This article is not drafted to alarm providers but it is identifying a potential area of vulnerability

Transcription

1 The last 12 months have been interesting in the Housing Benefit decision-making world. The avenues that local authority Housing Benefit departments are beginning to explore, when assessing Housing Benefit entitlement, have diverted from one regulatory path to another, albeit that the paths are as bumpy as the previous ones trod. These avenues are lined with various obstacles for accommodation providers to deal with when venturing down the long arduous road of assisting their occupants to claim for Housing Benefit. Liability to Pay Housing Benefit There May Be Trouble Ahead: Danny Key examines strategies adopted by HB Departments to avoid their obligations to pay claims This article is not drafted to alarm providers but it is identifying a potential area of vulnerability that could attract attention from local authority Housing Benefit departments on the basis that there are now a few cases which have been reported, and that word is likely to get round We have witnessed the emergence of regulation nine, which is closely linked with regulation eight of the Housing Benefit Regulations 2006 (HBR 2006) being utilised by an increasing number of local authorities as a strategy to reduce their obligation to pay Housing Benefit levels over and above the Rent Service determination, in fact the use of regulation nine prohibits the payment of any benefit at all. Regulation nine replaced regulation seven of the previous Housing Benefit Regulations 1987 (HBR 1987), it relates to circumstances where a person is to be treated as not liable to make payments in respect of a dwelling. This is in contract to regulation eight which relates to circumstances where a person is to be treated as liable to make payments in respect of a

2 dwelling. There is now a well practised potential three pronged approach based on regulation nine: the rental liability is a sham and does not in fact exist at all, or failing that, it is not commercial, or failing that it was created to take advantage of the scheme This article will discuss the first two issues, detailing what providers of supported accommodation need to be aware of, including best practice, to safeguard the rental liability of their occupants. The third area, which relates to taking advantage of the housing benefit scheme, will be discussed in the next issue of the Briefing. The decision to state that the rental liability is a sham has been fairly rare up until now and is often brought in to play when claims are made from religious centres, or where there is evidence of a family member renting a room or property to another family member where there is no real enforceable occupancy agreement in place. In reality this argument can only be used where the claim for housing benefit is quite clearly based on nothing but a verbal agreement or where there is an agreement in place that is undoubtedly not enforceable by law. The second part of regulation nine arguments is based on non-commerciality of occupancy. The decisionmaking process of local authorities is increasingly taking into account this issue in greater scope than it ever has before, particularly where the claims for benefit are from claimants residing in supported accommodation that is not provided by a registered landlord, and the rent charged is in excess of the Rent Service determination. Occupancy agreements, organisational structures, organisational constitutions and status are all increasingly being put under a microscope. To a certain extent this approach may be welcomed from local authority housing benefit departments as it will, and has, removed some of the dubious occupancy arrangements and subsequent claims for benefit in the sector, which may not have been in the interests of the tenants/licensees themselves. Historically the non-commercial argument has been used against faith-based organisations where they offer a free support and rehabilitation service and where no statutory or non-statutory funding stream is attached to the service or where family links are

3 apparent and the terms of the occupancy are not consistent with commercial arrangements, i.e. would the landlord evict the tenant should arrears accrue is a question often used by local authorities when assessing commerciality. The conditions of receiving the accommodation or service often include terms, within the occupancy agreements, which are deemed non-enforceable by law. However it is no longer the case that the non-commercial argument is being used solely for faith-based organisations, other charitable services or where close family links are apparent. Potentially every rental or leaseholder scheme is vulnerable to the new, more stringent test for commerciality and therefore liability to pay housing benefit. There have been various cases that have travelled through the courts relating to regulation seven of HBR 1987 (now reg. 9 of HBR 2006) where noncommerciality and creating liability to take advantage are intertwined. A recent Social Security Commissioners Decision (SSCD) case, which followed a similar case in 2003, deals in particular with Law of Property and Landlord and Tenant Law and directly addresses the liability to pay benefit and the arrangements for occupancy. This, by definition, therefore deals solely with the commerciality element of regulation nine of HBR This decision has inevitably provided local authority housing benefit departments with the framework to assess claims for benefit based on the test set out in the SSCD. Until the Social Security Commissioners Decision, CH/2743/2003, was issued in November 2003, few Housing Benefits officers were familiar with the Law of Property Act 1925, and even fewer may have realised that a tenancy for life is automatically deemed by the Act to be a lease for a term of 90 years. Because rent and service charges paid under a lease in excess of 21 years are eligible for Income Support/Job Seekers Allowance/Pension Credit and not Housing Benefit, local authorities started to follow the decision in CH/2743/2003 and started routinely rejecting claims from people who have been assured that they can be resident for life, often by a relative who owns the property. In November 2006, however, Deputy Commissioner Paines issued his decision in CH/0883/2006. In this case, the claimant had a written contract purporting to grant her a tenancy for 25 years. Not surprisingly, the Council had refused the claim as the lease was longer than 21 years. Or was it? The Law of Property Act 1925 says that a lease for more than three years

