Hi,

Please excuse my ignorance here, I'm not an expert on the Income Support Regs and just want to clarify this before I speak to my client.

I have a client whose claim for Income Support has been refused on the basis that she has too much capital.

Client has seperated from her husband and has moved into rented accomodation. Husband and son still live in former marital home.

When she has applied for IS a valuation has been done on the former property and IS have assumed half the value of the property as capital for my client (there is no outstanding mortgage on the property) and as such her capital exceeds the prescribed limits for IS.

I'm not sure that IS should have just taken half the value of the property as capital if the husband and son are still living in the property. If the same rules apply for IS as they do for the likes of HB, surely they should be using a valuation of how much the property would be worth if it were sold as it was, i.e. with the husband and son still resident? If this were the case, the valuation would be significantly lower.

Is anyone able to clarify how capital should be treated in the above situation and point me in the right direction as to where it says this in the regs

Cheers

John

Thu 15-Apr-10 01:52 PM by nevip

The relevant reg is 52 (capital jointly held). The legal owner(s) of property usually hold the property on trust for those who have a beneficial interest in it. In this case those who have contributed financially to the purchase price. The beneficial interest of each will usually be the percentage contribution of each unless there is evidence that at the time of conveyance they intended to take otherwise. However, the situation with married couples can be more difficult as property splits on separation or divorce can often be not that straight forward. Ariadne will be able to flesh out the bones on this better than I.

There would be nothing to stop a future buyer evicting the husband and so the market value of the property could be as it is valued, unless the husband applies to the court for an occupation order under the Family Law Act and gets one. Then the market value of the property with a sitting tenant might be very low or nothing at all depending on how likely the sitting tenant is going to remain there, among other things.

Thanks for the prompt response Paul. I'll have a look at the reg and try to find out some more details from the client

Cheers

John

There is a similar rule to HB where the former home should be disregarded while occupied by the former partner as a lone parent:

see Income Support (general) Regulations 1987 Schedule 10 para 25

True, provided they are not estranged.

I'm confused - the reg I've quoted applies to couples who are estranged. As long as the ex-husband doesn't have a new partner, then the capital from her former home is disregarded in full

The case law on para 4(b) of Sch 10 indicates that estrangement and separation are not necessarily the same thing. R(IS) 5/05 apparently says that estrangment has "a connotation of emotional disharmony." But in CH/117/2005, a different commissioner disagreed and said that a couple who'd concluded that their relationship was at an endcould be estrangemd even if they still were good friends. Both agreed that the key question was whether they had ceased to regard themselves as a couple.
Undoubtedly the ruels in Reg 52 says that she and her husband are deemed conclusively to hold the property in equal shares. But that doesn't mean half the value of the unecumbered whole. What she has is a beneficial interest in the property and it is that interest which must be valued as a separate right at its full market value - what you could get for it from a willing buyer, but on the assumption that the husband was not willing to sell.
Granted that the husband has a right of occupation of the property by reason of his own joint ownership, the market value must be pretty paltry. The question then is what the value of the wife's share of the property is subject to the husband's rights, discounted by 10% for the costs of sale. It isn't an easy question and a District Valuer will probably not get the point; but it has been suggested that the value may be often be very small indeed.

Thanks for the postings on this. I didn't think it was as straight forward as just automatically assuming 50% of the valuation of the property as a capital assett.
I'll get back to my client with this additional information and we'll take it from there

Cheers

John

seand has referred to para 25 of schedule 10.

If the son is a dependant of the father who is a lone parent then this is the most appropriate paragraph and issues around 'estrangment' and 'value' don't come into it.