disregard of jointly owned property

This is really a two part question.

The first part is - what is your client’s stake in the property actually worth? That is not as straightforward as looking the house up on Zoopla, deducting the mortgage and 10% for costs of sale and dividing by two (contrary to what DWP may say).

The question is what a hypothetical purchaser would pay to take over your client’s position in relation to the property. That valuation has to take account of the fact that the property could not then be sold except with either the agreement of its current occupant or a court order. A buyer would not be prepared to pay face value for such an interest because of the costs and difficulties involved in getting a return.

Also, its not necessarily a given that your client has a 50% stake in the equity. It may be possible to argue that her interest is less - for example because of the fact that her ex has been the one paying the mortgage for the past 5 years,

Disregards are the second part, although it may be that the value is actually too low to worry about disregarding it. Your best bet is probably with para 5 of schedule 10. There is obviously a prima facie difficulty with arguing for the 6 month extension to be extended to 5 years - but you may be able to argue by reference to your client’s anxiety that taking steps to sell would expose them to potential retaliation from the ex given that you say this is the reason why your client has not tried to sell. The test is just whether it is reasonable or not to extend the time and I don’t see why an argument like that isn’t potentially worth a go.

Thanks Elliot
The property is alleged to be worth £200k with a mortgage of £15k, ex has paid the mortgage for past 5 years and made renovations to the house, the DWP have deemed her share of the equity to be £82000 so its a long way from being less than 16k, I have suggested she look at starting the legal process again but she is very wary because of the trouble it would cause, (her ex is genuinely laughing at her predicament which tells you all you need to know about the type of person he allegedly is, she hasn’t paid her rent for past 3 months and is at risk of being made homeless).

Fi Barker - 20 August 2020 08:57 AM

Thanks Elliot
The property is alleged to be worth £200k with a mortgage of £15k, ex has paid the mortgage for past 5 years and made renovations to the house, the DWP have deemed her share of the equity to be £82000 so its a long way from being less than 16k, I have suggested she look at starting the legal process again but she is very wary because of the trouble it would cause, (her ex is genuinely laughing at her predicament which tells you all you need to know about the type of person he allegedly is, she hasn’t paid her rent for past 3 months and is at risk of being made homeless).

Yes I suppose the worth making is that its not a question of valuing the house as an asset but her interest in it. Nobody sensible would pay anything near £82,000 to acquire your client’s interest because they can’t live in the house and because of the difficulty in seeing a return. Plenty of people have won at FtT by arguing that in these cases the asset is functionally worthless or worth only a percentage of the face value.

We have a client in a very similar situation, except that the uncooperative co-owner is the client’s brother. The DWP took the view that the client could sell his interest in the house without the brother’s cooperation. There is UT authority to the effect that there is a market in beneficial interests in these circumstances. We approached various local estate agents who wouldn’t touch the sale with a bargepole. The VOA then came up with the name of specialist brokers and we approached them on the client’s behalf. At this point we were able to argue to DWP and LA that client was taking reasonable steps to dispose of the property and ESA and HB were restored . The brokers found a buyer but insisted that the client had independent legal advice as to the propriety of the transaction, as the client is vulnerable. We could not find a solicitor prepared to act. The only informal advice we could get from a conveyancing solicitor was to the effect that a sale of this kind is not actually possible because of Land Registry and HMRC requirements. Client is perfectly content to let sleeping dogs lie. Client has now been back on ESA and HB for 18 months and DWP has not reviewed.

Let me know if you’d like more detail such as the name of the brokers.

That’s really interesting Paus17 - its the furthest I’ve heard of anyone going down that particular rabbit hole.

Just to complete the picture we also approached a number of solicitors about taking court action. Legal aid is not available. Costs estimates were from £5000 upwards. No solicitor would take it on a conditional fee basis as the risk is uninsurable. Had DWP and LA not restored benefits we certainly would have argued to the FtT that, whatever the UT may say about there being a market in beneficial interests, in the context of this case there was no reasonable way for the client to realise the asset, so it should be valued at zero.

On a point as you say jointly owned - you cannot sell “your share” of a jointly owned property. Joint ownership means all the registered proprietors own 100% of the value of the property.

If it’s held as tenants in common it will have a form A restriction on the proprietorship register - “No disposition by a sole proprietor of the registered estate (except a trust corporation) under which capital money arises is to be registered unless authorised by an order of the court.”

This restriction speaks for itself.

Brian Fletcher - 21 August 2020 11:52 AM

On a point as you say jointly owned - you cannot sell “your share” of a jointly owned property. Joint ownership means all the registered proprietors own 100% of the value of the property.

If it’s held as tenants in common it will have a form A restriction on the proprietorship register - “No disposition by a sole proprietor of the registered estate (except a trust corporation) under which capital money arises is to be registered unless authorised by an order of the court.”

