My client sold her home and used the equity (c.£50k) as a deposit on rented accommodation, which the landlord used to reduce the mortgage, making the accommodation affordable. There is a written agreement to this effect, distinct from the tenancy agreement. HB refused. No interest will be payable on the deposit and it is to be refunded in full, less liabilities arising, if the house is sold (which it must be if the client leaves).

In my opinion this is a bona-fide agreement and I can deal with the non-commercial and contrived tenancy issues, but disregarding the 'capital' is not so straightforward.

I have two arguments to look at - I favour the second - but would be grateful for contributions towards either.

1. The capital is disregarded as 'the dwelling occupied as the home'. Para 1, schedule 5 HB regs (and para 1 schedule 10 IS regs). Traditionally, it seems, this disregard is intended to operate so that the dwelling, which the claimant OWNS and lives in, is disregarded. However, if this is the case, what is it doing in the HB regs....? Also, the HB regs do not define dwelling. Reg 5 refers to the dwelling, but only defines those who occupy it. Reg 2 defines what is to be 'included in a dwelling' and doesn't really help (except that it refers to renting'. A definition is found in s.137 SSCBA and does not refer in any way to the dwelling being owned by the claimant. Reg 2 IS regs defines "dwelling occupied as the home" and includes '...any premises...which impracticable or unreasonable to sell'. This is the only reference in the law that I can find to the dwelling being OWNED by the claimant

On this basis, I intend to argue that the client's capital is in 'the dwelling occupied as the home' and should be disregarded, even though she doesn't actually own the property.


2. That the capital should be disregarded under para 6 of schedule 5 (para 5, sch 10 IS regs) as a future interest. I can see arguments either way on this. I think it will work because the act of the property being sold is the only way that the money can be accessed and so the capital is a reversionary interest - the claimants only has the benefit of it dependant on a future action. If anyone has done any work on the reversionary interest disregard, you are more learned than I and your comments would be most welcome.


On a slightly related subject, but not part of this case, does anyone have any idea why rental deposits, unless deposited with a housing association, are not disregarded as capital...?


Finally, Merry Christmas and a prosperous New Year to all, and spare a thought for the victims of JC+ who will be sitting in a cold home with no Christmas dinner - I've got a few (including one very distressed woman last week who told me that she was selling her Christmas meat...).

Tony,

Regarding the capital issue, does the clmt have the right to prevent a sale of the property? If so, there may be issues about ownership.

However, I do have one or two observations about Reg 6/7/10 issues. I appreciate your comment that you have this in hand, but it's intriguing enough to make a comment or two and raise a couple of questions or so.

Having seen many cases with a variety of "arrangements" over the years, the arrangement in this case would certainly raise all sorts of questions. For a tenant to part with £50,000 as a DEPOSIT (reasons noted), there would have to be a huge element of trust with the L/L. That suggests the tenant & L/L know each other (although this isn't mentioned in your post). If the propery has not previously been let, and/or would not be let to someone else, further questions arise. Was the property specifically purchased with this arrangement in mind, with this tenant, or was the L/L the incumbant owner? Why did the clmt sell her previous home? Why did the clmt not rent through more conventional channels? Did the clmt agree to the arrangement knowing that she would otherwise have too much cap for HB/CTB (deprivation issues?)? Is it a long tenancy?

None of the above issues, individually, necessarily make the arrangement non-comm, or contrived etc, but the facts as a *whole* may lead to such a finding.

I've only ever come across 2 remotely similar cases (one where £27,000 was paid as rent in advance for 2 years; another where the clmt's ex-wife bought the prop specifically for him - allegedly). In the first case, the LA (eventually) paid, but this was more attributable to a complete farce when the claim was investigated. On the facts of the case, it should probably not have been paid - but the investigation made a mess of the evidence. In the second case, it went to Appeal - the Tribunal emphatically finding the arrangement to be non-commercial or, alternatively, contrived.

If your client's case is on the level, I wish you the best of luck. In that context, hope the above is of at least some assistance.

Regards

Thanks for your reply, Kevin.

I am anxious that my thread should focus on the capital questions as these are the ones that I'm not confident on. Nevertheless, it is an interesting case so here's some background.

