Refusal of HB for 5 years

Hi folks,

Not my usual area so apologies if the answer is as clear as the nose on my face!

Client owned home, fell into areas, house in bad state of repair. Wife had some form of mental breakdown and was admitted to psychiatric hospital. While there, son-in-law’s brother agreed to repair and modernise the house, his father would pay for the materials etc, on agreement he would be paid back from proceeds of sale. Client therefore moved out, rented somewhere and work began on property.

When complete, no buyers and wife was discharged from hospital. Both continued to live in rented accommodation while trying to see. Eventually, son-in-law agreed to buy house in return for £30,000 off asking price to repay his father for outlay-all agreed. Son-in-law then agreed to rent property back to client and client claimed HB.

HB decided that because he had sold the home he could not claim HB for 5 years for that particular property but agreed they would pay for a different one. They do not appear to have been treating it as a contrived tenancy and when I recently questioned the basis of the refusal with LA was told a 5 year ban is usual but they could not refer me to the Regulations covering such a rule.

Client is now in arrears with his rent and is expecting notice of seeking possession imminently. Client particularly worried about the impact on his wife if evicted.

Any info/ideas more than welcome!

HB REg 9(1)(h) covers selling a property and renting it back. This Reg has a 5 year rule within it, but there are exceptions. You then have to look at renting from a landlord who is a relative. So there are a few hurdles to cross. You will get some guidance at DWP Circular A5/2009. Also if you can get a hold of the Guide to HB and CTB (Lister and Ward) book there is some useful guidance there too.

The regulation is Reg 9(1)(h) of HB Regs 2006. Claimant is not eligible for HB on a home they have owned in the last 5 years, unless able to satisfy the LA that they could not have continued to live in the dwelling without letting go of ownership.

The latter part obviously rests on the facts of each case. At a basic level it sounds like you’d need to show that financially it was impossible for your clients to continue to own the property - that they were unable to pay the mortgage and their only option to avoid repossession and eviction was to take the course of action that they did.

Thank you both for your responses, I’m on the research trail now!

One problem may be the sequence of events. If they weren’t occupying around the time of sale they wouldn’t be covered by the exemption because it talks about “continuing” to occupy.

Ok. Turns out client/wife moved back in property after refurbishment and failed to meet mortgage payments because client had to significantly reduce his hours to care for wife. They tried to sell for 4 months while living there before son-in-law agreed to buy.

After sale in Oct 2011 they tried to claim HB and were refused under Reg 9(1)(h). They appealed and lost (not sure if this went to tribunal.)

Client has been managing to meet rent obligations since as he receives 2xpensions and wife was getting ESA (WRAG) however, now time-limiting has kicked in and only entitled to 32p IR ESA. On advice from BEL he has now made a claim for PC and was told he must close wife’s ESA claim in order to claim this, which he did last week. Our calculations show he will come into PC by about £23.00 + C.Tax reduction in full but they would certainly be better off trying to get wife in SG since they won’t get HB (I do think she meets criteria.) So now my questions are:

1)  If we’re outside absolute time limit to make late appeal to Tribunal re HB decision, can we just make a new application, get a decision to refuse issued and appeal that or is there literally nothing that can be done if outside the 13 months?

2)  Is there anything to stop client claiming PC while we attempt to get wife in SG? (ie: anything that stops both a claim for PC and ESA being open at same time-I am not aware of any Regs that preclude it)

Thanks everyone for your help.

Answer to question 1 is yes -  a new claim is a new claim.  The statutory provisions relating to finality in social security decision making displace the common law res judicata principle.  In simple terms, just because an earlier HB claim was rejected under Reg 9(1)(h) it doesn’t bind the LA or Tribunal in relation to any future claims.

Obviously after a while it will get to the stage where repeated appeals on the same subject are struck out for time-wasting, but that is certainly not the case here.  If they are properly advised this time they may present a stronger case for coming within the exemption to Reg 9(1)(h) - and if it isn’t too late, or hasn’t already been to Tribunal, there is even a possibility of getting the earlier refusal overturned.

It sounds as if the continuity of occupation isn’t an issue - they do in principle satisfy the threshold requirement for coming within the exemption.  There are two things they will need to persuade the LA/Tribunal about:

1. Things really had got so bad that the situation was untenable and so they had to make some change to their situation
2. There were no realistic alternative options that would have avoided the need to sell (restructure mortgage, equity release loan, a lodger).

I did a bit of work on this a few years ago, so I don’t know if there have been any more recent decisions or changes, but, for what it’s worth, here goes (in three parts).

“In general, people cannot claim HB where they once owned the home they live in, either as a freeholder or leaseholder, and now rent and where they sold that home within five years of claiming Housing Benefit (“the Former Owner Rule”).

