A client has moved into one of our properties for a period of intensive drug rehabilitation treatment that is likely to last for 9 months. She is on sick pay of c.£640 NET per month. The client pays a mortgage, but is in the process of selling her home. We think she first took steps to dispose of it between 3-6 months ago, but it is still on the market.
We have agreement from Social Services that they will pay her rent for the first 13 weeks of residency with us. After this point the rent will not be covered by them.

I am unsure whether the client will be able to claim HB after 13 weeks (when Social Services payments end). If so, would her house be disregarded as capital in the circumstances (is it ignored for 6 months from the date of claim, or 6 months from the date it was put on the market?). Are her mortgage payments counted to reduce her income figure?
Also, if she manages to sell the house, will this income be disregarded for a period of time?

Thanks

Your client should be eligible for HB if she can show that she is taking steps to dispose of the property i.e. it is on the market. The capital value is ignored for six months from the time that it is put on the market, although the local authority has the discretion to extend that period.

Unless there is something in the regs I have forgotten about I would say that her mortgage payments cannot be disregarded from her income for HB purposes. Any proceeds from the sale of the property would be capital rather than income and it should be borne in mind that the capital value of the property would in any case be the reminder after the deduction of outstanding mortgage, any other legal charges on the property, and 10% of the value to account for expenses of sale.

It is possible for the proceeds of the sale to be disregarded as capital (again for 6 months) if the money was going to be used to buy another property.

Obviously that should have been remainder not reminder in my penultimate para........

Thanks for the response Andy.
Further developments:

The house sale has apparently fallen through. I'm not sure how big a deal this is anyway, as the project manager thinks she has minimal equity (possibly negative!) in the property.

Apparently she is in no fit state to be dealing with a house sale anyway. Am I right in saying that owning a house should not prevent her claiming HB for a rented house, even if the owned house is not up for sale any more?

Additionally, it appears there may be a problem with the Social Services funding (we haven't yet received confirmation in writing and they are making some negative noises), so we are thinking of putting in an HB claim now just in case, along with a backdating request (on the basis of bad advice/confusion regarding the funding). What do you think are the chances of the backdate succeeding?

Also, if we were to put in a claim now, is there a fraud issue? It is still unclear whether Social Services will agree to pay - in this circumstance, is she fraudulently claiming HB, as it may turn out the rent is covered by Social Services?

Thanks

If the property falls to be valued as capital for any subsequent hb claim, it will be valued as part of the checks when the claim is made; the figure used will be net of incumbrances (eg mortgages).

If it has negative equity it will be nil value.

There will be no Hb fraud issues because you or your client would/should need to declare the social services arangements.

Please submit the claim asap, your client may well be losing out even without backdating. Any backdating will depend on the reason(s) for a "late" claim.

Thanks for the replies.

It appears Social Services will not commit to a contribution until they have assessed the situation with her house sale/value. We are awaiting her father's visit (he holds all the paperwork regarding her mortgage, bank statements & house sale). Therefore, there are no fixed arrangements with Social Services at present.
Also, I am informed that Social Services may wait to see if the client is awarded HB (and how much she is awarded) before deciding how much they contribute. Seems like a bit of a chicken & egg situation to me.

I suppose we can declare there is 'some Social Services involvement', but can't attach any hard & fast figures to it.
Should the LA be able to award HB even without the full detail of Social Services' financial commitment?

Also, exactly what documents would the client need to provide regarding her house valuation/sale? (i.e. would an annual mortgage statement suffice?).

Thanks again.