Capital Disregard – 1st property capital to be used to pay off 2nd property mortgage

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  • #38000
    AndrewDonald
    Participant

    Query – can the capital value of the 1st property be disregarded because it is to be used (when sold) to reduce the mortgage of the 2nd property?

    1st property has been up for sale for 3.5 years. We have determined that reasonable efforts have not been made to sell the property so have ceased to disregard its capital value (no mortgage on the property).

    Claimant states when sold proceeds will be used to reduce mortgage on 2nd property (which was bought when 1st property went up for sale), so should still be disregarded (he presumably would of reduced the mortgage if the 1st property had been sold before he bought the 2nd).

    All responses are welcome!

    #106982
    nickkeogh
    Participant

    I presume he doesn’t live in either of these properties and that the value of the 2nd property is negligible due to the mortgage on it. If he uses the proceeds from one house to reduce the mortgage of the other property then won’t the other property’s value increase by the same amount due to the lower encumbrance on it and you’re effectively in the same boat?

    #106984
    AndrewDonald
    Participant

    Sorry, he does live in the 2nd property.

    #106985
    nickkeogh
    Participant

    If you’ve made the decision that he isn’t taking reasonable steps to dispose of the property then it must be valued as capital unless any of the other prescribed disregards apply which doesn’t appear to be the case. He may try a bit harder to sell it now – has he given any reasons as to why it’s taking so long to shift?

    #106988
    John Boxall
    Participant

    It’s worth pointing out that property sales are running at about 10% of the levels a few years ago so however hard you try it may be that a property just wont sell

    Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery. The blossom is blighted, the leaf is withered, the god of day goes down upon the dreary scene, and—and in short you are for ever floored.

    Wilkins Micawber, Ch12 David Copperfield

    #106990
    nickkeogh
    Participant

    [quote=John Boxall]It’s worth pointing out that property sales are running at about 10% of the levels a few years ago so however hard you try it may be that a property just wont sell[/quote]

    Indeed. I would make sure that you have a solid argument for the original decision that he is not taking reasonable steps to dispose of the property considering the current state of the property market.

    #107061
    AndrewDonald
    Participant

    Thank you all for your replies, much appreciated.

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