The property is owned by the claimants brother, who let it out for several years on a fully commercial basis. My client owned her previous house jointly with her mother, but the mother is disabled the property wasn't suitable. There were also some social problems in the locality. My client sold the home, but before she could buy another the current property became available. The decisive factor is that the property had some disability adaptations done by previous tenants and is far better suited to the needs of both of them. On that basis, it made perfect sense to arrive at the agreement. My client's have secured suitable accommodation at a reasonable price. They haven't given away thier money, just used it to invest in an affordable home.

The authority have given virtually no evidence to support thier decision, which is as follows (acording to the appeal submission):

1) there is no liability to pay rent;
2) If there is, it is not commercial;
3) if none of the above apply, client has excess capital.
4) they also say that the tenancy is contrived to take advantage, if not know, then at some point in the future (!!??)

We complained to the authority saying they were clutching at straws. They said they weren't....

All agreements are put in writing and there is no evidence (that I can see anyway) of any wrong-doing. It is interesting to note that the authority paid a claim in respect of the mother for 2-3 years, having investigated the circumstances, and then changed their mind when the client made her own claim after leaving work due to the arrival of a new baby.

My biggest concern is the capital question. It matters not if the agreement is contrived or otherwise, if the capital falls to be counted.

Cheers!

Tony

Is there anything to be derived from thinking about those hybrid schemes where a person pays rent for part of a house and also has a mortgage to buy a share? During the mortgage period they are acquiring some capital in the house and are not thereby disqualified from getting HB on the rental part; the only difference here is that the capital your client has in the house represents a fixed cash sum, as opposed to a proportion of the (variable) total value.

There was a HoL housing case some years ago called Street v Mountford which held that with any legal agreement you have to look behind the surface to see what the true nature of the agreement is; can you argue that your client's agreement is really in the nature of a rental purchase? Especially since, if she needs to demand her "deposit" back, the property will have to be sold to fund that?

(That case was illustrated with some ingenious comparisons with gardening tools, but I can't recall the specifics and I'm off home now so haven't time to look).

Street v Mountford was concerned with the distinction between a licence and a tenancy and was in response to landlords creating sham licences to try and avoid giving the rights associated with a tenancy. It did examine "intention" quite closely but only in respect of the licence/tenancy distinction so I really dont't think it would be very helpful..afterall HB is a statutory scheme and in any case a licence can be eligable for HB as long as it is not non-comercial/contrived etc.

Agree with S Lloyd about the subject matter of Street v Mountford. However, In giving the lead judgement Lord Templman quoted the dicta of Lord Greene in Booker v Palmer (1942): -

“There is one golden rule which is of very general application, namely, that the law does not impute intention to enter into legal relationships where the circumstances and conduct of the parties negative any intention of the kind”.

Thus a close examination of the conduct (as opposed to the intention) of the parties should be the first consideration of an adjudicating authority.

The gardening reference referred to above is: “the manufacturer of a five pronged implement for manual digging results in a fork even if the manufacturer, unfamiliar with the English Language, insists that he intended to make and has made a spade”.

I appreciate all these replies folks, but I really need info regarding the CAPITAL DISREGARD - not the nature of the agreement, etc.

Thanks.

tony, i'm no expert in reversionary interest, sorry, but i can't see any reason why para 1 doesn't cover her. 'ownership' is not stipulated - she has acquired an interest in the property, rather than being the owner, and no doubt had good reasons for investing her capital in her home.

the existence of para 1 acknowledges the home as the most significant investment most people will ever make, and the singular importance of the home - it exempts it from being counted as capital - there is no intention of forcing people to sell their homes in order to realize the capital tied up in the home.

i don't see that deprivation of capital could apply - she still has her capital, in a different form.

this is just my opinion, what it is... : )

merry xmas

jj

Tony,

I get what you are saying I think...

You want to disregard the capital because it actually forms part of the claimants home, and therefore it is disregarded. The difficulty you have is that the landlord is the legal owner. An ingenious approach...

As I understand it you are therefore saying that the claimant is an owner in equity. You might have to be careful here, as the agreement signed between landlord and claimant might create an estoppel between the parties to prevent the claimant from asserting equitable ownership.

In matters of equity and ownership of property, I like to rely on Bull v Bull <1955> 1 QB 234 at 237. A mother and son purchased a property, the son registered legal title in his own name. He then sought to evict his mother for non-payment of the rental due...

