Search rightsnet
Search options

Where

Benefit

Jurisdiction

Jurisdiction

From

to

Forum Home  →  Discussion  →  Covid-19: Welfare benefit issues  →  Thread

Capital abroad

Z2KCaseworkvolunteer
forum member

Zacchaeus 2000 Trust (Z2K)

Send message

Total Posts: 11

Joined: 28 September 2016

Client is a Portuguese national with ILR under EUSS. She has nil income but is currently receiving accommodation and subsistence support from social services. Social services helped her apply for UC in January of this year, but she was refused on the basis that she holds capital in excess of the upper limit, in the form of an apartment in Lisbon valued on the open market at €75k. The apartment is currently uninhabitable and lacks basic amenities (running water, sewerage). In any event, flights remain suspended between the UK and Portugal, and the client lacks the means to travel there in person. She is alienated from all her remaining family living over there. Legal title was transferred to her when she was a teenager, but her father was in occupation as a usufructuary.

Portuguese law has a concept of usufruct (‘usufruto’), a right to property in rem that entitles a usufructuary to use the property during their lifetime. The proprietor holds as a “bare owner” (‘raiz’), albeit they are free to dispose or sell the legal title. As far as I can tell, this is something like a common law life estate. When the usufructuary dies, the right is extinguished and reverts to the owner. The owner is then required to notify the land registry (‘Conservatòria do Registo Predial’) of the usufructuary’s death and pay a fee of €300 before they can dispose of or sell the property. (This, I suspect, is crucial to any argument about UC entitlement, but I can’t find clear guidance about this online. It appears that this is a condition precedent of sale, rather than a registration requirement triggered by transfer of legal title as under English law. It also appears that this has to be done in person at the Portuguese land registry, with notarised documents).

The client’s ability to sell the property would also depend on her ability to obtain further, costly documentation (https://blog.torfx.com/general-interest/step-by-step-guide-to-selling-your-property-in-portugal/). Another difficulty is the client’s unwillingness to sell, given the sentimental value attached to the property.

My question is how to approach this issue. I suspect the only possible argument to make is for a 6-month disregard under Sch.10, para 6 of the UC Regs. The issue here is (i) no identifiable decision/intention to sell (the evidence she’s already given UC is that she doesn’t want to sell); (ii) any steps she could have taken short of registering the usufructuary’s death (in person) at the land registry in Lisbon and obtaining the relevant documents required to sell would have been ineffectual. The ‘reasonable steps’ requirement is obviously sensitive to context/facts of a given case, but I wondered whether there might be some scope for saying that because no steps she could reasonably currently take could actually lead to the property’s sale, inaction was a reasonable step (probably not!). The clearest guidance I can find is ​R(SB) 32/83, which requires “overt action in furtherance of [the decision to sell] ...which will normally take the form of putting the sale into the hands of a solicitor or estate agent” (para 10). I suspect the lack of a decision/intention to sell & and identifiable action to sell of any kind will be fatal, so the advice I’ve given was to contact estate agents/solicitors in Portugal and make a new claim for UC, evidencing this step.

This is where I wondered whether any arguments could be made on the basis that there would be a prior limitation on her ability to sell. I know that this is an argument which is considered and distinguished in R(IS) 1/01, in the context of limits/restrictions on the ability to administer an estate. Struggling to find further case law on this point, and I wondered whether this line of argument could be exported to UC?

[ Edited: 20 Apr 2021 at 01:59 pm by Z2KCaseworkvolunteer ]
Elliot Kent
forum member

Shelter

Send message

Total Posts: 2299

Joined: 14 July 2014

I don’t think I would be pursuing the case in terms of disregards really. It’s an issue of the valuation of the asset she actually owns more so than looking for a disregard. The question which needs to be asked is what your client’s actual interest in the property is worth. i.e. what would somebody pay to be placed in her legal position as it is now, rather than what the bricks and mortar house is worth.

To put it into more familiar terms, suppose that a person owns the freehold to a property in England which would attract a price of £75k unencumbered and with vacant possession. However the freeholder has granted a relative a 99 year lease at a peppercorn rent and the relative has no intention of leaving. No sane person would pay anything approaching £75k to acquire the freehold interest in that property - and their interest in it is all they have to sell.

There are rather a lot of threads which discuss these sorts of cases where the claimant has an asset which is subject to some sort of encumbrance which would mean it is only of interest to a speculator. Usually the issue is that the property is jointly owned by somebody who would not consent to a sale - which is a situation the case law has dealt with specifically - but I don’t see that there is any real difference of principle here.

Z2KCaseworkvolunteer
forum member

Zacchaeus 2000 Trust (Z2K)

Send message

Total Posts: 11

Joined: 28 September 2016

Thanks Elliot. I found the cluster of cases in Sweet & Maxwell about realisable assets almost as soon as I had posted the query - apologies!

The problem seems to be that, for all intents and purposes, she is the legal (and beneficial) owner of the freehold. While the registration of the death of the usufructuary is a legal precondition of sale, her interest is still the Portuguese equivalent of a freehold because the ‘usufruto’ was automatically extinguished by her father’s death.  As far as I can tell, there aren’t any restraints on sale other than the registration process, the €300 fee + the documents she has to obtain but cannot because of her lack of means & current travel restrictions.

I definitely see how the argument would work where she had claimed UC while her father had been in occupation, at which point not only would she be selling the house without vacant possession, but her legal interest would have been the ‘raiz’, which would only have a nominal value anyway (equivalent to the French ‘nue propriete’), at which point arguments along the lines of https://www.rightsnet.org.uk/forums/but/member/6917/viewthread/13276/#61874) could be run). But struggling with that argument in this context, as all of the relevant cases seem to deal with much clearer legal restraints on sale (freezing orders, trust instruments). This seems a much smaller hurdle, but perhaps the difference is really only one of degree?

 

[ Edited: 20 Apr 2021 at 02:30 pm by Z2KCaseworkvolunteer ]
Elliot Kent
forum member

Shelter

Send message

Total Posts: 2299

Joined: 14 July 2014

Sorry perhaps I am missing something here but is the father now dead?

Z2KCaseworkvolunteer
forum member

Zacchaeus 2000 Trust (Z2K)

Send message

Total Posts: 11

Joined: 28 September 2016

yes - father died a few years ago. Sorry if didn’t make that clear in OP.

Elliot Kent
forum member

Shelter

Send message

Total Posts: 2299

Joined: 14 July 2014

Z2KCaseworkvolunteer - 20 April 2021 02:52 PM

yes - father died a few years ago. Sorry if didn’t make that clear in OP.

Okay sorry I had thought he was still alive so that the his interest would be an indefinite encumbrance on the property so my previous reply was in that light.

I am not really sure that the fact that there will need to be an outlay before the property is sold will really go very far as an argument. There is an allowance of 10% for the costs of sale in any event and it doesn’t seem out of the realms of what is reasonable to expect her to take out some finance in order to deal with the cash flow aspect bearing in mind she expects to make €75k from the sale.

The clearest way for her to get a disregard applied is going to be to take some action with a view to selling the property - even if that is not particularly effective action. I think the specifics of what action is taken are less important than being able to show that a decision has been taken to sell the property and that action is being taken along that road. You have indicated that there is a suggestion that she may not wish to sell the property for sentimental reasons - that may be, but if she does not wish to sell it the result will be that no disregard applies and she doesn’t get any UC.