We have a client who is working etc and has a liability for mortgage costs of £1240 per month - this is more than a third of her income and I have proof of the payments required. However client is NOT actually making the payments to pay the mortgage - and is happy for house to be re-possessed and is aware of consequences. My question is.....can I deduct the £1240 for housing costs on CW1 as she is liable for the housing costs even though she is not actually making payments and her file notes explain this?
Post by Patrick Torsney on Jan 17, 2011 13:06:41 GMT
The LSC has said to me previously that it is only the amount actually in payment that can be deducted. So, in answer to your question, I would say no
By all means check this out with the LSC. The relevant guidance (LSC Manual 2E–017) includes:
In calculating disposable income an allowance can be made in respect of mortgage or rent payable for the period of calculation in respect of the client’s main dwelling.
To me at least, this isn't as clear as it could be. Your client's mortgage is 'payable' but she is not paying it. This would appear to get her off the hook. However, when talking about being able to include amounts being paid towards arrears in calculating disposable income, the Manual is clear that you can only do this if the amounts are actually being paid. I think the implication is that you would only allow the mortgage liability if it was actually being paid
As I said, feel free to ask the LSC and if they give you anything by all means update this thread; it was some time ago when they last said it to me, and you may get a more sympathetic interpretation/response than I had
Post by Colin Henderson on Jan 17, 2011 14:08:41 GMT
Let's think about this issue in the real world.
In housing and debt cases it is BY DEFINITION often the case that the client hasn't actually been paying the mortgage/rent (some even have the cheek to feed their kids first) and if they are approaching you for advice to negotiate preventing repossession on the offer of payments in future, then an interpretation of that rule as meaning actual payments would prevent ALL such work, which is clearly absurd. Now being absurd has never stopped the LSC, but everyone I know doing this work treats such unpaid amounts as payable and deductable.
If, AFTER assessing eligibility on the basis of what's payable and opening a file, you THEN advise the client that, say, there is no point opposing possession cos the borrowing/rent is unaffordable through change of circs (most commonly relationship breakdown) and that the client should concentrate on making a homeless application, or going bankrupt, then that is all still chargeable work. On the other hand, if a client refuses to pay their housing costs against your advice, then the sufficient benefit test means you end the case there, but you can still claim for the matter start.
And what about all the cases where the client comes for advise on poor housing conditions and has understandably or on advice withheld rent where repairs are due? Frankly I don't see how the rule "only what has actually been paid" applies in practice, unless at the start of an interview the client states they have no housing-related issues and can afford their rent/mortgage but choose not to pay it for no good reason. Do you get a lot like that? No, me neither.
Thanks Patrick. I also telephoned Brighton and they advised me that I could make a deduction for housing costs, if client was liable but not paying. They quoted the LSC Manual - Part D Guide to Assessment & Financial Eligibility. Section V Disposable income, allowances and disregards. (5.6 para 2). I have made a note on the CW1.
Post by Mr Fiona T. Wardle on Jan 19, 2011 8:36:51 GMT
Wasn't there a Judicial Review or High Court decision, or some such, on this very issue somewhere in the not-too-distant past? The LSC had nil assessed some files because on CW1s advisers had deducted the rent/mortgage actually due to be paid, and the LSC tried to say only what was in payment should be deducted. The LSC lost. I wish I had a better memory, but I am certain there was some battle over this, I'm sure it isn't a false memory (and of course, if your client is paying extra to clear arrears, this too can be deducted as an allowance, but a written agreement on the the arrears additional payment would be helpful evidence). Anybody else have a better memory (and filing system) than me?
Post by Patrick Torsney on Jan 19, 2011 15:00:34 GMT
Well done Fiona and apar, spot on. You would think I would remember things like this myself seeing as I act as a Project Consultant to CLS Support (!) And, what is totally worse: I wrote the darn thing back in August 2007
I think I must be getting old....
Here is the text of the bulletin (117), which explains the outcome of the JR against the LSC and why the full amount should be allowed, whether the client is paying it or not:
Financial Eligibility: Update on applying the Housing Costs Allowance
CLS Support Contracting email bulletin no. 117
This bulletin is relevant to organisations performing means assessment calculations on behalf of clients. It provides an update to CLS Support Contracting Email Bulletin no. 116: “Financial Eligibility: High Court clarifies meaning of “rent payable””.
What we told you in bulletin no.116
When assessing disposable income, the LSC view had been that you should not make a deduction for housing costs where the client is not actually making the payments they should be
This interpretation – in respect of clients who pay rent - had been successfully challenged by way of Judicial Review
We were going to write to the LSC to ask if it accepts that the same principle applies to clients who are liable for mortgage payments
A housing costs allowance can be allowed when calculating disposable income
If the client has no dependants eg doesn’t have a partner and/or children, then the maximum that can be allowed is £545
If the client has at least one dependant then the full amount that the client has to actually pay themselves can be allowed
Following the High Court judgement, even if the client isn’t paying the rent or mortgage the amount they should be paying can be allowed (including any payments towards arrears they might or should be making)
It is only the amount that the client is (or should) be paying that can be used when considering the housing costs allowance. This means that when calculating what the client is/should be paying, in order to apply the allowance, you should first deduct:
Any housing benefit that is being paid on behalf of the client (if the client is receiving full housing benefit then no housing cost allowance can be applied at all)
Any proceeds of sub-letting any part of the premises
Any amounts reasonably attributable to anyone else other than the client, their partner and other dependants, who is accommodated in the premises other than as a sub-tenant.
The LSC was granted right to appeal the High Court decision and is currently considering its position.
Further information and guidance
If you need any further information or guidance on any of the issues considered in this email bulletin, please contact the CLS Support consultancy service on 0870 7700 447 Monday to Friday 1pm to 4pm or email email@example.com at any time. CLS Support email bulletins and briefings can be downloaded from the CLS Support User’s Area on the Advice Services Alliance website at www.asauk.org.uk/clssusers. Please contact us if you do not know your username or password.
Written by Patrick Torsney, CLS Support Project Consultant
This week we have had four exceptional cases given a nil assessment on the basis that the "means assessment has incorrectly included a deduction for rent, which the client has not paid, therefore overscale on income".
We will of course be appealing. I rang and spoke to one of the assessors at the LSC who wasn't aware of the 2007 case. I would think if we have just had four cases wrongly assessed on this basis it is likely that others may also get similar decisions.
Post by giveusachance on Sept 8, 2011 12:38:33 GMT
Not exactly the same but along similar lines, we have had an exceptional case nil assessed for ineligibility. The circumstances are that the client owned a property which was in neg equity. They rented the property out but the rental income did not cover the morg repayments and so they were toping them up from their own income. The client was living and paying rent in a separate property and as such a deduction was made for this. The LSC seem to be saying that the rental income should be included as income but no deduction can be made for the mortgage payments out as they were not living in that property.