"The son is, of course, the legal owner of the house; but the mother and son are, I think, equitable tenants in common. Each is entitled in equity to an undivided share in the house, the share of each being in proportion to his or her respective contribution. The rights of equitable tenants in common as between themselves have never, so far as I know, been defined; but there is plenty of authority about the rights of legal owners in common. Each of them is entitled to the possession of the land and to the use and enjoyment of it in a proper manner. Neither can turn out the other; but if one of them should take more than his proper share the injured party can bring an action for an account. If one of them should go so far as to oust the other he is guilty of a trespass: See Jacobs v. Seward <1872> LR 5 HL 464. Such being the rights of legal tenants in common, I think that the rights of equitable owners in common are the same, save for any such differences as are necessarily consequent on the interests being equitable and not legal”.

If you can apply that reasoning to your case, I think you have a good chance of succeeding in saying that the capital is disregarded, because the house rented, is also the house owned. If you can make the argument that the claimant owns the property in equity, then you might also want to consider an argument based on Article 1 of the 1st Protocol of the HRA, (ECHR). That the LA by its actions might cause the claimant to lose their interest in their property...

Hope I have understood your post properly and this assists...

Tony, on reflection, you might also want to consider the effect of reg 7 (1) (e) and reg 10 (2) (c) in any attempt you might want to make in asserting revisionary/equitable interests, as switching hats for a mo, igf that arguement were presented to me as a PO, I would be tempted to use those regs to confirm the LAs decision to refuse HB, (Obviously none of the above applies directly in Scotland, but there again, I am currently reading the 97 HoL decision in Sharp)...

This probably does more to muddy the waters than clarify, but thought I should bring these to your attention...

There is always the equity share arguement, but that would again depend on rhe agreement that sets out how the £50,000 will be used (again, bringing in the above, the person giving the £50,000 to trhe landlord should also receive some amont of increased rental reduction, to take account of the interest lost on that sum whilst it is with the landlord, as per reg 7 (and possibly reg 6), I only thought of this after my PSP battery died on the way home this evening... Isn't it strangr the things there are to think about on the District line?

Thanks,

I was planning to argue along the lines of JJ's post - and some useful phrases are included in it. However, HBspecialist has given food for thought and, as you pointed out, has muddied the waters a bit, and highlighted the problem of being a lay adviser...

HBspecialist; if an equitable interest has been formed, then that would create a type of beneficial interest leading to 'ownership' of a sort, would it not (is that what you were suggesting)? Would that then increase the prospects of para 1 of the schedule applying as it gets rid of the problem of establishing if para 1 is directed only at property owners?

On the other hand, the regs define 'owner' as the person able to dispose of the fee simple - that being the person with authority to absolutely pass on the property. If my understanding is correct, a beneficial or equitable ownership may well give a right to claim against the property, perhaps in the form of a charge, but it wouldn't give the right to dispose or sell of the property. In this case, the landlord is the sole owner and my client's details are not registered with either the land registry, the mortgage lender, or anyone else and so she cannot dispose of the fee simple and is not an 'owner' - which brings us back to square one.

Reg 7(1)(e) I don't fully understand but fairly sure it wouldn't apply as the reg specifies who the agreement must be with for it to bite. The landlord is a close relative but doesn't live in the property. I can argue against 10(2)(c) also on the basis that client isn't an owner.

I'm still minded to lean towards the para 1 disregard as I can't figure out why it's there. Payments by owners are specifically excluded in reg 10(2)(c) and so para 1, unless it applies to non-owners (and therfore covers other types of agreement) is redundant..?

Further comments would be more than welcome, and I appreciate all contributions so far.

Merry Xmas

I had a very similar case and we refused HB on the basis of Reg 7(1)(e). We went to tribunal with it. The claimant was represented by a solicitor who accepted that R(SB)1/85 applied but argued that liability was not intended as a means of taking advantage of the benefit scheme (so Reg 7(1B) should apply). However, our decision was upheld.

The terms of the agreement are crucial. If it was intended and understood that the £50,000 was to be used to pay the mortgage then this should be sufficient to give the claimant a beneficial/equitable (for these purposes it is the same thing) interest in the home. Para’1 should therefore bite and it is irrelevant that the claimant does not have legal title.

