Deprivation of Capital - Buying Shared Ownership

GirlFromMars_2

Hello, in need of some assistance please! ... I've spoken to a number of Citizens Advice Type people as I have a very complicated housing situation and am currently trying to buy a shared ownership home with the HOLD scheme for people with disabilities, and none of them really seem to be certain about the advice they are giving me, and the rules they are referring to don't really seem to cover my situation.

In particular I'm worried about Deprivation of Capital, and I've been told today by the Advice Centre that I won't be able to buy a house, for me to live in, as it would be considered to be Deprivation of Capital ... this seems ludicrous to me if it's true ... and if it isn't true could you please point me in the direction of the information to prove that it isn't true, as I need to prove to the housing association that I am buying with that I will be able to claim means tested benefits after buying the house.

My Situation ...

Benefits. I'm currently in receipt of no means tested benefits, and have never claimed means tested benefits. I receive contribution based ESA and DLA.

Capital. I own a share in my brother's home, which was left to us a long time ago when we were children. I am unable to live in this house as he lives there with his family. I moved out permanently last year, and am unable to move back.

My Living Situation. Since my illness for the past decade I've been trapped living with other family, as I was unable to realise the capital in the home I own without evicting my brother, so I've lived in the spare room of a family member, without paying rent (as I can't claim housing benefit because of my capital ... and couldn't pay housing benefit to a family member anyway). Although I spent some time living in the house I own over the years, for the most part, and as far as the DWP are concerned I've not lived there. I have put up with this situation for my brother's benefit, and have been happy to do that knowing that at some point in the future he would be able to buy our childhood home and I would be able to buy my own home and move out.

My brother is finally in a position to buy me out for my share of the house we own together. I would like to use this money to put towards a Shared Ownership property. I would own 55% of the Flat outright ... and the other 45% would be owned by the housing association. After buying the flat I would need to be in receipt of Housing Benefitto pay the rent on the rented share of the property.

I would be using all of the capital from the sale of my brother's home to buy my share in the new flat, saving £5K which I need to hold back for moving expenses ... and a further £1K for potential Capital Gains Tax.

To complicate matters further ... pending appeal my Contributions Based ESA is running out and I will be moved to Income Related. Obviously I would need to be in receipt of ESA as well to live independently, and as this will be means tested this will also be subject to Deprivation of Capital Rules.

I have been told by the Advice Centre that I cannot use this money to buy a house, as I don't fall under any of the rules relating to selling houses and Capital, their advice was to move back into the home I am trying to sell so I can fall into the 26 week rule. This isn't an option. HOWEVER I believe these rules are in relation to claiming means tested benefits while you are in possession of capital? ... I don't want to claim means tested benefits while I have capital, either owning a house, or selling it ... I just want to claim means tested benefits after I've moved the capital into a home I am living in.

I will need to move my capital from a home I cannot live in, into a home I can live in.

I will then need to immediately be eligible to claim Means Tested ESA, Housing Benefit and Council Tax Benefit.

Please could you advise me firstly if this is a possibility, or if I really just have to sell the house and live off that money till it dwindles away to nothing, before I'm eligible for any benefits (DLA aside) again?

If I am able to use this capital to buy a house without Depriving myself of Capital and still claim ESA, Housing Benefit & Council Tax Benefit could you please point me to the specific legislation, or tell me who I need to talk to, to get a decision made? I need to have this in writing from someone before the Housing Association will move forward with the purchase.

The Advice Centre have been really helpful, but they really don't know much about Deprivation of Capital (other than don't deprive yourself of capital!!!) as in the area I live it doesn't come up all that often!

I believe they are getting confused by the rules about claiming while you are in possession of Capital (ie you can claim within 26 weeks of trying to sell your own home/buy somewhere new) as opposed to Deprivation of Capital ... buying a home to live in, having no other capital, then claiming.

Thanks heaps for the help! x

Housing_Benefit_Officer

http://www.dwp.gov.uk/docs/hbgm-bp1-assessment-of-capital.pdf

P170 onwards.

