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Persons who are to be treated as not liable for their housing costs.
Introduction
The Housing Benefit (General) Amendment No. 2 Regulations 1998, SI 1998/3257, amends regulations 3 and 7 of the Housing Benefit (General) Regulations (SI 1987/1971). Regulation 3 defines non-dependants and regulation 7 deals with people who are to be treated as not liable for their housing costs. This circular gives guidance on the intention and interpretation of the amended regulations. It replaces the guidance in paragraphs 14 to 22 of Circular HB/CTB A30/95.
Regulation 7
1. There are some claimants who, although liable to make payments in respect of their dwelling, are. to be treated as not liable, and this basic principle is reflected in regulation 7(1). In general, this is because the arrangement under which the liability arises amounts in some way to an abuse of the HB scheme. This arises where the liability either creates or increases the claimant's entitlement to HB, when he would have been adequately accommodated without any liability. Regulation 7(1) also excludes people who are maintained by a religious order and most people in residential accommodation, although these are not instances of abuse of the HB scheme.
2. Regulation 7(1) has come under repeated scrutiny by the Courts, particularly in determining its intended effect. This regulation has now been re-drafted to make that intention clearer. It does this by extending the list of cases which clearly fall within the remit of the basic principle of the regulation, as well. as stating that principle, which is that HB should not be payable where the liability has been created to take advantage of the scheme. This extended list not only identifies cases where the claimant should be treated as not liable, but also indicates the kind of case which should be considered under the basic principle.
Specific cases
3. Regulation 7(1) lists a number of situations where HB should be refused. Any claimants in these categories are to be treated as not liable for their housing costs. The LA is not required to show that the liability has been created to take advantage of the HB scheme in these cases.
4. Some of these are groups that were previously excluded by regulation 7:
a person who resides with and pays rent to a close relative;
a person who was previously a non-dependant of someone who still resides with them;
a person who is a member of, and wholly maintained by, a religious order; and
a person who lives in residential accommodation (except where paragraph 2 applies).
and there is, therefore, no change for these claimants.
5. New or amended groups are:
non-commercial arrangements;
a person who rents a former joint home from their ex-partner;
a person who is responsible for a child of his landlord;
a person who rents their accommodation from a company of which they are a director or employee;
a person who rents their accommodation from a trust. of which they are a trustee or beneficiary;
a person who rents their accommodation from a trust of which their child is a beneficiary;
a person who previously owned the dwelling which he now rents;
a person who occupies his home as a condition of his employment.
6. Although the regulation contains a list of people to be treated as not liable, that does not mean that someone who is not in one of the specific groups should automatically be treated as liable. There will still be cases which take advantage of the HB scheme which are not specifically mentioned in the list. Such cases should be excluded under the provisions of regulation 7(1)(1) (see paragraphs 27 to 30 below).
Non-commercial arrangements
HBR 7(1)(a)
7. You should note that this provision, while similar to the previous one, no longer depends on the claimant residing with his landlord, and thus has a wider effect.
8. A commercial rental agreement, whether a tenancy or a licence, imposes conditions upon the parties to the agreement which are enforceable at law. If one party breaks the agreement m some way, the other has the right to go to court to seek redress. An agreement may be considered to be non-commercial where it includes terms which are not legally enforceable or which the parties did not intend to be legally enforceable.
9. Such terms may be written into the agreement or may be verbal. This might arise where a tenant does household chores for his landlord. However, where a person does such chores and consequently pays a lower rent, and when he does not do the chores he has to pay the higher rent, then the chores could be considered as payment "in kind", and the agreement regarded as a commercial one.
10. You should note that charging a low rent does not, on its own, make an agreement non-commercial. Many charities and voluntary bodies, and some individuals, choose to let properties at below market rents or do not want to make a profit from letting, but their tenancies may still constitute commercial arrangements if that is what the parties to the agreement intended.
