ESA owning a property and deprivation of capital

Mildmanneredman

Hello all,

Wondering as many i anyone can help or point me in the right direction. I may make an appoint with the CAB but thought I would try here first/as well.

My mum is in receipt of DLA and ESA Suppport group and it's very improbable she will ever be able to work again. I work.

The intention is for me and my mum buy our council property together (I have lived there 20 years growing up and for a couple of years again now) under a Joint mortgage (it would have to be joint under Right to Buy although I am now on the tenancy), as I understand it she would continue be entitled to both DLA (non-means tested) and ESA (ownership of property is disregarded if it's the home you live in) whilst living there after us purchasing.

The problem is my mum actually want's to move out anyway after we buy, and sign the deed over to me solely as in practice I will be paying the mortgage...I will then be renting her a private place, with a view to buying her a little place tin her old age.

As I understand it if you own property that you don't live in then it does get counted as capital for ESA and therefore she would lose her ESA..Now she would no longer be a property owner having signed over the deeds prior to moving out, but what I wondering is, could this be seen as deprivation of capital..That certainly isn't the intention, mum wants move per sae, but of course it would add financial strain if she would lose her ESA after moving, because of the capital deprivation issue..I'm hoping that the fact that the plan all along is that I end up sole owner will mean it's not deprivation of capital, but I don't know...

Thanks for reading all that..:)

rogerblack

In short.

If you give away assets that have value that you own, for the primary purpose of obtaining more benefit (or that is what is believed by the DWP you have done) they may treat you as still having the amount of capital you gave away.
(notional capital)

She would (after the property is bought out by you both) normally have the right to sell her half. Simply giving this to you may indeed be viewed as deprivation.

This may only come into effect once you've started to move out.

Secondly - you mentioned renting her a place - this would not usually be eligible for housing benefit - unless it met all the rules of a normal commercial tenancy - for example it was considered likely you'd evict her on non-payment.

Timing and details matter.

My understanding (you would need to check this with the DWP) is that - assuming she has no other capital - she can give you the value of her half - if that value is less than 6000 pounds, this will not affect her benefit.

This would mean that shortly after the house purchase - before many payments have been made, she signs it over to you.
At this point - she is legally owing a large amount of money - and by you taking over the mortgage - there is no deprivation of capital issue that would arise - because she is not giving you an asset with a positive value, but a debt.

Purchasing her a place again isn't an issue, nor is her moving out.

As mentioned above - renting her a place may be problematic.

This assumes the mortgage company will let you do this!
You need to make sure that they are happy to let you.
My (limited) understanding of the right to buy scheme is that there may also be problems with the above being legal.

Is the total value of the property much under (say) 60K?

If the value of her half when she gave it to you exceeds 16K - that will remove all entitlement to ESA.
However, this value is not simply the market value of the property.
It is the value of her half of the property, if she was to sell it to someone else - and you were not willing to sell your half.
This is considerably lower.

You need to get approval from the DWP first - to make sure that their interpretation matches the above.

charlieismydarling

Yet another chancer trying to profit by buying a parents council house.

Why doesn't your mum asked to be rehoused by the council in a smaller property, thus freeing up a rare and valuable resource for another needy family?

Disgraceful.

elmer

We had a similar case recently, and refused to pay the HB under the deprivation of capital rules.

The claimant will eventually be eligible when her notional capital is used up in many years time, she gave her house to her son who sold it and used the money to buy a flat for her to rent and she tried to claim HB on it.

elmer

rogerblack

elmer wrote: »

We had a similar case recently, and refused to pay the HB under the deprivation of capital rules.

The claimant will eventually be eligible when her notional capital is used up in many years time, she gave her house to her son who sold it and used the money to buy a flat for her to rent and she tried to claim HB on it.

This is clearly correct for a simply owned property, with no mortgage (or indeed significant equity)
This may not be the position of the OP.

Mildmanneredman

Thanks chaps. With regards renting my mum a new place, I would be paying for the rent on that myself so she wouldn't need HB, but her loosing her ESA would ratchet up the financial strain on me I would have to replace it so she's not without...Her share would have a value (after her amount owing to bank) of £50k (property worth 200k, discount of £100k) so I guess she is giving me a positive value and would lose her ESA then

Thanks a lot much obliged.