Horseunderwater

It is still Capital and as the value is above the £16k limit - it is that - that has stopped you being able to claim any Means tested benefits till now. I cannot see how when you finally get the actual money and it sits in your bank account until the money goes to the housing association to pay for 55% shared ownership that it could be classed as DOC. So you should be able to claim Housing benefit for the other 45%, but there will be a little time while it gets processed that you may need to pay the rent to the HA until that point. The poster called Housing benefit officer may well have more of an incite into this as they deal with that side of it. Generally both DWP and Local authority deduct £1/£250 over the £6k limit up to the £16k from both ESA & housing benefit. I am sure that someone on here will know loads more re the DOC thing. You will need to buy some items for the home like a fridge washing machine furniture unless the HA provides that? That is not DOC. I hope that it goes well and that you will finally be able to have a new home of your own.

GirlFromMars_2

Housing_Benefit_Officer wrote: »

P170 onwards.

Thanks! ... from what I read in there, the house I own should be disregarded capital already? ... as it is where my brother (a relative) who is in receipt of DLA (incapacitated) lives? (1.181 ii)

... so I actually have been entitled to means tested benefits for the entire time he's been claiming DLA? ... oh well!

... and after I've disposed of my share of the house it becomes ...

Capital Disregarded for 52 weeks?

"amounts paid to the claimant and deposited in their name solely for purchasing premises which they intend to occupy as their home" (1.201 ii)

And then when I buy a home for me to live in it becomes Disregarded Capital again as it will be

"The claimant’s home, but only one dwelling one dwelling may be so disregarded" (1.181 i)

Am I reading that right? ... the woman I spoke to today seemed to think that once it becomes Capital I cannot then dispose of it to make it disregarded by buying my own home and living there?

Sorry ... I've had so many issues already with red tape trying to get to a point where I can sell my share of this house that I'm really confused, and would like to be clear that I'm understanding this correctly ... I cannot get into a position where I buy half a house and have no ability to pay the rest of the rent or living expenses!

Thanks! x

paddedjohn

Im sure capital gains tax would be due (on any price increase on her share since she inherited it) since the house isn't the op's main residence.

Housing_Benefit_Officer

Is the only reason for part buying a property is to enable you to claim housing benefit?

CKhalvashi

Horseunderwater wrote: »

One of the things I noted was that you mentioned Capital Gains tax. There should not be any to pay as you inherited the home from your Parent, so in effect you have not bought an asset to sell at a later date. All you are doing is realising the capital that has been tied up in what was the former parental home. It is still Capital and as the value is above the £16k limit - it is that - that has stopped you being able to claim any Means tested benefits till now. I cannot see how when you finally get the actual money and it sits in your bank account until the money goes to the housing association to pay for 55% shared ownership that it could be classed as DOC. So you should be able to claim Housing benefit for the other 45%, but there will be a little time while it gets processed that you may need to pay the rent to the HA until that point. The poster called Housing benefit officer may well have more of an incite into this as they deal with that side of it. Generally both DWP and Local authority deduct £1/£250 over the £6k limit up to the £16k from both ESA & housing benefit. I am sure that someone on here will know loads more re the DOC thing. You will need to buy some items for the home like a fridge washing machine furniture unless the HA provides that? That is not DOC. I hope that it goes well and that you will finally be able to have a new home of your own.

HBO will be the only one that can advise, as this is well outside my specialist remit, too.

Best of luck when he gets here!

CK

GirlFromMars_2

Horseunderwater wrote: »

One of the things I noted was that you mentioned Capital Gains tax. There should not be any to pay as you inherited the home from your Parent, so in effect you have not bought an asset to sell at a later date. All you are doing is realising the capital that has been tied up in what was the former parental home.

Unfortunately we're pretty sure it's liable for some Capital Gains Tax ... I have specialist Tax Advisers helping me with this part of the problem ... It was never a parental home, it was my grandmother's house ... although it became our main family home after she died. We're hoping I'm entitled to almost full Private Residence Relief but that's yet to be decided.