4 is only valid if it is executed by a deed - a specialised legal document that requires a witness, and even sometimes a seal. Moreover, a lease of 7 or more years created since 2002 must be registered in accordance with the Land Registration Act The claimant's 25-year lease was not executed by deed, nor was it registered; it was therefore not legally valid. Where did that leave the tenant s claim? Is Housing Benefit claimable? Is Income Support claimable? Or is there is no liability to pay whatsoever? There are two possible scenarios; either the claimant had an equitable lease or, by default, the claimant had an open-ended periodic tenancy which can be created without a deed. The outcome of this case will be monitored and commented on here in the briefing should any resolution be reported. The meaning of an equitable lease will also be discussed in the next issue of the briefing. This case is significant to providers of supported accommodation; in fact this decision will have an impact on Housing Benefit across the board therefore affecting all accommodation providers. Where long leases are provided to leaseholders it is possible that many of these are deficient in either or both of the ways described i.e. not executed by deed and/or not registered. The most significant impact of this decision could be on providers of accommodation where that provider is not the owner of the property in question, and where they are the leaseholder. A lease represents an interest in the land, a form of ownership. This enables the leaseholder to offer occupancy agreements and therefore, in essence, to sub-let the property to its tenants. However if that lease is not executed by deed and/or not registered with Land Registry then that lease is not valid, therefore the legal interest in the property is not apparent, therefore occupancy agreements cannot be offered. The agreement is therefore by definition noncommercial and there may be no liability to pay. This article is not drafted to alarm providers; it is purely identifying a potential area of vulnerability that could attract attention from local authority housing benefit departments on the basis that there are now a few cases which have been reported, and that word is likely to get round. The important thing for housing providers is to use this information in a timely way to make sure that they are covered against this potential problem. At present the actual number of authorities where this

5 approach is being used is very small, and we are simply identifying what may become a trend. Until the Social Security Commissioners Decision, CH/2743/2003, was issued in November 2003, few Housing Benefits officers were familiar with the Law of Property Act 1925, and even fewer may have realised that a tenancy for life is automatically deemed by the Act to be a lease for a term of 90 years. Because rent and service charges paid under a lease in excess of 21 years are eligible for Income Support/Job Seekers Allowance/Pension Credit and not Housing Benefit, local authorities started to follow the decision in CH/2743/2003 and started routinely rejecting claims from people who have been assured that they can be resident for life, often by a relative who owns the property. In November 2006, however, Deputy Commissioner Paines issued his decision in CH/0883/2006. In this case, the claimant had a written contract purporting to grant her a tenancy for 25 years. Not surprisingly, the Council had refused the claim as the lease was longer than 21 years. Or was it? The Law of Property Act 1925 says that a lease for more than three years is only valid if it is executed by a deed - a specialised legal document that requires a witness, and even sometimes a seal. Moreover, a lease of 7 or more years created since 2002 must be registered in accordance with the Land Registration Act The claimant's 25-year lease was not executed by deed, nor was it registered; it was therefore not legally valid. Where did that leave the tenant s claim? Is Housing Benefit claimable? Is Income Support claimable? Or is there is no liability to pay whatsoever? There are two possible scenarios; either the claimant had an equitable lease or, by default, the claimant had an open-ended periodic tenancy which can be created without a deed. The outcome of this case will be monitored and commented on here in the briefing should any resolution be reported. The meaning of an equitable lease will also be discussed in the next issue of the briefing. This case is significant to providers of supported accommodation; in fact this decision will have an impact on Housing Benefit across the board therefore affecting all accommodation providers. Where long leases are provided to leaseholders it is possible that many of these are deficient in either or both of the ways described, i.e. not executed by deed and/or not registered.

6 The most significant impact of this decision could be on providers of accommodation where that provider is not the owner of the property in question, and where they are the leaseholder. A lease represents an interest in the land, a form of ownership. This enables the leaseholder to offer occupancy agreements and therefore, in essence, to sub-let the property to its tenants. However if that lease is not executed by deed and/or not registered with Land Registry then that lease is not valid, therefore the legal interest in the property is not apparent, therefore occupancy agreements cannot be offered. The agreement is therefore by definition noncommercial and there may be no liability to pay. approach is being used is very small, and we are simply identifying what may become a trend. danny@supportsoutions.co.uk This article is not drafted to alarm providers; it is purely identifying a potential area of vulnerability that could attract attention from local authority Housing Benefit departments on the basis that there are now a few cases which have been reported, and that word is likely to get round. The important thing for housing providers is to use this information in a timely way to make sure that they are covered against this potential problem. At present the actual number of authorities where this