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Forum Home  →  Discussion  →  Income support, JSA and tax credits  →  Thread

IS - 1/4 share of 2nd property - capital value?

MNM
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Solicitor, French & Co Solicitors, Nottingham

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Hi all,

I am thinking aloud and would be grateful for any input.

Brief summary
Client rents a house (property 1) (gets HB and IB)
Client along with 4 other siblings got 1/4 share of father’s home (property 2)upon his death - all formal and registered on title deed (10 yrs ago)
Mother remained in property 2- rent free - until she died (last year)
Property 2 sold in 2013
Proceeds of sale are not in issue after the sale.

Issue
I am of the view a 1/4 share in a property with a sitting occupant had no market value pursuant to the IS Regs - as 1/4 share could not have be sold in the ‘property market’ especially with an occupant. I have checked DMG and it doesn’t really elaborate much more on market value. 

Is it wrong to take that view?

Anyone know of any caselaw which clarifies such situations.

Thanks in advance

 

nevip
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Welfare rights adviser - Sefton Council, Liverpool

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It would depend on the security of tenure of the occupant.  If the occupant was fairly young and healthy with a tenancy for life the market value might be very low.  After all, who would want to buy a property with a tenant he could not get rid of?  If, on the other hand, the occupant was there on an assured shorthold tenancy the seller could get the full market value as eviction is a formality.

MNM
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Solicitor, French & Co Solicitors, Nottingham

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I haven’t asked.
Think it was an informal agreement between siblings. Does the fact that 3 other siblings would not have evicted make a difference?

nevip
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Welfare rights adviser - Sefton Council, Liverpool

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I’m unsure whether I’ve understood you correctly.  If, while on a means tested benefit, he had a beneficial interest in the property when his mother was in occupation then that interest needed quantifying.  That interest would have been between zero and a quarter of the full market value, depending on the legal occupation rights of his mother.  If his beneficial interest is below the capital limit for benefit then no issue arises.  If above the capital limits then the DWP will, effectively, treat him as having that money, subject to any periods of disregard that might apply, unless there is a legal obstacle to him being able to realize that interest.  For example, there is a legal barrier preventing him applying to the court for an order of sale, or to the court actually granting such an order.  I’m unsure why you’re asking now after the property has been sold.

Peter Turville
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In addition to Paul’s comments, in my experience the Valuation Service, to who DWP/LAs should refer for a valuation, are incapable of applying the correct test to the valuation of such shared property - see CPAG p367 - often perhaps because client/DWP/LA do not supply enough detail to VS about the shared ownership/occupants etc.

A further thought - was there a will that provided for the wife/mother to continue to live in the property until her death?

MNM
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Solicitor, French & Co Solicitors, Nottingham

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Thanks

I ask now, after the event, as IUC with DWP regarding the sales proceeds which were used to buy the council house. 

In relation to a will. It was not in the will. It was a family agreement.

Surrey Adviser
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Benefits and debt adviser - Esher CAB, Surrey

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It seems to me there are only two ways in which he could have tried to realise any value while the mother was alive:

1.  Persuade the other 3 siblings that they jointly:

a)  Give the mother a secure rent free tenancy for life; & then
b)  Sell the property subject to that tenancy.

What are the chances of the siblings agreeing to this course of action - somewhere between zero & nil I would guess!

2.  Tell the mother & 3 siblings he has no alternative but to raise his interest in the property.  Then apply to Court for an order for sale - which would have to result in the mother’s eviction as she has no security (so far as I can see from what has been posted).  The mother & all 3 siblings would almost inevitably object.  What decision would the Court make?  I know what I would say if I was the judge!


So my view is that - in reality - the quarter share had no value throughout the mother’s life (assuming she remained living there until her death).

HB Anorak
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Benefits consultant/trainer - hbanorak.co.uk, East London

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From Schedule 10 to the Income Support Regs (disregarded capital):

4. Any premises occupied in whole or in part by–

(a) a partner or relative of a single claimant or any member of the family as his home where that person is aged 60 or over or is incapacitated;

So if the claimant’s mother was over 60 or in poor health (it doesn’t seem to have been amaended to say SPC age) the quarter share would be disregarded anyway.  Same applies to HB.

Edmund Shepherd
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Tenancy Income, Royal Borough of Greenwich, London

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If it comes down to the value of the share being taken into account as capital, I wouldn’t say it was as simple as 1/4 minus cost of sale. If the owners are joint owners as opposed to tenants in common, the value of a part share in a house would not necessarily fetch a quarter of the full sale value, as when buying the property outright you are paying for a property that you can dispose of as you see fit without anybody else to deal with.

So, if the property is worth £100,000, selling a quarter share would probably not fetch £25,000. Maybe half that or even nothing at all.

MNM
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Solicitor, French & Co Solicitors, Nottingham

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Thanks everyone.  Its nice to have a forum like this to get advice, guidance and feedback.