It is still Capital and as the value is above the £16k limit - it is that - that has stopped you being able to claim any Means tested benefits till now. I cannot see how when you finally get the actual money and it sits in your bank account until the money goes to the housing association to pay for 55% shared ownership that it could be classed as DOC. So you should be able to claim Housing benefit for the other 45%, but there will be a little time while it gets processed that you may need to pay the rent to the HA until that point. The poster called Housing benefit officer may well have more of an incite into this as they deal with that side of it.

Thanks ... so even if it is currently classed as capital I am allowed to buy a house for myself with it?

Generally both DWP and Local authority deduct £1/£250 over the £6k limit up to the £16k from both ESA & housing benefit. I am sure that someone on here will know loads more re the DOC thing.

... this is where you have me worried ... once I buy the house I will no longer have capital ... that will be when I'll be making Housing Benefit claims ... will they still count me has having capital from the money I had before I bought the new place?

You will need to buy some items for the home like a fridge washing machine furniture unless the HA provides that? That is not DOC.

... I think I'm going to have to spend so much actually paying for the shared ownership in the first place I'm going to have so little left that I'm going to have to do all that on the cheap! ... but good to know I'm allowed to buy stuff for the house!

I hope that it goes well and that you will finally be able to have a new home of your own.

Thanks heaps! ... that's the dream!

GirlFromMars_2

Housing_Benefit_Officer wrote: »

Is the only reason for part buying a property is to enable you to claim housing benefit?

LOL! ... nope! ... I currently own a house I can't live in, and am living a half life in a relatives spare room, I have no room for my belongings, am unable to have guests visit the house, and am unable to have people visit me at the house. I am disabled so am unable to get out much and spend most of my time at home ...

... it is a truly depressing existence, and I have only been doing it as there's been no way out until my brother was able to afford his share of the property. At least not without losing our childhood home, and I didn't want to do that ...

... I need to move out, I need to live in my own place ... I need to have space so I can have people visit me, so I can have my own belongings in my own home ... I need to live somewhere where the radio isn't on all night in the next bedroom keeping me awake ... I need to move on with my life ...

... if I could afford to buy somewhere outright I'd be very happy to do that ... unfortunately the house I am selling is in a low house price part of the country, and the place I will be buying is in a high price part of the country, so there is no way I can afford to buy a property outright myself ... so I'm going the shared ownership route because I have no other option, and I have no other way of paying the rental share than using housing benefit ...

ETA ... I am on the local authority housing list as it's a requirement for the Shared Ownership scheme I'm planning on buying with.

GirlFromMars_2

paddedjohn wrote: »

Im sure capital gains tax would be due (on any price increase on her share since she inherited it) since the house isn't the op's main residence.

... yup ... that's my understanding ... unfortunately it never occurred to me it would count as a second home till it came to selling it, but at the moment we're trying to work out how much Private Residence Relief I'm entitled to ... the working assumption at the moment is the Cap Gains Tax bill won't be too high, but there will be something to pay! x

BurnleyBob

Ideally you'd want it in writing from the DWP, who administer both types of ESA, and from the LA, who administer Housing Benefit and Council Tax Support on behalf of the DWP where the shared ownership is, that you'd be eligible to claim income-based ESA plus the other two so that you can present that evidence to satisfy the HA that you'd be able to meet your rent liability to it should you proceed.

I doubt you would receive an unqualified yes from them or an indication that it should be okay because under the current rules, in my opinion, it would be deprivation of capital. Although I agree with your 'ludicrous' comment, the simplest solution would be not to travel that path and instead act on the recommendation from the Advice Centre re the 26 week rule as those tasked with deciding whether you fit the criteria for claiming means-tested benefits will have to base their decision on their interpretation of those rules.

You stated that the home you half own you 'cannot live in' and that returning to live there 'isn't an option' but didn't expand upon the reasons why. Other than an extraordinary set of circumstances, legally you would be able to live there whenever you wish. If you meant it would merely be awkward or unsatisfactory for a variety of reasons then I'm afraid those would be unlikely to convince an impartial bureaucrat that you hadn't deliberately deprived yourself of capital.

Couldn't you ensure you're resident there for a very brief period before and on the date that the payment from your brother clears into your bank account? If you can, be sure to declare your new address to the DWP, LA, etc, the instant you move back in for their records to be updated.