11. This provision could cover some cases where a person resides with a relative who is not a close relative. For example, someone who has been brought up by an aunt and is then charged "rent" for their room. At the same time, someone who left the parental home and went to live with their aunt on a board and lodging basis could be considered to have entered into a commercial arrangement. Whether the arrangement is on a commercial or non-commercial basis is a question of fact which you must determine on all the evidence.
HBR 7(1A)
12. Regulation 7(1A) therefore requires you, when determining whether an agreement is on a commercial basis, to have regard among other things to any terms in the agreement which are not enforceable at law.
Landlord is a close relative
HBR 7(1)(b)
13. This is the same provision as previously contained in regulation 7(1)(a)(i). You should note that a person who rents his accommodation from a close relative but does not reside with him, does not fall foul of this particular provision. Such an arrangement may seek to take advantage of the HB scheme, bearing in mind other aspects of the arrangement, and thus fall foul of regulation 7(1)(l). On the other hand, it may be a perfectly normal, and legitimate, tenancy.
Landlord is the tenant's ex-partner
HBR 7(1)(c)
14. Where a couple, whether married or unmarried, separate and the one remaining in the joint home (or his partner if he has one) is charged "rent" by the one who has left, then he is to be treated as not liable for housing costs. This provision equalises the treatment for married and unmarried couples. Where the couple are married, the remaining partner is not under an obligation to make payments in order to live in the home. Note that the landlord can be the ex-partner of the claimant or of his partner.
Example: Mr Brown and Miss White live together (as man and wife) at 3 Bloom Terrace, which Mr Brown owns. They fall out and agree to separate, and Mr Brown leaves the property and rents a flat. Mr Green, Miss White's new boyfriend, joins her at 3 Bloom Terrace, and Mr Brown agrees to let him the property at a rent of £80 per week. Mr Green claims HB. Mr Green is to be treated as not liable for his housing costs under regulation 7(1)(c), because his landlord is his partner's ex-partner.
Landlord is the parent of the tenant's child
HBR 7(1)(d)
15. Where the landlord is the parent of a child for whom the tenant, or his partner is responsible, then the tenant is to be treated as not liable for his housing costs. This reflects the fact that the absent parent has responsibilities towards his child, including providing accommodation. For these purposes, "responsibility for a child" means more than "cares for". You should look for cases where the child is a member of the tenant's family, and provision for him is included in the claimant's applicable amount. It would not normally apply where the tenant is a child minder of the landlord's child.
Example: Mr and Mrs Black rent their home from Mrs Black's parents, Mr and Mrs Grey. Mrs Black is killed in a traffic accident, leaving Mr Black with their two children, aged 3 and 7. While Mr Black is at work, Mr and Mrs Grey look after the children. Mr Black drops them off at 8:30 and picks them up at 6:00 each working day. However, in order to be able to spend more time with his children, he has had to take lower paid work and claims HB. Although Mr and Mrs Grey look after these children during the day, they are not "responsible" for them, and Mr Black should not be refused HB under this provision.
Landlord is a company
HBR 7(1)(e)
16. Where a claimant, his partner, his ex-partner, his partner's ex-partner, or a close relative who lives with him is a director or an employee of the company who is the landlord, then the claimant is to be treated as not liable for housing costs.
HBR 7(1B)
17. Regulation 7(1B) exempts a claimant who can show that the arrangement between the company as landlord and the employee as tenant was not a means of abusing the HB scheme.
Example: A claimant rents a flat that has been advertised on the open market through a letting agent. After living there for some time, she obtains a part-time job in a local shop. It transpires that the company which runs the shop is also the owner of the flat. It is clear that the liability in respect of the flat is not created to take advantage of the HB scheme, and the fact that the claimant's landlord is also her employer is purely fortuitous.