The Former Owner Rule will not apply where they can satisfy the local authority processing their Housing Benefit claim that they could not have stayed living in their home without selling it. They do not need to show that it was completely impossible to keep their home, but they do need to show a degree of difficulty that, while falling short of impossibility, still amounted to practical compulsion.

There are a number of precedent setting cases which make it difficult to claim HB on a house which was previously owned.

Legal Precedents
e.g. in R(H) 6/07, formerly CH/3450/2006, the commissioner says, dismissing the appeal,
“the tribunal identified a number of steps the claimant and her husband could have taken to avoid selling their home and found (applying CH/3853/2001) that the claimant and her husband were not under a practical compulsion to sell, although subjectively they may have believed themselves to be.”

and

“2. it is impossible in the normal use of language to interpret “could not” to mean “believed she could not” and, apart from exceptional circumstances, such as extreme stress, where the claimant’s perceptions might limit the options available, the claimant’s perceptions are not relevant to the application of the test (paragraphs 17 to 19).”

The tribunal listed some of the factors they considered, including

“10. The chairman considered what options were available to the claimant and her husband. He ruled out a remortgage on account of their ages and the size of the property. He also ruled out taking in a lodger on account of the sleeping arrangements. However, he found that the couple could have taken steps that would have allowed them to retain ownership of their home. Specifically, they could have contacted the mortgagee and the credit card companies to discuss payment arrangements. Nor had they considered contacting the CAB about debt management. The chairman did not itemise the possibilities, but they are well-known. The credit card debts could be consolidated; a schedule of repayments could be negotiated; there was more than sufficient equity in the property to provide security for repayments; and an equity release scheme might be appropriate.”

The commissioner did suggest one possible argument

“18. The claimant’s perceptions may also affect or limit the options that are available. For example, a claimant might be under so much stress as a result of debts and worries that it is in the interests of her own mental health to dispose of ownership as quickly as possible without investigating and regardless of other options that are available. But that would be an exceptional case and there is no evidence that the claimant or her husband were so much or so badly affected in this case.”

But we are not aware of any cases where this has been accepted.

In CH/1586/2004 the commissioner says
“There seems to have been no investigation as to whether they could have obtained employment and financed the mortgage that way (which is how most people finance their mortgages), or as to whether they could have raised an income by sub-letting part of the property (for example, to their son to develop his business), or as to whether they could have run some slightly different sort of business rather than selling the property. The tribunal was in error of law in failing to consider such matters.”

And in CH/859/2006 the point is made again

“9. The second point on which I disagree with the submission for the Local Authority is the extent to which the tribunal was obliged to inquire into and make findings on the claimant’s financial position. In paragraph 15 of CH/396/2002 and in paragraphs 10 to 17 of CH/3853/2001 the Commissioner who made those decisions explains that the resolution of the questions relevant to the exception to the regulation 7(1)(h) rule involves a consideration of the nature and extent of the claimant’s health and financial problems. The compulsitor which justifies the application of the exception is, as the Commissioner explained, not merely legal compulsion but also practical compulsion.”

There are numbers of similar decisions to the same effect.

The effect of the decisions is to make it difficult to qualify for benefit in these circumstances unless the local authority is satisfied, after it has made its own investigations, that there really was no alternative.

(Cont.)

(Part 2.)

There is a slightly more reasonable, and more recent, decision in

CH/2340/2008 — Sale and lease back / whether claimant could have continued to occupy property without relinquishing ownership

In October 2006, before his appeal against a decision that he was no longer entitled to some benefits was heard (ultimately successful in 2007) and a few days prior to his mortgage lender obtaining a possession order as a result of the mortgage arrears that had accrued, the claimant made an agreement to sell his house to a company who then rented it back to him.

However, the claimant’s subsequent claim for housing benefit was refused under regulation 9(1)(h) of the Housing Benefit Regulations 2006 on the grounds that, as the former owner of the property, he could not satisfy the local authority that -

‘... he could not have continued to occupy that dwelling without relinquishing ownership.’

With a tribunal having dismissed his appeal against the decision, the claimant appealed to the commissioner.

Deputy Upper Tribunal Judge Mark explains that the tribunal had found that the claimant had no other indebtedness, made little effort to borrow from other sources (such as credit cards) and that - 
‘... his concerns were not of sufficient gravity to warrant a panic sale of the property at the time the property was actually sold’.

However, the deputy judge holds that the tribunal’s findings were clearly inconsistent with the evidence before it, for example that he had used part of the proceeds of his house sale to pay off a county court judgment, and that he had made enquiries of his local CAB about entering into an individual voluntary debt arrangement. In addition, the tribunal’s suggestion that he could have used a credit card to pay off his arrears required evidence that he had one or more credit cards with a sufficient limit to enable him to do this, but there was no such evidence the deputy judge holds.