This restriction speaks for itself.

A tenant in common is able to assign their interest and a joint tenant is able to render themselves a tenant in common by unilateral severance (in equity at least - which is what matters for present purposes)

The land registration points are interesting. I can see how it presents a problem from a conveyancing point of view. It may be that the transaction would have to be some sort of unregistered deed, which would present its own problems. I can see why solicitors are saying they won’t touch it with a bargepole.

But as we know, the Upper Tribunal has decided that these arrangements are possible and need to be taken account of. Whether that is true or not ceases to be relevant unless you have “Lord Justice” in your name.

The matter of the disposition of equity is not the issue. The issue is that you simply cannot be registered as an owner of the interest by the mere fact that you have purchased the interest.

Land can only be transferred in a legally prescribed manner. The effect of s.27 of the Land Registration Act 2002 is that on the sale of a registered title, completion of a transfer does not transfer the legal estate from the sellers to the buyers. The legal estate remains with the sellers. The legal estate only passes to the buyers when their names are put on the register as the new owners of the land. Transfer of ownership by deed does not suffice, and it must be followed by registration of the transfer. In short, unless you comply with the restriction, your name cannot be registered on the title with the Land Registry and you have no legal title. To draw an analogy, it’s like having all your money in someone else’s bank account.

It is an issue which creates uncertainty, which is the reason why, as you say, nobody will touch it with a barge pole. You need to have legal and equitable ownership by the same person.

It’s possible for the legal and beneficial ownership of a property to reside in different people, just as it is possible for all of your money to be in somebody else’s bank account. This is how trusts work and co-ownership of land is always a trust.

Very many people have equitable interests in property where they are not the legal owner. These are not always registered. The best example is where a person lives with a partner who is the sole owner of a property but they have obtained some beneficial interest in the value of the property by e.g. contributing to the mortgage.

Being the legal owner is significant for a number of purposes (e.g. actually selling the property itself), because the legal owner is the person actually entitled to deal with the property. But the social security system only cares about your beneficial interest i.e. your stake in its ultimate value.

In the case above, the client and her ex-partner are co-owners of the legal title as joint tenants and hold the land as trustees for the benefit of themselves as beneficiaries (either as equitable joint tenants or tenants in common). It is conceptually possible (as against practical or advisable) for the client to assign her beneficial interest to some third party. This would have the consequence that she would continue to be a joint legal owner of the property with her ex, but it would now be held on trust for the benefit of her ex and the third party. Conversely, the third party would not be a legal owner (so could not sell the house itself) but would be a beneficiary of the trust under which the legal owners hold it so would be entitled to part of the proceeds of a sale. There has been no transfer of the legal ownership of the property itself.

Transfer of the legal ownership requires the agreement of all co-owners. So an awkward co-owner can prevent the transfer of the legal ownership which is why my case and the one which started the thread are all about the beneficial interest. You would think that no sensible investor would buy a beneficial interest which can’t be registered because dishonest owners of the legal interest can sell without revealing the existence of the beneficial owner and make off with the proceeds. But some will.

That is because ownership of a beneficial interest alone allows you to apply to the court under s14 of the Trusts of Land and Appointment of Trustees Act 1996 for a direction to the trustees to sell the property and pay the appropriate share to the new beneficial owner.  Had the sale proceeded in our case that is almost certainly what would have happened. The investor would have bought the interest at half its value, immediately asked the court to order a sale with vacant possession, and pocketed something like a 90% profit. Nice work if you have the capital and are prepared to take the risk.

Although this couple are not married, she could argue by analogy with similar facts of the case before the then Deputy Commissioner in CIS/1915/2007  

Mr Deputy Commissioner (now Judge) Mark   held at [16]-[18]

16. That also appears to be the basis on which the decision makers approached the matter, and it appears to me to be a sensible practical interpretation of paragraph 26.  The decision makers appear to have considered that if the claimant did not proceed with the divorce proceedings even temporarily, paragraph 26 would no longer assist her, as she was no longer taking reasonable steps to dispose of the premises through those proceedings.

17. On this appeal, the secretary of state has submitted that a more flexible approach should be taken to the question of reasonableness, so that if there is a break in the divorce proceedings, whether to see if a reconciliation could be achieved, or because of family pressures or threats of violence if they are proceeded with, all the factors need to be looked at to determine whether the claimant is taking reasonable steps in relation to the proposed divorce.

18. In my judgment, the secretary of state is right that in considering the reasonableness of the period taken by the claimant to secure a divorce and the resulting disposal of the premises, including any temporary suspension of such action, it is necessary to look at all the facts, including the pressures that were brought on this claimant.  The tribunal failed to approach the matter in this way, and on this account also it was in error of law.