property split into two dwellings – second property or not?

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  • #46314
    sarah elliott
    Participant

    Please could anyone help?

    I'm trying to work out how capital/ income would be calculated in this scenario.

    Customer purchase a property, but mortgage lender stipulates that he must convert it back to a single dwelling (one freehold title, but had been seperated into 2 seperate dwellings – basement & mainsonette).

    He converts it back to a single dwelling, but shortly afterwards splits it again.

    He occupies the masionette & claims CTB there.

    He rents out the basement.

    They are 'seperate' dwellings (rated seperately for CT). But would the basement be considered a seperate dwelling for capital purposes?

    Para 1 of Schedule 5 (CTB regs) says disregard capital value of the dwelling occupied by the claimant as his home including any premises not so occupied which it is impracitable or unreasonable to sell seperately. Paperwork from mortgage lender makes it clear they would not have consented to carving out a leasehold title (required to sell basement seperately).

    Would the capital value of basement be disregarded under this provision?

    If so, does this mean rental income from basement would be classed as income derived from renting out part of the dwelling occupied by the claimant as his home?

    I'd be very grateful for any opinons/ advice!

    Thank you

    #130660
    louie
    Participant

    I would say yes, disregard the capital value as he would not be able to sell; however you should include the rental income in his CTB/CTR calc

    #130663
    Andy Thurman
    Keymaster

    I’m not so sure about this!

    I really don’t know much about the establishing of leaseholds etc., but I doubt it is as straight forward as that. That the mortgage lender would not have consented at point of agreement is very different from their possible position now it has been done without that consent! Not saying it shouldn’t be disregarded but questioning the weight of the evidence.

    #130665
    louie
    Participant

    I know that we have used the legal services of NHAS before now (part of Shelter); they may be able to let you know the legalities. Tel; 0300 330 0517 If you go onto the website, it shows all Local Authorities have access to their services.

    #130671
    sarah elliott
    Participant

    Thank you both 🙂
    I do agree with what you’re saying, Andy. But my in this case, I have a problem with a lack of available evidence! The case is an appeal against decision made in 2013 which was that customer had received a recoverable overpayment of CTB 01-09 due to capital exceeding £16k (in form of basement flat). I’m assuming that the burden of proof is on me to demonstrate that capital value of basement flat would have exceeded £16k, as it could have been sold separately. This will be difficult, as it was sold in 2010 so I doubt lender would give the customer a retrospective opinion on whether they would/ would not have agreed to him selling it as a leasehold title. As lender did originally forbid such an arrangement due to the threat it posed to the security of the loan, I think (on balance of probabilities) they would have been less likely to agree to leasehold than to have consented to it. If likely proceeds of sale of basement would have cleared mortgage or reduced it to small % of value of maisonette, they might have agreed – but that wasn’t the case.

    #130679
    Andy Thurman
    Keymaster

    It will certainly be easier to find as disregarded – how should you then apportion the mortgage secured against the two properties?!
    The additional facts (re proceeds etc.) suggest firstly that you can reasonably disregard and secondly, that the value less encumbrance would be fairly minimal anyway. Possibly worth contacting NHAS as Louise suggests. The VOA may be of help, too.
    (I’m assuming that the 2010 sale you refer to was for the whole thing?)

    #130681
    sarah elliott
    Participant

    Yes, not an easy one! Sorry – I should have put more info in the original post, but thought I’d put you all off if I gave the full details 😀 Yes the sale in 2010 was for the freehold title of the whole thing.

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