Housing benefit: calculating capital

The Upper Tribunal has given guidance on the proper approach to the calculation of capital under reg.51, Housing Benefit Regulations 2006. Justin Bates, David Cowan and Amy Knight report.

Section 123, Social Security Contributions and Benefits Act 1992, makes general provision for the scheme of housing benefit to be administered by local housing authorities. Detailed provision for the assessment and payment of housing benefit is made by the Housing Benefit Regulations 2006 (S.I. 2006 No. 213) and Housing Benefit (persons who have attained the qualifying age for state pension credit) Regulations 2006 (S.I. 2006/214).

Housing Benefit is an income based benefit and a person with capital in excess of a prescribed amount (currently £16,000: reg.43) is not entitled to receive housing benefit. Certain assets are to be disregarded for this purpose, including any premises occupied by the former partner of the claimant as his home (Sch.6, para.4). This disregard does not apply where the former partner is a person from whom the claimant is estranged (Sch.6, para.4(b)).

If an asset is not disregarded, then it must be valued in accordance with reg.51. That requires an assessment of the actual, realisable value of the interest in the asset (reg.51; Hourigan v Secretary of State [2002] EWCA Civ 1890; [2003] 1 W.L.R. 608).

In Neary v LB Hillington [2014] UKUT 427 (AAC) Mr Neary was the carer for his disabled son and mentally ill wife. Initially, they all lived in the family home which was jointly owned by Mr & Mrs Neary.

In August 2009, following a deterioration in her condition, he and his son moved to rented property and applied for housing benefit. Although Hillingdon initially paid housing benefit, they ceased doing so in 2012, on the basis that Mr Neary had capital exceeding £16,000, i.e. his half-share in the family home. The authority valued his half-share at c.£109,000.

Mr Neary unsuccessfully appealed to the First Tier Tribunal, which found that he was estranged from his wife, such that the disregard did not arise. It accepted that he was to be treated as having capital of c.£109,000.

Mr Neary subsequently obtained legal representation and obtained permission to appeal to argue, inter alia:

(a) the authority and FTT had erred in their approach to the valuation evidence as they had valued the house and then simply identified what his share of the proceeds of sale would amount to; the correct approach was to value his interest and, in doing so, the valuation had to take into account, inter alia, the fact of his wife’s occupation, the absence of any willingness on her part to sell, the need to take proceedings to force a sale and her mental capacity;

(b) he was not estranged from his wife, such that the disregard applied.

The Upper Tribunal allowed an appeal. The valuation evidence was wholly inadequate as it simply valued his share of a notional open market sale. In order to ascertain the value of his actual interest one needed to consider the factors identified by the appellant. As a matter of common sense, it was unlikely that a purchaser would pay half the open market value of the property for a half share in a property where the other half was held by a person with severe mental health difficulties who was in actual occupation.

It was unclear why the FTT considered that Mr Neary was estranged from his wife. The Tribunal needed to look at the facts as a whole and see what change had occurred in their relationship and whether it truly had broken down.

The case was remitted for re-hearing.

Justin Bates, David Cowan and Amy Knight are barristers at Arden Chambers. They acted pro bono for Mr Neary.