www.bailii.org/ew/cases/EWCA/Civ/2004/1510.html
NB: Some bright spark might suggest removing your client’s name from the LR in order to obtain HB. If that course of action was to be taken, it would be surprising to me if the LA didn’t immediately decide that the liability had been created to take advantage of the HB scheme. Also, looking beyond HB, would the removal of her name have other unwanted consequences relating to her rights connected to the property?
Could you expand on the ‘client owns a third of the trust’. That’s a little puzzling to me.
I don’t understand this. You quote from a letter from the LA which says Cl. is renting from a Trust (of which her children are beneficiaries). You then say she is a part owner of the house. If the latter is correct, I don’t see how she can be renting from the Trust. It gives the impression (hopefully wrongly) that a tenancy was created showing her as renting from the Trust when that was totally unnecessary because - as an owner - she had a right to occupy the premises anyway.
Or is there something else in the documentation which makes it clear her occupation is linked in some way to the Trust & she couldn’t occupy without paying rent to it? In which case, how can she be a part owner?
Is she one of the trustees of the trust? You can’t rent in one capacity from yourself in another capacity.
I wouldn’t advise on this one without seeing the trust instrument as it sounds pretty specialised. Who set up the trust? And how many of the beneficiaries have interests only in reversion - ie, after the death of the father who appears to be a sort of life tenant (which doesn’t mean anything to do with housing tenancies)?
In light of Burton (consistently followed since), I can’t see the Trust position will make any difference. The entry on the Land Registry means the clmt is an owner for HB purposes. If it transpires the clmt in any case has the right of occupancy, I agree that no rent is payable in any case and therefore no HB would be payable. Even if a rent is charged and paid, the right of occupancy would surely make the agreement to make the unnecessary payment one that is not on a commercial basis.
Thank you all so much for your input! I had come to the conclusion that trying to argue that my client was entitled to claim housing benefit was a non starter, due to the fact that even if I can prove that her children aren’t actually beneficiaries of the trust that she rents from, she is a part owner….
To explain further…
The property my client is living in was owned and previously occupied by her parents, her Mother died in June 2007 and (as she was the main carer for her Father who has Alzheimers) her Father had to be moved into a care home. In order to fund the Fathers care the house needed to be rented out and her Brother was managing this. However, he was unable to find tenants and the property stood empty - my client was at this time renting privately and her tenancy was due to end - it made financial sence for her to move in. My client moved in on 3rd March 2008 and claimed Housing Benefit, at this time her Father was the owner of the property and her landlord which she disclosed to HB.
The Mothers will stated that following her death her half of the house should be placed in trust to her children (my client and her brother and their Aunt). My clients rent is paid into the trust and this money is used to pay for her Fathers care. The Solicitor dealing with the will and setting up the trust has confirmed that the trust is a ‘discretionary trust and there are therefore no named beneficiaries of the trust’. I have also been trying to obtain copies of the trust accounts to illustrate that there is no money held there.
My clients name does appear on the Land Registry as being part owner however, she did not actually become owner until 12th February 2010, as such I am at least going to argue that until this point she would have been liable to pay rent and eligible for Housing Benefit.
I would obviously like to find an argument to say that the overpayment accrued from 12th February is not recoverable but I am struggling….......
surely, she’s only owner of the legal title, not the beneficial title?
half still owned by dad, the other half by the trustees as trustees?
in which case you’re into trust law again ....
but still, probably, impossible for HB purposes…
What you are describing isn’t a discretionary trust, so there must be more to it than that.
Are there any beneficiaries other than the children of the old couple? Who ar the trustees?
Is there any power to distribute the proceeds of sale to one only or in unequal shares at the trustees’ discretion? This would make it discretionary.
Is the inheritance of any share in the trust contingent upon the happening of some event such as surviving the father? This would mean that the interest was not vested and could not be enforced against the trustees.
Is there any provision in the trust requiring the property to be kept pending the death of the father? If the client’s interest is reversionary - no rights until father is dead - then this is normally disregarded.
Is the father a beneficiary of the trust? Is using all the income from the property to maintain him thus an exercise of the trustees’ discretion, or is it the only thing they can do with it while he is alive?
