UC,capital, property abroad to which claimant cannot return

The issue is whether they are ex partners for benefit purposes, rather than generally still an item in their own minds.  The word “partner” has a definition in Reg 2: the other member of a couple. UC Reg 3 deals with couples.  They are no longer treated as a couple if either of them has been or is likely to be absent from the household for longer than six months: Reg 3(6).  Therefore she is or will be his former partner for the purpose of Schedule 10 if it gets/has got/looks as if it will get to the six month point.

Many thanks - just checked further, by the time claimant claimed UC they had definitely been apart (by force of events) for over 6 months.

Not the kind of query I usually get!

and in any event, you need to check mortgage/equity position. if it’s fully mortgaged and with no equity, there’s no capital in it.  also joint ownership = he only has a relevant share. and french law issues as well…

I have something similar in that I have a client who fled DV from a property in Malta. Initially we had to challenge that the property should be disregarded for six months on the basis that:
5.  Premises that a person has ceased to occupy as their home following an estrangement from their former partner where—
(a)the person has ceased to occupy the premises within the past 6 months; or
(b)the person’s former partner is a lone parent and occupies the premises as their home.
6.  Premises that a person is taking reasonable steps to dispose of where those steps have been commenced within the past 6 months.
R(SB) 32/83 makes it clear that if an applicant is taking steps to dispose of property then it can be disregarded for 6 months.
I also refer you to SP v SSWP [2009] UKUT 225 (AAC):
Paragraph 26 states that property is to be disregarded for 26 weeks from the date at which it was decided to dispose of the property, and in addition 26 weeks is a minimum as per paragraph 34.
In some instances this may not be the date on which the property was first put on the market (see JH v SSWP [2009} UKUT 1 (AAC).

The decision maker has replied saying that now the six months have ended she is no longer eligible as the property in question is outside of the UK and hence the mortgage cannot be taken into account. The property has been valued at 170 000 euro and has a mortgage of £151 000 euros.

ANyone have any ideas?

JustinM1 - 23 January 2019 09:10 AM

The decision maker has replied saying that now the six months have ended she is no longer eligible as the property in question is outside of the UK and hence the mortgage cannot be taken into account. The property has been valued at 170 000 euro and has a mortgage of £151 000 euros.

that’s a bizarre thing to say

does the DM think that if the property is sold, the mortage paid off and the equity split with the ex partner, your client will be left with 170000 Euro?  hardly.  think your DM must be ignoring things and being irrational etc…. and tht’s before we start on the DV point, whether her ex is cooperating, malta’s legal procedures in the circs etc etc etc

The issue I think is in the decision makers guide:
Capital outside of the UK
H1608 The value of capital which a person has outside of the UK is
1.  its current market or surrender value in the country outside of the UK if people
can transfer the money they get for the capital to the UK or
2.  the price people get for it if sold to a willing buyer in the UK if the country will
not let them transfer money to the UK.
1 UC Regs, reg 49(2) which states:
Valuation of capital
49.—(1) Capital is to be calculated at its current market value or surrender value less—

(a)where there would be expenses attributable to sale, 10%; and
(b)the amount of any encumbrances secured on it.
(2) The market value of a capital asset possessed by a person in a country outside the United Kingdom is—

(a)if there is no prohibition in that country against the transfer of an amount equal to the value of that asset to the United Kingdom, the market value in that country; or
(b)if there is such a prohibition, the amount it would raise if sold in the United Kingdom to a willing buyer.
(3) Where capital is held in currency other than sterling, it is to be calculated after the deduction of any banking charge or commission payable in converting that capital into sterling.

Example

Filipe owns a house in Portugal which has been valued at the equivalent of £62,000.
He has a mortgage of £50,000 on the house. He would be able to transfer proceeds
of the sale of the house to the UK. The full value of the property is taken into
account as his capital and so as his capital exceeds £16,000, he is not entitled to
UC.

Agree completely about the DV and other issues but there does not seem to be anything challengeable.

Thanks

I had to check, but yet another case of the guidance getting it wrong. There has been a change to the way the regs providing for the valuation of capital are drafted with UC (IS had two separate regs - reg 49 for capital in the UK and reg. 50 for capital outside the UK) with the result that reg. 49 UC Regs is poorly/confusingly drafted. As a result, I can see how at first sight it might appear that there is no disregard for either 10% of the value where there would be expenses in selling and the amount of any outstanding mortgage. But a closer reading shows there is;

1. Capital is calculated at its current market or surrender value less:
- 10% of the value if there would be expenses associated with selling
- the amount of any outstanding mortgage
2. If the asset is outside the UK, the market value is;
- the market value in the country where the asset is, if that value can legally be transferred to the UK
- if there is such a prohibition, what the value would be if there asset were in the UK and sold here.

But the stuff in 2 (my summary of what reg 49(1) says) does not change the definition of what ‘market value’ actually is.

The example given in the guidance is wrong - the value of the capital is £12,000 - below the capital limit.

It is quite obvious that paragraph (2) qualifies paragraph (1), i.e. the para (1) starting point before you factor in the 10% and mortgage deductions is established in accordance with para (2) for non-UK property.  The guidance is wrong.

In Justin’s case the value for UC purposes is 170,000 minus 10% = EUR153,000, less the mortgage, which reduces it to EUR2,000 (in that order by the way).

FWIW I agree with PC and Peter that the guidance is clearly wrong (and really if we think about it with some common sense for a moment, why should we be pretending that mortgages in Malta just don’t exist).

The other point really is just that all of the six month disregards can be extended indefinitely where it is reasonable in the circumstances - see reg 48(2) and ADM H2110 - so even if the DM is right and the property is worth 170k and the six months is up, she has a residual discretion to disregard it anyway.

HB Anorak - 23 January 2019 11:46 AM

in that order by the way

I always get that one muddled up!

Thank you all for this. I shall draft a further MR

Without sounding like I want the moon on the stick does anyone know where I can find a definition of market value.

Many thanks

Justin

JustinM1 - 23 January 2019 04:11 PM

Without sounding like I want the moon on the stick does anyone know where I can find a definition of market value.

Many thanks

Justin

This paper from a NAWRA meeting might help a bit although it doesn’t really deal with properties abroad.

JustinM1 - 23 January 2019 04:11 PM

Without sounding like I want the moon on the stick does anyone know where I can find a definition of market value.

That agreed between a willing buyer and a willing seller.

JustinM1 - 23 January 2019 04:11 PM

Without sounding like I want the moon on the stick does anyone know where I can find a definition of market value.

Many thanks

Justin

Hello Central Sussex.

Reg 49(2) is the definition of market value. The market value is the market value.

To repeat what others have said, the starting point for calculating the capital value of the property is 49(2) - the market value. Then apply 49(1) to allow for sale costs, and mortgage to get the net capital value of the property. And don’t forget to divide it by two if your client owns it equally with somebody else.

Elliot Kent - 23 January 2019 11:57 AM

FWIW I agree with PC and Peter that the guidance is clearly wrong (and really if we think about it with some common sense for a moment, why should we be pretending that mortgages in Malta just don’t exist).

The other point really is just that all of the six month disregards can be extended indefinitely where it is reasonable in the circumstances - see reg 48(2) and ADM H2110 - so even if the DM is right and the property is worth 170k and the six months is up, she has a residual discretion to disregard it anyway.

HB Anorak - 23 January 2019 11:46 AM

in that order by the way

I always get that one muddled up!

There is now a case where 6 months period should be extended if it is ‘more likely than not’ about purchase of house. EAM v. SSWP [2020] UKUT 247 (AAC). Hope that helps.