2nd property capital value – odd request!

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  • #57736
    John Smith
    Participant

    Hi all,

    Previously (and I am talking a long period in Benefits) when asked to disregard the capital value of second property that is up for sale, we have always been faced with a fait accompli – the claimant has already moved out of the property that they own and has put in a claim for housing benefit in the new rental property.

    In this instance, we have a person who still lives in the property that they own querying whether they can put their property on the market and then move into rented accommodation and claim HB until the sale goes through (obviously with the 6 month limit, extended where appropriate, etc).

    I can see nothing in the regs forbidding this or making it contingent on there being a particular reason for the move; but looking at it this way round it really seems to be an abuse of the system – a person could own a £5,000,000 penthouse in London, put it on the market and then claim HB somewhere else.

    Any thoughts welcomed.

    John

    #163587
    clarence_phillips
    Participant

    Hi

    Unless there is a very good reasons as to why they cannot continue to occupy the (owned) property, somthing like fear of violence at the property for example, I would definitely class the new tenancy as having been created to take advantage and refuse HB.

    Most people have to sell and buy at the same time because they cannot pay rent and mortgage at the same time so that should be the standard to measure against. Therefore unless there is a very, very good reason to do things differently to the norm, just because you can by using the benefits scheme, that would definitely amount to 'abuse' in my book. 

    Money from selling the house can also be disregarded so HB could be in payment for some time? Until he/she eventually moves to somewhere warm and sunny.       

     

    #163593
    John Smith
    Participant

    Thanks for that, Clarence.

    Any other views?

    #163602
    viki_hamm
    Participant

    Id certainly want to ask who is remaining in the property, is there a mortgage, and want to see a copy of a contract with an agent at the least before making a decision.

    Briefly with a genorous hat on, are both properties in the local area? Perhaps the clmnt has been offered employment locally so needs to rent while they get their old house sold, or its a couple moving in together from different areas? Lots of ifs.. more information definately needed.

    You always have the position of " we cant assess/ guarantee an HB award until a claim has been made based on the facts at the point of claim."

    #163609
    John Smith
    Participant

    Thanks Viki,

    John

    #163619
    andyrichards
    Participant

    As Viki says, I think you would need to look at their reasons if you were going to decide whether the tenancy was created to take advantage.

    Another which springs to mind is someone contemplating ending a relationship.

    And whilst I appreciate the potential for abuse, I'm struggling to see the point of doing it if there isn't some other factor compelling or pushing the person to do it.

     

    #163620
    John Smith
    Participant

    Thanks Andy – yes, time to ask for further information and gather all the relevant facts!

    John

    #163632
    pbirks
    Participant

    or an X factor winner that got a mortgage based a deposit of royaltie of their Christmas no1 and their £2m contract….. and is moving back to a one bed flt when they havent sold any records a year later and only income is from a panto role at their local theatre ….

    so may scenarios…..  

    #163635
    John Smith
    Participant

    And all because I purchased "Killing in the Name Of" by Rage Against the Machine on iTunes, just cynically to block their Christmas No 1 aspirations …

    #163649
    d-stainsby
    Participant

    Oh and I bought Ding Dong the Witch is Dead in 2013

    #163651
    John Smith
    Participant

    D – thank you for your most comprehensive response!

    #163648
    d-stainsby
    Participant

    Just because something is unusual does not make it an abuse.

    I have also been around long enough to know that HB ( and IS housing payments) have been used to fund some very righ people's housing expenditure.  (In Secretary of State v Julien (reported as R(IS)13/92), the Court of Appeal held that the interest (at14.9%) on a mortgage of £630000 taken out in 1989 must be met by  IS as housing costs.)

    Mr Julien won his case, but it was such an "outrageous" one that it arguably led to successive changes in legislation that we see today

    It is also interesting to note that Mr Sier in the famous Cambridge CC v Sier case was a merchant banker who had chosen to rent accommodation in London SW1 and seek to  exercise his right to buy in Cambridge. (and get HB on both in the meantime)

    Mr Sier came unstuck but Mr Julien did not.

    I have represented those with shared ownership tenancies who can no longer keep up their payments and their only option has been to move out,  sub let, and then rent somewhere else and claim HB.

    This has been feasible because the lack of equity in the shared ownership property meant that there is nothing complicating the subsequent HB calculation, and the rent obtained from renting out the shared ownership property just covers the outgoings so there is no inccome obtained from it.

    In the case of the hypothetical £5m penthouse, I dont think you need to look at the take advantage angle because there are a number of Commissioners decisions where it has been held that take advantage does not mean "make the most of opportunities that it presents”  (see for example CH/0039/2007), but means something more akin to abuse

    The person with the £5m penthouse would presumably have a mortgage to pay whilst waiting for any sale to go through, so unless they rent it out they will continue to incurr that expediture.  (On the other hand it might be owned outright)

    I would be asking whether they are renting it out , what the mortgage payments are, and for evidence to confirm that they are taking steps to sell the property.

    You then need to look at whether or not the £5m property is to be disregarded or not and if so how you assess the income if any that is generated by the disregarded property (assuming there is enough equity to be disregarded)

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