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Owner of a property as trustee

Catblack
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Benefits specialist - South Somerset District Council

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I have a vulnerable man who has “purchased” the property he is a tenant in so he is the registered legal proprietor of the property.
A deed of trust has been drawn up stating that the “tenant” does not own the beneficial interest in the property but is a trustee holding the property in trust for the “landlord” who is entitled to sell the property or earn income form it.
The “tenant” does not own a beneficial interest and is not entitled to sell it or any income from it.
I have checked the HB regs which are very clear 12(2)(c) that HB cannot be paid in respect to payments by an owner (land registry confirms he is the owner).
There are clearly other issues going on here but in respect to ongoing HB, I cannot see any way around this for the tenant.

HB Anorak
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It depends whether it’s freehold or leasehold, the definition of “owner” in HB Reg 2 only catches freeholders in England and Wales.

If he is indeed the legal freehold owner there is a long line of case law confirming that he cannot claim HB.  The closest match on the facts would be R(H) 7/05 Stephen Burton v New Forest District Council, where the claimant was a trustee with no beneficial interest in the property but was still excluded from HB.

There was even one case where the freeholder A granted a long lease to B, and then B granted A an assured tenancy.  But A’s HB appeal failed because A was the freehold owner and was caught by Reg 2: R(H) 8/07

If it’s a leasehold property the cases on “owner” don’t apply.  But there are also cases (eg CH/1578/2006) that consider the fundamental nature of payments attracting HB - the idea is to cover payments that must be made as a condition of the right to occupy the dwelling where the consequences of non-payment include eviction.  In this case, the beneficiary cannot evict the owner for rent arrears because the beneficiary is not in a position to grant a tenancy to the owner.

Elliot Kent
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This transaction sounds bizarre and enormously suspicious. In what sense has the gentleman ‘purchased’ the property if he has no equitable interest in it, has no right to derive an income from it, isn’t entitled to make decisions in relation to it and remains at least notionally obliged to pay rent to occupy it. It sounds like some sort of device to obfuscate the true ownership of the property. Were any conveyancers involved in setting it all up?

As noted, it is difficult to see how he could actually have any liability to pay the rent in the first place given that he is the only person entitled to grant a tenancy and you cannot grant a tenancy to yourself.

Catblack
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Benefits specialist - South Somerset District Council

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HB Anorak - 05 November 2021 09:09 AM

It depends whether it’s freehold or leasehold, the definition of “owner” in HB Reg 2 only catches freeholders in England and Wales.

If he is indeed the legal freehold owner there is a long line of case law confirming that he cannot claim HB.  The closest match on the facts would be R(H) 7/05 Stephen Burton v New Forest District Council, where the claimant was a trustee with no beneficial interest in the property but was still excluded from HB.

There was even one case where the freeholder A granted a long lease to B, and then B granted A an assured tenancy.  But A’s HB appeal failed because A was the freehold owner and was caught by Reg 2: R(H) 8/07

If it’s a leasehold property the cases on “owner” don’t apply.  But there are also cases (eg CH/1578/2006) that consider the fundamental nature of payments attracting HB - the idea is to cover payments that must be made as a condition of the right to occupy the dwelling where the consequences of non-payment include eviction.  In this case, the beneficiary cannot evict the owner for rent arrears because the beneficiary is not in a position to grant a tenancy to the owner.

Yes from the land registry search, the “tenant” is the leaseholder as it is a first floor flat. The “tenant” acquired the funds to purchase the property from the “landlord”. What has also now come to light is that the “landlord” was not the original leasehold owner….......

HB Anorak
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OK, so T bought the long lease from O, using money provided by L.  There is a trust deed between T and L which gives the beneficial interest in the capital and income to L.  And separately, there is supposed to be a tenancy between T and L in which L is the landlord and T is the tenant - but this is impossible as L has no standing to grant a tenancy to anyone, let alone T.  This is very much CH/1578/2006 territory