Do the trustees have the power to let any of the beneficiaries live in the house (this is sometimes done in lieu of giving them income from the trust, but normally rent free) and if so are they allowed to charge rent?
I have to say I wouldn’t be at all surprised if the LA has got the law wrong here as they aren’t experts in trusts law, but I would need to go into this in a lot more detail and see the terms of the trust and look at case law first.
Ariadne
Thanks for your post! In answer to your questions:
* Are there any beneficiaries other than the children of the old couple? Who are the trustees?
The Trustees are the Son and Daughter and Sister of the ‘owner’ of the property. The Grandchildren are also beneficiaries as in if the property is ever sold they would inherit £1,000.00 each.
* Is there any power to distribute the proceeds of sale to one only or in unequal shares at the trustees’ discretion? This would make it discretionary.
The Trustees do have discretion as to who benefits from the trust from a list of potential beneficiaries, they can also decide that none of the potential beneficiaries will benefit. The Trustees have various duties which include making sure that the trust is preserved and produces an income.
* Is the inheritance of any share in the trust contingent upon the happening of some event such as surviving the father? This would mean that the interest was not vested and could not be enforced against the trustees.
Not really – the Trustees have a duty to regularly review the trusts assets – one being the half share in the property – if the investment is not producing an income than the trustees have a duty to change the investment. In this case – if my client is not paying rent they can ask her to leave and either find another tenant or sell the property.
* Is there any provision in the trust requiring the property to be kept pending the death of the father? If the client’s interest is reversionary - no rights until father is dead - then this is normally disregarded.
I think this is answered above.
* Is the father a beneficiary of the trust? Is using all the income from the property to maintain him thus an exercise of the trustees’ discretion, or is it the only thing they can do with it while he is alive?
Yes – it was set out in the will that the proceeds of the trust should be used for the Fathers care.
* Do the trustees have the power to let any of the beneficiaries live in the house (this is sometimes done in lieu of giving them income from the trust, but normally rent free) and if so are they allowed to charge rent?
They have to ensure that the trust is producing an income – there is nothing to say that the Trustees have any rights to occupy – this is where I keep going round in circles – my Supervisor insists that if your name is on the Land Registry you have a right to occupy and that is that…..
I have a letter from the Solicitors stating that the trustees are not owners of the property so I will base the appeal on this and see what they come back with.
Your post has really helped me think the situation through – thank you so much! (I am very new to this benefits minefield) I will let you know how I get on.
Brilliant! Thank you for that! I will clarify the Freehold/Leasehold situation - I would have assumed that it is Freehold however, as it is “the old stores” it might not be… I have asked the question and will post the answer as soon as I have it.
I can confirm though that the Mother and Father were the sole owners prior to the Mothers death, it took a while for the will to be settled and the trust to be set up so, my client did not become a trustee until Feb 2010 - I had decided to use that as a backup -
The Solicitors who dealt with the will and set up the trust have provided written confirmation that the trust is ‘discretionery’ and that there are NO beneficiaries as such. Furthermore one of the requirements of the trust is that it provides an income for the Fathers care - if no rent is received it is not producing income - and the trustees would have to ‘change’ the trusts investment….....they would therefore have the right to ask the tenant to leave and find another tenant OR to sell the property to fund an alternative investment?
I have decided to go with this for the appeal and see what they come back with…..
Just to add though - the Solicitors not only set up the trust etc. they also drew up the tenancy agreement for my client that clearly names her as both the trustee and the tenant whos rent is to be paid by housing benefit….......So they are DEFINATELY going to be on the side of her not having right to reside…...
I will post any further info as soon as I have it…in the meantime…thank you ALL so much for your input!
Just to add though - the Solicitors not only set up the trust etc. they also drew up the tenancy agreement for my client that clearly names her as both the trustee and the tenant whos rent is to be paid by housing benefit….......So they are DEFINATELY going to be on the side of her not having right to reside…...
Just picking up on that one point… it is not an enforceable term or condition of a tenancy that rent SHALL be paid by HB. Neither the tenant nor the LL has a contract with the LA. Further, payment of HB does not in, or of, itself create a tenancy.
No - my point is that they were aware (or should have been) that she would not be entitled to claim HB.
hbinfopb - in answer to the query about whether the property is Freehold or Leasehold….I can now confirm that it is definately Freehold…... (shame!)