In any event, the deputy judge says that it would be the ‘height of irresponsibility’ to borrow even short term at the very high rates of interest chargeable on credit cards or from anybody who would provide credit to such a poor credit risk whose only hope of repaying the debt when due, if any hope there was, lay in a successful appeal from the DWP’s decision terminating benefit.

Further, the claimant could not be criticised, the deputy judge holds, for not awaiting the outcome of his pending benefit appeal, the successful outcome of which would have enabled him to clear his mortgage arrears -

‘... the longer he put off the sale while trying to obtain extensions of time while awaiting the outcome of his appeal, the greater the amount of debt which would be secured on the property, the greater the risk that the court would refuse a further extension, and the greater the risk that the purchaser willing to lease back would cease to be interested, or would insist on revising the bargain to the claimant’s disadvantage.’

If the claimant wished to remain in his home, the deputy judge says, his only hope was to sell to somebody who would then let back the house to him, and that is what he did.

As a result, and highlighting that, as was stated in R(H) 6/07, ‘could not’ in the context of ‘could not have continued to occupy ... without relinquishing ownership’ does not mean that it was completely impossible to do otherwise, the deputy judge sets aside the tribunal’s decision and remits the determination of the claimant’s entitlement back to the local authority.
DWP Guidance

As promised in the SARB consultation processes the DWP have published a guidance circular, HB/CTB A5/2009, to make the conditions for HB entitlement clearer to local authority staff.

In the circular, they state:
“...It is in a format that can be copied and handed to those thinking about entering into a sale and rent back arrangement, whether or not they have any immediate intention of claiming benefit.”

(cont.)

(Part 3)

Broadly the guidance states:
“This is quite a difficult test to satisfy. The onus is on them to explain their reasons for giving up ownership as well as providing evidence of the situation they were in that lead to the sale of their home, such as letters from the lender about action to be taken over arrears etc.

The local authority has to reach a decision based on the specific facts of each case and must apply the test to the particular circumstances. In general, a person’s own beliefs and perceptions as to whether they could have avoided selling their home are not really relevant.
Consequently, if they thought that in their particular circumstances they had no other option but to sell so as to remain living in their home, but in actual fact there were other feasible options available that they had not considered, then the Former Owner Rule would still apply.

In reaching a decision, the local authority may take into account the fact that

•  benefits such as Income Support, Jobseekers Allowance, Employment and Support Allowance and State Pension Credit, can help with homeowners’ housing costs, including mortgage interest payments

•  only the recovery of debts secured on the home rather than unsecured debts are likely to lead to repossession”

The following are examples of situations where Housing Benefit has been denied. In each case the crucial point was that there were alternative options to sale available – that is, they could have kept ownership of the property and continued living in it. The situations include selling the property and renting it back

•  following the signing over of the home to relatives, both where a payment was made for the property and where one was not, but where it was thought that there was no compulsion on the person to do so

•  to claim Housing Benefit to avoid claiming the help available with housing costs through Income Support, Jobseekers Allowance, Employment and Support Allowance or State Pension Credit

•  to lower the person’s outgoings so that they could be a student where the housing costs were paid up to date

•  to use the equity released to clear other unsecured debts such as credit card and gambling debts

Where the local authority is satisfied that a person had to sell their home the next factor to consider is that there are also rules concerning the amount of savings or capital that a person has that affect entitlement to Housing Benefit.

There are lower capital limits above which housing benefit is reduced and upper limits above which benefit cannot be paid. The value of most forms of capital is counted for benefits purposes; although, some forms of capital are ignored.

Another relevant capital calculation rule provides that a person shall be treated as possessing capital of which they have deprived them self for the purpose of securing entitlement to housing benefit. In the context of sale and rent back situations, this rule means that the local authority has to consider whether they sold their home (i.e. deprived themself of their capital) to become entitled to Housing Benefit.

The local authority must consider each case on its individual facts. Unlike the Former Owner Rule, their beliefs and perceptions are the key here. The local authority must be satisfied that their actual, subjective purpose was to sell their home in order to become entitled to Housing Benefit.

Obtaining Housing Benefit must be a significant operative purpose behind their decision to sell their home. It is not enough that they knew that obtaining Housing Benefit is a natural consequence of selling their home; there must be a positive finding that they actually knew of the capital limit in light of all the facts.

If the local authority decides that they sold their home to obtain Housing Benefit, then the value of the home will be taken to be part of their capital. Consequently they may well exceed the upper capital limit, meaning that they will not be entitled to any Housing Benefit.

(the End.)