Reg 9 (h)

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  • #44026
    lindsey.aylott
    Participant

    A gentleman has approached us to see whether he could sell his home to a private seller and rent through an estate agent and then claim housing benefit.

    He is in receipt of income support as he is a full time Carer for his Mum who is very poorly.  Income Support are paying the interest and he still has £400 a month of his mortgage to meet himself from his income support.  On top of this he has £19k debts through credit cards.  He is all up to date with his mortgage.  If he sold his property he would receive 33k from proceeds of sale – however he would pay his debts off which would leave him with13k which we would include as capital. 

    In my opinion he would not be entitled since he does not have to relinquish the ownership as he is all up to date with his mortgage payments.  My knowledge is that he would have to relinquish the ownership by a mortgage rescue scheme or supply evidence of the mortgage lender’s actions being taken over arrears (I have considered the A5/2009 and Reg 9 ( h ). 

    He is still going to consider selling his home and moving elsewhere if we don’t meet housing benefit on the current home as it is a real struggle for him to keep up the current mortgage payments.  The rent on the alternate private rented accommodation would be higher than the one he would remain living in and therefore as a result we would be meeting higher hb costs.  Is there any away around the regulations so we could agree to pay his hb?

    #125098
    Andy Thurman
    Keymaster

    There is no hard and fast rule on the proof required to satisfy the caveat in the previous owner clause.

    On the basis of the post, you seem to acknowledge that he cannot maintain the status quo – I’m assuming he has been using his credit card to pay the mortgage but, however he’s done so, it is not something that could be realistically continued. His medium term prospects income wise are not good!

    I checked out A5/2009 – it isn’t completely unhelpful but the point re clearing credit card debts is misleading in that it, in your case, this seems to be more about how he would use the equity rather than why he is selling. It is all part of the ‘big picture’ but his primary problem is how he will continue to pay the non-interest part of his mortgage. The circular also mentions arrears letters – great if they exist but somewhat circumstancial! There will be people that do have arrears (and such letters) that would not need to sell and just because there are none YET, there is an inevitability for your prospective claimant that it will follow. I don’t think the regs are worded (or intended) so that arrears have to exist – you would then be forced to advise this guy to go away and come back when his situation is much worse! The need to sell has just been recognised as the arrears are about to start rather than once thay have built up.
    Similarly, there is no obligation to use a mortgage rescue scheme – the background to A5/2009 is an acknowledgement of “dodgy” “rent/buy back” arrangements existing. The rescue schemes are a safer option. Where the new landlord is a private individual/organisation, you just need to scrutinise the deal more closely – is there a slow release of equity intended to avoid capital limits etc. (this doesn’t seem a concern in your case).

    So – your question is….
    Can this man continue to live in the property if he doesn’t sell? Not black and white in this case but seems a fairly persuasive argument. Perhaps one question I would ask is whether he has spoken with the mortgage provider to consider a switch to interest only but I would not expect a positive outcome!

    #125102
    peterdelamothe
    Keymaster

    My guess is that most Tribunals would reject this argument. He still has substantial equity in the property; he needs to consider all the options including a lodger, reducing payments as Andy suggests and so on. It is intended to be a narrow exception and 33K profit on the sale suggests the position is not desperate yet. Trouble is these cases are rather subjective…some cases are clear but most of them are arguable either way.

    #125103
    John Boxall
    Participant

    One point worth making is that any ‘sale and leaseback’ deal now has to be done by a FSA registred provider – and at the moment there are none!

    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

    #125105
    Andy Thurman
    Keymaster

    [quote=John Boxall]One point worth making is that any ‘sale and leaseback’ deal now has to be done by a FSA registred provider – and at the moment there are none![/quote]

    Any link/info on this John?

    #125106
    John Boxall
    Participant

    Try

    http://www.fsa.gov.uk/library/communication/pr/2012/011.shtml

    http://www.fsa.gov.uk/pages/consumerinformation/product_news/mortgages/sale_rentback/index.shtml

    http://england.shelter.org.uk/get_advice/repossession/sale_and_rent_back_schemes

    I did have a proposed sale and leaseback case recently but that did not proceed

    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

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