Housing Benefit for sale and rent back cases: Test of practical compulsion

The UK Upper Tribunal has found that a First Tier Tribunal erred in law by deciding that a person who sold his former home and rented it back could not receive Housing Benefit. In an important decision, the court ruled that the test of whether someone could continue to occupy their home without relinquishing ownership is one of practical compulsion, rather than legal compulsion and does not necessitate that the lender has started legal action to recover possession of the property.

Background to the case

The case, CSH/10912018, centred on an elderly person’s application for Housing Benefit. The claimant had been paying a mortgage on the property until February 2017, at which point he sold the property, under a “sell and rent back” arrangement with a friend. The claimant had sought advice from the council before selling the property and had been assured that he could claim Housing Benefit to assist with the rental costs of £350 per month.

The claimant’s only income was his state pension and, aside from the property which was financed through an interest-only mortgage, he had no assets. The mortgage was due to mature in 2021, at which point the redemption figure would have been £52,050 and the claimant had no repayment vehicle in place.

On applying for Housing Benefit, the initial claim was rejected under Regulation 9(1)(h) of the Housing Benefit (Persons who have attained the qualifying age for State Pension Credit Regulations 2006. The equivalent provision in the Housing Benefit (Northern Ireland) Regulations 2006 is Regulation 9(1)(h), which states:

“he previously owned, or his partner previously owned, the dwelling in respect of which the liability in respect of rent arises and less than 5 years have elapsed since he or, as the case may be, his partner, ceased to own the property, save that this sub-paragraph shall not apply where he satisfies the appropriate authority that he or his partner could not have continued to occupy that dwelling without relinquishing ownership;”

The claimant appealed the initial decision, but the First Tier Tribunal (FTT) upheld the council’s decision. The claimant then sought permission to appeal to the Upper Tribunal on the grounds that the FTT had erred in law. The Secretary of State for Work and Pensions made a submission supporting the council’s position, arguing that an immediate threat to continued occupation was required in order to satisfy the exception triggered by Regulation 9(1)(h).

Interpretation of “could not have continued to occupy…without relinquishing ownership”

The judgment of the Upper Tribunal hinged on the following principles:

• The words “could not have continued to occupy” do not mean absolute impossibility;
• The test is one of practical compulsion, rather than legal compulsion;
• Consideration must be given to whether the claimant had any realistic alternatives to selling the property ;
• The practical compulsion to sell does not have to be in the form of legal action from the lender;
• Each case must turn on its own merits.

The Tribunal also held that it was not necessary “…to decide how far off the threat of losing occupation is for the claimant to fall within the exception”, pointing out that the use of a defined time-limit earlier in the regulation (disposals in the last five years) showed that the legislature was happy to use clear time parameters where it felt this was required, and had decided not to do so on this occasion.

The Tribunal also dismissed the Secretary of State’s argument that the exception was only met by an immediate threat to continued occupation, dismissing the argument that the phrase “has to” must be interpreted as evidence of requiring the existence of an immediate threat to continued occupation.

Tribunal erred in law

Ultimately, the Tribunal remitted the case to the First Tier Tribunal for fresh consideration, finding that the initial tribunal erred in law in its interpretation and application of the regulation in question, and by placing too much emphasis on the absence of evidence of repossession action by the mortgage company.

Relevance to Northern Ireland

Decisions of the UK Upper Tribunal are persuasive rather than binding precedents for NI social security decision makers. However, this case should be cited in support of any former owner occupier who has felt compelled to sell and rent back his or her home due to financial difficulties.

The full decision is available from Gov.uk