Any danger (if there is any) would be if the agreement between the parties could be construed that the giving over of the £50,000 was in the form of a loan. If so then the claimant would not have any interest in the home at all and would be expected to call in the loan unless there was a provision that the money would only be refundable on the occasion of some future event (other than the mere sale of the home). Then there would be a reversionary interest and the claimant would be treated as not possessing that capital.

The issue of legal ownership is only really relevant as to who is ineligible to claim HB on that property. The person with freehold title is the owner of the fee simple and is thus ineligible. The owner of leasehold title is ineligible as these leases are usually for a period of more than twenty-one years and, as such, are classed as long tenancies.

As long as the claimant has neither freehold nor leasehold title then ownership does not come into it, except as to the question as to whether the claimant has a beneficial interest in the home. If the claimant does have a beneficial interest then para’1 should apply as long as that is the home where the claimant lives.

From the info’ you have provided it would be my view that the LA would base its main argument on contrived/non-commercial agreement grounds. It seems like it has chucked in the question of capital as an afterthought.

it's a very interesting case, raising a number of issues beyond the case itself - i assume from tony's wish to clear up any risks from the capital aspect, that he has confidence in the likely arguments arising about the tenancy agreement and contrived tenancy etc.

i question why kevin uses the term "an ingenious approach". whose terms are these, and how are they derived? who is actually doing the approaching.

is it not possible that that there is a genuine arrangement made arising out of the individual's circumstances, albeit unusual in relation to the bulk volume of cases the LA deals with? people have complex lives after all, and do not always fit neatly into tick boxes. is it necessary, or desirable that 'unusualness', or not fitting a pattern or profile, is met from the outset with suspicion of abuse?

although kevin cites a case where the son later tried to evict the mother, it does not mean that many people are not capable of conducting their lives, particularly among families, with honesty and integrity, and would not dream of cheating their mother or siblings. that there are people who do not have to go to court to get their lives unravelled and judged?

local authorities are not able to pay solicitors salaries for HB processing, not should they need to, if the notion of 'user friendly tribunals- representation not required is consistently applied - we are talking about making civil claims to benefit afterall...how much more does that thinking apply to first tier decision-making...

of course the LA's have to prevent abuse of the scheme, but don't a number of problems arise from starting with a premiss of abuse which the claimant has to prove is not the case? what happened to a premiss of impartial neutrality? how far do authorities go in requiring 'verification'.

i am thinking wider than this particular case which obviously i don't know the details of, but generally, there are cases where all that is required is for the LA's to listen properly to the claimant's explanations of their circumstances, for an officer to be satisfied that there is not an abuse attempt, and it just remains to ascertain whether the law permits payment...

jj

Hear, hear, JJ - well said!

To be honest, I hadn't taken that much notice of the 'ingenious approach' comment, but be assurred of this: if I didn't believe that the claim was not genuine, I wouldn't be dealing with it.

I have total confidence that the contrived tenancy argument cannot, and will not, be upheld. In fact, when it isn't, I intend to pursue this case to the Ombudsman. The authority are clutching at straws in this case and have failed, in every respect, to provide any evidence to back up thier claim - and the burden is theirs to prove.

The property is now on the market as the landlord is not receiving rent payments and cannot meet his mortgage liability. If the house is sold, the authority stand to lose a great deal of money if the Ombudsman upholds the complaint as both the Landlord and my client will be substantially out of pocket, and my client's mother would have been 'constructively evicted' by the authority from an accommodation suitable for her needs as a disabled person.

I'm not surprised that they can't see thier folly, and JJ explains why.

Tony

Glad to hear that you will pursue this to the bitter end. I remember many years ago a benefit officer in a LA, which shall remain nameless, informing me over the phone (in connection with a missing NHB1), in a rather snotty voice, and I quote directly, "we don't make mistakes and if we did we wouldn't admit it". Breathtaking!

Oh dear,

First, Kevin did not write any of the above, (and whichever Kevin you are referring to). My name is John, hello! Also the ingenious approach was meant as an observation about knowledge and application of law, not to suppose that something was wrong... People really read far too much into this kind of stuff... It might come as a surprise to some of the authors of the above, but even as a PO at TAS, I take peoples rights seriously. On complex cases I go out of my way not only to proffer impartial advice, and have made many referrals to agencies on the appellants behalf, and have even made referrals through Rightsnet, which have been taken up... to ensure that peoples rights are respected, and to ensure the correctness of my decisions. I take cases to TAS and Rep against LA’s and the DWP (in IS & JSA cases only), without fee.

