Disregard of capital to buy new home

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  • #32023
    jamcon
    Participant

    Just need to re-assure myself I’m reading this correctly. Paragraph 3 of Schedule 6 states:-

    Any sum directly attributable to the proceeds of sale of any premises formerly occupied by the claimant as his home which is to be used for the purchase of other premises intended for such occupation within 26 weeks of the date of sale or such longer period as is reasonable in the circumstances to enable the claimant to complete the purchase.

    The way I read this is that the extension must follow the initial 26 week period. You can’t, for example, receive the capital with no intention of buying a property, then several years down the line decide you have a firm intention to buy a property and then have the capital disregarded because it is reasonable to do so. Or can you?

    #89488
    Anonymous
    Guest

    I agree with your interpretation: I think the effect of the “such longer period …” proviso is simply to substitute a longer period for the standard 26 weeks. Whether it is the flat 26 weeks or a longer period, it must be counted from “the date of sale”, which to me suggests a prospective period to complete a purchase that you already have in mind as early as the date of sale.

    #164269
    Abigail_Harvey
    Participant

    So to clarify, if a clmt divorcing her former partner has a sum of capital from the sale of the joint marital home but has had to move into rented accommodation until a suitable property can be found, can this capital be disregarded or should the purchase already be under way once the sale of her former home has been completed?  And if it CAN be disregarded while she looks for a suitable property, what evidence would she need to provide that she is looking for one for it be disregarded for an HB application?

    #164270
    Abigail_Harvey
    Participant

    So to clarify, if a clmt divorcing her former partner has a sum of capital from the sale of the joint marital home but has had to move into rented accommodation until a suitable property can be found, can this capital be disregarded or should the purchase already be under way once the sale of her former home has been completed?  And if it CAN be disregarded while she looks for a suitable property, what evidence would she need to provide that she is looking for one for it be disregarded for an HB application?

    #164279
    nick dearnley
    Participant

    The disregard applies if the money is intended to be used to purchase a new property.  That will include part-rent/part-buy properties.  In a similar way to looking at intention to return in temporary absence cases, I think you need to know whether there is a realistic and realisable intention to buy a property.  I don't think they need to have agreed a purchase or put down a deposit, but they will need to show you that they are looking for a place that they could buy. 

    For example, I am dealing with a case where the disregard was applied and ran for 55 weeks.  The clmt now tells me that she has not looked at all since April last year because a mortgage adviser told her the limits of what she could borrow and she can't find a place in that range.  So she has not taken any steps since then, and I decided that the money was no longer set aside for a purchase.  I also found several properties nearby that looked to be at least potential candidates.  She's appealling…..

    I would want to know what steps she has taken to find a place, when, and so on. If, at one end of the scale, she just wanders past the estate agents on her way to work that won't be enough, but if, at the other end of the scale, she can show mortgage quotes and offers made (even if rejected by vendors) that would satisfy me.  It depends on the individual case.  The object of the disregard is to give some time between the original sale and the purchase of the new place, because it takes a while to find a house, but doing nothing isn't an option.

    The standard disregard is 26 weeks, so anything longer than that needs to be explained as part of the reasonableness test for the extension.

    #164286
    jamcon
    Participant

    This is taken from R(IS) 1/07, which you may find useful:-

    7.         Mr. James adopted the Secretary of State’s written submission resisting the appeal and, in particular, relied on CIS/8475/1995 and CIS/15984/1996, submitting that, to the extent that CIS/685/1992 was irreconcilable with those decisions, the later decisions were to be preferred. It does not seem to me that the passages from CIS/685/1992 quoted above cannot be reconciled with the later decisions. The second sentence of the first passage perhaps needs to be qualified by the addition of the words “during that period” at the end but it seems fairly clear from the context that that is what the Commissioner meant. He was in fact concerned only with a claim made long after the 26 week period had expired so that the issues before him were whether the period could be extended and whether it was necessary for the condition that the sum was “to be used” for the purchase of another home to be satisfied from a date within the 26 weeks following the sale or merely during the period in respect of which benefit was being claimed. As was said in CIS/15984/1996, the Commissioner deciding CIS/685/1992 “did not discuss what was meant by the words ‘to be used’ because the issue did not arise in that case”.

    8.         That issue did arise in CIS/8475/1995, where the Commissioner said:

     

    “28.     … In my judgment, Miss Hartridge was right in pointing to the difference between the wording “to be used” in para 3 and the tests of intended occupation in for example paras 2, 27 and 28. It seems to me that the claimant has to demonstrate something more than just a genuine intention on his part to use the money from his old house to acquire a new one …

    29.       I therefore accept Miss Hartridge’s submission that the words “is to be used” in para. 3 require an element of practical certainty as well as subjective intent. It would be unusual for any sum of money to be set aside or earmarked sufficiently to be impressed with a trust to use it only for the purchase of another home, and para. 3 is not in my judgment restricted to cases where there is a binding legal obligation. Nevertheless the claimant must in my view be able to demonstrate at the time relevant for his claim a practical commitment to a purchase that is bound in the normal course of events to involve using the money he is keeping aside for that purpose. Such a commitment can be demonstrated for example by a binding contract for purchase which is not yet completed, or by a firm commitment (e.g. an agreement ‘subject to contract’) in circumstances where the tribunal is satisfied the money could not reasonably be expected to be withdrawn from the project and used for other purposes such as living expenses instead.”

    The test enunciated in the first sentence of paragraph 29 of that decision was precisely the test used by the tribunal in the present case, which suggests that they may well have known of the decision. It is important to note that the claimant in CIS/8475/1995 succeeded despite the apparent strictness of the Commissioner’s approach. In CIS/15984/1996 the Commissioner warned against regarding the examples of evidence of commitment given in paragraph 29 of that decision as being exhaustive and pointed out that there were circumstances where, for example, a person could not sensibly look for a home because the location depended on outstanding job applications but where nonetheless the necessary commitment might be demonstrated even though providing the evidence might be more difficult. He said that the Commissioner in CIS/8475/1995 had captured the essence of the words “is to be used” in the need for an element of certainty. I gratefully adopt that approach. It seems to me that a claimant must satisfy a tribunal not only that he or she intends to use the capital sum to buy another home but also that it is reasonably certain that he or she will in fact do so within the material time.

    #164287
    Abigail_Harvey
    Participant

    That's great.  Thanks.

     

    #164289
    nick dearnley
    Participant

    Is that the right reference jamcon?   R(IS)1/07 looks like a case about housing costs for a pensioner.

    #164290
    nick dearnley
    Participant

    Got it – R(IS)7/01

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