Landlord is a trustee of a trust
HBR 7(1)(e)
18. Where a claimant rents a property from a trust (strictly speaking from the trustee(s) of a trust) of which he, his partner, his ex-partner, or a close relative who lives with him is a trustee, then the claimant is to be treated as not liable for housing costs. A trustee is required to act for the benefit of the trust and its beneficiaries. A trustee who was also a tenant of the trust would have a foot in both camps as tenant and, in effect, landlord. A claimant is also to be treated as not liable where he, his partner, his ex-partner, a close relative who lives with him is a beneficiary of the trust.
Example: Mr Brown lives with his elderly mother, Mrs Brown, who is an owner-occupier. A trust is set up naming Mrs Brown as beneficiary, and the home is transferred to it. The trust rents the home to Mr Brown who claims HB. Such an arrangement clearly takes advantage of the HB scheme, since without setting up the trust Mr Brown would have no entitlement to that benefit.
HBR 7(1B)
19. Again, regulation 7(1B) exempts a claimant who can show that the arrangement was not intended to exploit the HB scheme.
Example: The Goodfellow Trust is a charitable institution set up under the will of Robin Goodfellow for the relief of hardship for widows of employees of the travel industry. They raise their funds from large property holdings throughout the country. Mr Brown is one of their tenants. His mother, Mrs Brown, is the widow of a travel agent and has a small annuity from the Goodfellow Trust. As she is becoming increasingly frail, she comes to live with Mr Brown. There is no connection between Mr Brown's tenancy and Mrs Brown's annuity from the Trust. Regulation 7(1B) applies, and HB should not be refused.
HBR 7(1)(f)
20. A claimant is also to be treated as not liable where his or his partner's child is a beneficiary of the trust that is their landlord. However, the exemption in regulation 7(1B) does not apply in these cases.
Previous non-dependant
HBR 7(1)(g)
21. A claimant who was previously a non-dependant of someone who resided in the same dwelling is to be treated as not liable as long as that person still resides there. Regulation 7QB) again applies to those who can show that there was no intention to abuse the HB scheme.
Ex-owners
HBR 7(1)(h)
22. A claimant who, or whose partner, previously owned the accommodation which he now rents is to be treated as not liable for housing costs. An exception applies where he could not have continued to reside in the property without the transfer of ownership. Such a situation would arise where he was previously so far in arrears with a mortgage, that the lender was on the point of seeking legal possession.
23. The onus is on the claimant to show that that was the case. He should be able to provide evidence e.g. letters from the lender about action to be taken over arrears. The transfer could be through a Mortgage Rescue Scheme, or through a private arrangement. Care should be taken where the original lender was a relative of the claimant, or where the claimant, on transferring the property, received less than the market value. It is unlikely that the courts would award an order for possession in a case where the claimant retained equity in the property, ie when the outstanding debt, including any arrears, was less than the market value of the home.
Tied accommodation
HBR 7(1)(i)
24. A claimant who has to occupy specific accommodation as a condition of his, or his partner's, employment is to be treated as not liable for housing costs. In this situation it is reasonable to assume that the remuneration takes account of the fact that the employee is living rent free.
Example: The owner of a riding school offers employment to a stable boy. He is to receive a wage of £50 per week and is required to live in a bed-sit over the stables. After he takes up the employment, he finds he has to pay £55 pw for the bed-sit. Such an arrangement seeks to take advantage of HB since the stable boy has no choice about where he lives and his wages, which are paid by his landlord, are insufficient to meet the cost.
25. This provision applies to a person who is required to live in specific accommodation in order to carry out his employment, or where his residence in the accommodation is written into his contract of employment. It should not be taken to mean "as a result of his employment". Thus, a tenant of tied accommodation who continues to live in that accommodation after retirement should not be treated as occupying his accommodation as a condition of his employment by the landlord, and this provision would cease to apply.
