Guaranteed Pension Credit and Housing Costs

I have a client whose wife purchased the family home.
She paid cash for it in 2003 - £145,000. The deeds to the property are in her sole name.

They have both lived there since then and still do.

She funded the purchase with the part proceeds of a claim made by her husband to the Criminal Injuries Compensation Board in 1995. He was severely injured following an armed robbery that he foiled but unfortunately received gunshot wounds.

Due to his injuries, both physical and mental it was felt that at the time he would not be able to deal with the property purchase and he allowed his wife to carry out the acquisition. It was agreed between them that when he improved, the property would revert to joint ownership.

In 2005 she mortgaged the property for £50,000 then again in 2007 for another £35,000. This total represented 50% of the value of the property in 2005 (£170,000).

There is no problem with this £85,000 be it a question of deprivation or not. The Pension Service accept that it is not available and as such is not treated as available capital.

Instead of her husband becoming a joint owner he received his half share of the value and allowed his wife to remain as the sole owner. He actually signed a document at the time agreeing that he had no call upon the property and would leave when asked to do so.

Moving on to April 2012 when they applied for Pension Credit together with housing costs.

The Pension Service have refused to grant any help towards the mortgage interest on the following grounds:

1. That no mortgage was obtained to purchase the property initially.
2. That they do not consider that the arrangement for the wife to buy out her husband’s share is acceptable.

Does anybody have any views on where I go with this now please?