There was therefore no need for people to go off at tangents. Still I guess that’s what happens when people see a them and us approach to welfare rights...

JJ’s approach is laudable. However, I have to say this; whilst the decision of the LA might be right or wrong, the LA has a duty to investigate. They do not employ solicitors to be HB decision makers, but HB decision-making is a legal process, not an administrative one, (that’s nicked from Commissioner Jacobs). HB decisions must be made in line with law. The comments about stuff about civil processes are all well and good, but regs 6 & 7 are based on land law and anyone stating that the application of the LPA 1925 (or the totally different system of ownership that exists in Scotland) is an easy matter that does not require detailed application of law needs to think again, otherwise HB progresses down the ‘oh go on let him have it’ route that I see from lay advisers when dealing with Good Cause in HB, (which the government has scrapped in most (all?) other benefits, and so makes the process of administering & challenging HB decisions more complex for all concerned).

A person has £50,000 they then give it away, for a reduction in rental (the amount of which is unknown, as is any level of interest payable). This is not a run of the mill case. I have to say that I would be extremely suspicious of this case if I were the PO on first look. I would want more info about the way the money was transferred, what discussions took place beforehand, whether there was a rate of interest payable (on the ever reducing amount as it would appear), and if not why not. If the reduction in rent is say £40 a week or so at the outset, then probably not contrived etc. If only £1 a week, it is probably contrived. Perhaps just as important, why the £50,000 on that property, with that person… These are matters for a Tribunal, and I would love to know the outcome…

On the issue of equitable ownership, reg 7 (1) (e) might have effect, unlikely, but it might. There is an issue of a trust being created, constructive or resulting, and these are equitable concepts, so might have application, or might not… Whether Reg 7 (1) (e) and or 10 2(c) will bite will in large part be governed by the document that controls the £50,000 and its conditions. The argument about the claimant being an owner might fail because of the laws of equity, and its maxims, (clean hands is most defiantly one I would want to look at here!), and if the AO/PO is any good at submission writing and presenting, you should expect to see it raised as an issue…

Tonys comments above… “If my understanding is correct, a beneficial or equitable ownership may well give a right to claim against the property, perhaps in the form of a charge, but it wouldn't give the right to dispose or sell of the property. In this case, the landlord is the sole owner and my client's details are not registered with either the land registry, the mortgage lender, or anyone else and so she cannot dispose of the fee simple and is not an 'owner' - which brings us back to square one”.

Tony, it doesn’t matter in whom the legal title is vested, the concept of equitable ownership will overrule the entry on the land register, as it did in Bull v Bull cited above, but as I said that depends on whether the claimant has equitable ownership. If so, you will succeed on capital but fail on reg 10 (2) (c) or maybe reg 7 (1) (e). If however you do not succeed on ownership, then you have the issue of notional capital to address, (ad assuming the LA has correctly applied the diminishing notional capital rule). In all outcomes, you will have whatever part of Reg 6 and/or 7 the LA uses to refuse HB, (and some LA’s are adept at making the decisions which parts of reg 6/7 to use, some leave one or more regs out, to their determent I might add) to address, though you seem confident about that.

But I think this has gone on long enough, so will end here and watch and wait… but in the meantime, a happy xmas and prosperous new year to one and all...

jj:

Statements in your post are incorrectly attributed to me - it would be appreciated if that is acknowledged. Thank you.

Regards

I hadn't seen John's post when posting my brief message.

The only addition I will make (which should have been made in the brief message) is to be clear that I did not infer disagreement, OR agreement with John's contribution. But, my view is (and was) he was not taking sides and I think his latter post makes that clear.