Non-abuse cases
HBR 7(1)(j) & (k)
26. Regulation 7(1) provides for two groups of people who are to be treated as not liable where there is no intention to abuse the scheme. These are:
a person who is a member of, and wholly maintained by, a religious order; and
a person who lives in residential accommodation (except where paragraph 2 of regulation 7 applies).
These groups were also excluded by provisions in regulation 7 prior to this amendment.
General provision
HBR 7(1)(l)
27. Regulation 7(1)(l) states the general principle which relates to a determination that a person is to be treated as not liable for his housing costs. This is that HB is not payable where the LA is satisfied that the liability was created to take advantage of the HB scheme. You should note that such an abuse can be on the part of the claimant, the landlord, or both acting together. This provision should be used only where none of the preceding paragraphs apply.
28. There must be something about the arrangements relating to the liability which indicates that it seeks to exploit the HB scheme, and it will be up to the LA to demonstrate such arrangements in order to substantiate a decision that exploitation is involved. A liability for a very high rent would not, of itself, amount to an abuse of the HB scheme for the purposes of this regulation, because the maximum rent rules would prevent the payment of large amounts of HB. However, a landlord who targets high rents at specific groups of claimants who are excluded from the maximum rent rules might-lit be creating liabilities which take advantage of the HB scheme.
29. You should also look for arrangements which the claimant has entered into which create a liability which he cannot meet without housing benefit where he could have avoided such a situation and still been adequately accommodated. This would not normally be the case where, for example, even though they rely on HB to help meet the rent:
a person previously had no accommodation
a person has moved home to take up work because he could not travel to work from his previous address
a person moves home because his family was overcrowded at his previous address
a young person leaves the parental home to take up his own accommodation.
In the last case, you should not generally take account of accommodation in the parental home as evidence that the person could still have been adequately accommodated.
30. As in all determinations, you must take account of all the available evidence when making a determination that a liability has been created to take advantage of the HB scheme. Generally speaking, you will be looking for an improper or incorrect use of the rules which govern HB.
Exemptions
HBR 7(1B)
31. You should note that the onus is on the claimant to show that the arrangement is not one seeking to take advantage of the HB scheme for any exemption to apply. The exemption only applies to previous non-dependants, cases where the landlord is a company and cases where the landlord is a trust. However, it does not apply where the claimant's child, or his partner's child, is a beneficiary of the trust that is their landlord.
Regulation 3
32. There is a consequential amendment to regulation 3(3) of the HB (General) Regulations, which ensures that, where appropriate, persons who are treated as not liable under regulation 7(1) should be treated as non-dependants. This will generally only arise where the claimant concerned resides with another claimant who is not affected by regulation 7.
Effective Date
33. This revised regulation applies to all new claims received on or after 25 January 1999.
34. Generally speaking, anyone who would be affected by the new regulation would have been treated as not liable under the previous version, and so there should be few existing cases who are in receipt of HB. For any who are, the new regulation is effective from the day following the last day of their current benefit period.
35. Where an existing claimant submits a (new) renewal claim at the end of his benefit period, you should check whether any of the provisions of the re-drafted regulation 7 apply to him, and, if they do, determine the claim accordingly. If you determine that such a claimant is not entitled to HB anymore, there will be no overpayment for the past period.
Liability
36. You must remember that before you can bring regulation 7 into operation you must be satisfied that the claimant has a liability to make payments in respect of the dwelling he occupies as his home. A legally enforceable liability only arises where a specific amount is included in the agreement. Thus, a claimant whose rent is "whatever HB you get" does not have a legal liability, and is not entitled to HB. It is not always easy to determine whether a person has a liability, but it would be difficult to prove that they didn't if they have a properly constituted, written tenancy agreement.
37. You may receive a claim for HB from a joint-owner who says he has to pay rent to the other joint owner(s) for their part of the accommodation. Payments of this kind are not met by HB, and are provided for in regulation 10. Such a claimant should, therefore, fall within the provisions of regulation 10(2)(c) (ie payments by an owner), rather than regulation 7(1).
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