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Smi loan and joint owner

 

LJF
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What if joint owner is awol. Do both parties have to sign the charge form?

     
Gareth Morgan
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Only owners in the home have to agree to the charge.

     
LJF
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So a non resident joint owner can have a charge put on their property without their consent?

Do you have any links to where it states both owners don’t need to sign?

The resident partner who is not a joint owner has to sign? Does that have any implications for them?

     
Paul_Treloar_AgeUK
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The legal owner in the home who is eligible for housing costs must accept an equitable charge on the property in respect of their beneficial interest it.

     
LJF
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Brilliant. Thanks all

     
Paul_Treloar_AgeUK
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Conditions to meet before the loan payments can be made

5.—(1) The Secretary of State may make the loan payments if—

(a)the loan payments offer is accepted in accordance with regulation 4; and

(b)the conditions in paragraph (2) are met.

(2) The conditions are—

(a)in England and Wales—

(i)where all of the legal owners are within the benefit unit, each legal owner has executed a charge by way of legal mortgage in favour of the Secretary of State in respect of the relevant accommodation;

(ii)where one or more legal owners are not within the benefit unit, each legal owner within the benefit unit (if any) has executed an equitable charge in respect of their beneficial interest in the relevant accommodation;

http://www.legislation.gov.uk/uksi/2017/725/made

     
LJF
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Super

     
Caitlin
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Can anyone else offer further guidance on this? We have had an enquiry of a mother and daughter - joint ownership and both potentially entitled to apply for the loan come April… The mother is concerned what might happen should she pass away and I would assume, with it being a secured loan, this would be similar to ‘transfer of ownership’? Would this mean the daughter would have to address the outstanding loan at that point? Or would she agree at the start of this process to sign the standard security?

Any help appreciated.

     
Paul_Treloar_AgeUK
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I think that the regulations provide that repayment shall be limited to the amount of that legal owner’s equitable interest in the relevant accommodation - i.e. if the mother owned 50% and then passed away, DWP would want her loan repayment repaid based on 50% valuation of the property.

See reg15(1) and (5) http://www.legislation.gov.uk/uksi/2017/725/regulation/16/made

     
Gareth Morgan
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This is one of the scenarios I’ve raised with DWP.  My question and their answer:

The consequences on joint owners, where not members of the same claim, when a loan becomes repayable could be serious. Where a lender may be willing to transfer a mortgage across to a joint owner, there is no provision in the regulations for this to happen with an SMI loan. (12)

(12)
We will be looking to address this scenario in a package of amending regulations.

     
Caitlin
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Thanks everyone, we gathered they would need to detail it further as they only mention ‘benefit units’ whereas in this scenario it’s separate claims, etc.

     
Paul_Treloar_AgeUK
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I think they’ve taken a very worrying approach on these kind of issues - we raised similar enquiries as yours Caitlin also and were quite shocked with the response. In almost every co-ownership scenario our advice line advisers mentioned, the outcome of a change of circumjstances was that the loan became immediatley repayable.

How this will work with social care funding, equity release and so on is anybody’s guess it seems, yet this is still apparently coming into force from April.

     
ClairemHodgson
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Paul_Treloar_AgeUK - 12 January 2018 11:38 AM

I think that the regulations provide that repayment shall be limited to the amount of that legal owner’s equitable interest in the relevant accommodation - i.e. if the mother owned 50% and then passed away, DWP would want her loan repayment repaid based on 50% valuation of the property.

See reg15(1) and (5) http://www.legislation.gov.uk/uksi/2017/725/regulation/16/made

and if that occurred, they’d have to find the other joint owner and get an order to force a sale, if that joint owner didn’t want to sell (but, perhaps, move in).

DWP trying to do land law whilst knowing nothing about it?

     
Paul_Treloar_AgeUK
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I think the regulations do provide DWP with powers to issue proceedings to force a sale. See section 87(1) below.

The Loans for Mortgage Interest Regulations 2017

Regulation 2 Interpretation
“charge by way of legal mortgage” has the meaning given in section 132(1) of the Land Registration Act 2002

Regulation 5 Conditions to meet before the loan payments can be made

(2) The conditions are—
(a)in England and Wales—
(i)where all of the legal owners are within the benefit unit, each legal owner has executed a charge by way of legal mortgage in favour of the Secretary of State in respect of the relevant accommodation;
(ii)where one or more legal owners are not within the benefit unit, each legal owner within the benefit unit (if any) has executed an equitable charge in respect of their beneficial interest in the relevant accommodation;
(b)in Scotland, each legal owner within the benefit unit has executed a standard security in respect of his or her interest in the relevant accommodation;

Land Registration Act 2002

Section 132(1) General interpretation
“charge” means any mortgage, charge or lien for securing money or money’s worth;
“legal mortgage” has the same meaning as in the Law of Property Act 1925;

Law of Property Act 1925

Section 87 Charges by way of legal mortgage.

(1)Where a legal mortgage of land is created by a charge by deed expressed to be by way of legal mortgage, the mortgagee shall have the same protection, powers and remedies (including the right to take proceedings to obtain possession from the occupiers and the persons in receipt of rents and profits, or any of them) as if—
(a)where the mortgage is a mortgage of an estate in fee simple, a mortgage term for three thousand years without impeachment of waste had been thereby created in favour of the mortgagee; and
(b)where the mortgage is a mortgage of a term of years absolute, a sub-term less by one day than the term vested in the mortgagor had been thereby created in favour of the mortgagee.

Section 205(1) General definitions.

(xvi)“Mortgage” includes any charge or lien on any property for securing money or money’s worth; “legal mortgage” means a mortgage by demise or subdemise or a charge by way of legal mortgage and “legal mortgagee” has a corresponding meaning; “mortgage money” means money or money’s worth secured by a mortgage; “mortgagor” includes any person from time to time deriving title under the original mortgagor or entitled to redeem a mortgage according to his estate interest or right in the mortgaged property; “mortgagee” includes a chargee by way of legal mortgage and any person from time to time deriving title under the original mortgagee; and “mortgagee in possession” is, for the purposes of this Act, a mortgagee who, in right of the mortgage, has entered into and is in possession of the mortgaged property; and “right of redemption” includes an option to repurchase only if the option in effect creates a right of redemption;

     
ClairemHodgson
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and if the non resident owner not part of the “benefit unit” knew nothing of the charge? which is likely ....

mmmm

keep the land and equity lawyers busy, that will… I should think

     
Surrey Adviser
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The 2017 Regs. Paul linked to include – Regs. 5 & 6 – a need to notify the claimant & partner (who I presume may not be a joint claimant) before a loan payment is made.  What doesn’t seem to be covered is joint ownership of the claimant with someone who is not their partner – e.g. a couple who have separated and one has moved out, or two unrelated people (who may both live in the house).

To draw an analogy with a charging order after a CCJ there is, I believe, a requirement for all joint owners to be notified of the proposed order.  (Of course, this may not be practical if one has moved out & their address is unknown & has not been notified to Land Registry or the mortgagee, but I imagine there would be some sort of obligation to take reasonable steps.)

Also, with a charging order, if the creditor wants to get an order for sale there has to be a specific Court hearing at which the judge can refuse to grant the order.  I’ve not gone over the whole of the 2017 Regs. but from the comments on this thread I assume no such provision is included.

However, DWP do seem to have understood that in cases of joint ownership their charge can only be against the part of the property owned by the “benefit unit”.  So that makes it alright then!

As Claire says “DWP trying to do land law whilst knowing nothing about it?”