Regards

to kevin and john

my sincere apologies for mixing you two up in my mind, and possibly confusing others. my fault entirely - i am very bad with names. i'm in a bit of a quandary with a friend's new partner - what to put on the gift tag - i can't remember if he's a john or a dave... so, very sorry about that.

to john, it's also true that i interpreted 'ingenious approach' as illustrative of an LA attitude which i find objectionable, and it was not the way you intended it - i read too much into it. that also is my fault, and i apologize for causing any offence, and hope you didn't take it. you are sounding sensibly well chilled, unlike me - my 'clear-up-for -xmas schedule' was blown badly off course yesterday )i mean wednesday) by the CTB suspension issue i mentioned to mike shermer, with the consequence that i had to go in to work at a ridiculous hour tonight, even though it's the first day of my xmas break, to meet a deadline to the commissioners.

the whole thing probably did colour the tone of my post, but i hope you know that it wasn't aimed personally, but intended to provoke thought and self-questioning by and about LAs' approach ... it appears i have provoked... this isn't necessarily a bad thing, but i am sorry if you took the brunt of it. it was undeserved, and you do not have to explain yourself to me, i feel very bad about that.

i do appreciate the views of all contributors here, and try to avoid taking an us and them approach. the variety of experience and viewpoints is what makes rightsnet a healthy and stimulating 'place' where real debate can take place - i wouldn't have it any other way.

in this particular case, if the client's investment of her capital in the property has acquired for her an interest in the home, i will have to be persuaded that she shouldn't benefit from the disregard in para 1 of the schedule, and i am a stubborn yak...
as an adviser, knowing that people cannot post full details here, i had no doubt that tony's enquiries concerned a genuine case, and much was unsaid. in spite of my acknowledged and obvious limitations, : ) my comment about the agreement arising out of circumstances (as opposed to arranged purposively with regard to HB entitlement) approaches the real issue i was getting at - these are real people's lives. i gathered that the real battleground in tony's case is the tenancy agreement, but perhaps it has shifted...but the real point of concern i was getting at, is of the premises and presumptions at the starting point of determining the claim.

i am unapologetic about my objections to a presumption of 'guilty until proven innocent' approach to civil claims and applications generally, i view it as extremely damaging to the quality of civil life - i'm sad to have to say that i feel this way because i am a libertarian, not a terrorist or a criminal, and because history and current events set alarm bells ringing...as if the evidence of some of my cases didn't...

lots of interesting points have arisen in this thread, and you have raised several issues i'd like to pick up on - but that would be a very serious discussion, and the festive season is now upon me - i have just now allowed myself the first glass of wine for xmas, and will have to stop before i pass out with exhaustion!

if there is anyone left here who cannot wait for further intellectual stimulation,: ) they may wish to contemplate why the DWP are attempting to overturn Commissioner Levenson's (i think - fingers crossed) wise and compassionate decision on a legal technicality.
(too tired to dig out the reference - it's the one about HB and NiNos for people from abroad subject to immigration controls).

wishing you john, and everybody, a very happy xmas and a peaceful new year.

jan

Jan,

No problem and no need to feel bad! And, while obviously unable to speak for John, I'm pretty sure he'll be fine too.

Hope your Christmas break etc is good - only 366 shopping days until x-mas 2006...... *cough* By the way, are the Easter eggs out yet? )
Only kidding.....

Regards

I heard a message on the radio this morning from a trucker delivering Easter eggs.................on the shelves by Boxing day is my bet...

If only the DWP were this well organised!

jj No worries...

Everyone else, not too sure what part of the world you are all in, but sweetie shops in the Old Kent Road where I am in SE London, already has Cream Eggs etc. to get there by Train, you need to...

That reminds me, I must go and purchase an advent calendar, what with it being 23rd and all, I have a lot of catching up to do!!!

John

I’m puzzled by your comment that as an owner in equity the claimant would fail as an owner under Reg’ 10(2)(c).

I don’t understand how, if he is not the registered (legal) owner (absolutely or as trustee), is he entitled to dispose of the fee simple by virtue of section 20 of the Land Registration Act 1925. Apologies if I have misunderstood you.

Regards
Paul

Hi Folks,

The appeal on this case was heard last Thursday. The chair focused solely on the how and why the agreement was reached and found in the client's favour.

The Chair, despite keeping us waiting for an hour while he typed his reasons, did not touch on the capital issue at all - it's not even mentioned.

This is disappointing as it doesn't really get us much further along.

Maybe we'll get back to a tribunal with this issue later, or maybe the LA will just get on and pay - who knows...?

Thanks to all contributors for your help and comment with this thread, it's appreciated. I'll post up in future with any more updates.

Happy repping!