Charlieismydarling> Because after paying decades of rent on it, it's now in our interest to buy it. Hope you feel better commissar.

Thanks a lot guys much obliged.

bloolagoon

Mildmanneredman wrote: »

Thanks chaps. With regards renting my mum a new place, I would be paying for the rent on that myself so she wouldn't need HB, but her loosing her ESA would ratchet up the financial strain on me I would have to replace it so she's not without...Her share would have a value (after her amount owing to bank) of £50k (property worth 200k, discount of £100k) so I guess she is giving me a positive value and would lose her ESA then

Thanks a lot much obliged.

Charlieismydarling> Because after paying decades of rent on it, it's now in our interest to buy it. Hope you feel better commissar.

Thanks a lot guys much obliged.

Her share would have a value of £100k.


Sorry maths is Wrong £50k

charlieismydarling

Mildmanneredman wrote: »

Thanks chaps. With regards renting my mum a new place, I would be paying for the rent on that myself so she wouldn't need HB, but her loosing her ESA would ratchet up the financial strain on me I would have to replace it so she's not without...Her share would have a value (after her amount owing to bank) of £50k (property worth 200k, discount of £100k) so I guess she is giving me a positive value and would lose her ESA then

Thanks a lot much obliged.

Charlieismydarling> Because after paying decades of rent on it, it's now in our interest to buy it. Hope you feel better commissar.

Thanks a lot guys much obliged.

It might well be in your interest to buy it. Decades of below market rent in a property with a secure tenancy is not enough for you? If you are trying to say that decades of paying rent somehow benefits others and entitles you to profit from RTB, it doesn't. How lucky your family were to enjoy that benefit. Let others now have the benefit. Trying to dress up greed as somehow being repaid something owed to you is absurd. You want to make a fast buck, your mother doesn't even want to live there.

Again, disgraceful.

leveller2911

rogerblack wrote: »

In short.


She would (after the property is bought out by you both) normally have the right to sell her half. Simply giving this to you may indeed be viewed as deprivation.

If she sells her "half" of the property within 5 years of purchase she would have to pay back the discount she received from the RTB scheme.......


Just to add my opinion......Its yet another case of someone trying to take advantage of the RTB scheme. The current and previous Governments could have stopped the RTB scheme with an Act of Parliament ........

But to their shame neither have and the only reason is to keep the Housing market inflated.

BigAunty

Mildmanneredman wrote: »

Thanks chaps. With regards renting my mum a new place, I would be paying for the rent on that myself so she wouldn't need HB, but her loosing her ESA would ratchet up the financial strain on me I would have to replace it so she's not without....

And if you lose your job, what then...? Also, you'd have to pay her council tax, too, she won't get a discount on that.

On the housing forum, we often see terrible problems when relatives buy each other's properties or become landlord/tenant. Once there are any financial issues, then the family relationship breaks down. We see broke relatives having to evict their parents, for example, or others experiencing repossession or parents that gift their properties to their children on the expectation of rent free living whose children then can't afford to do this. They lose properties and family ties once these things are enmeshed.

Ask about the potential issues regarding your plans on the housing forum - they can tell you about any inheritance/capital gains tax issues but also deprivation of assets issues from a care home perspective.

If your mother requires means tested care later, and has transferred her capital to you, then the council will take umbrage about this and there's no time limit about when they look back. In fact, if there are signs that she's now infirm or less capable, she is more likely to have an issue as there is a legal precedent from a case that means if a claimant could have anticipated future care, they shouldn't have given away their property. Claiming ESA/DLA already indicates a potential need for care.

See the Age UK website to understand the implications - they have a fact sheet on this. Councils have rarely tried to repossess the gifted properties once they've been transferred to relatives but Age UK believe this could become more common.

Also, you need to check with the housing forum members if your mother can ever extract herself from the mortgage. Only you can take it over if you show the mortgage company you've got sufficient means - she can't just take herself off the joint mortgage in the same way that the ownership can be changed. If you lose your job, then lose the property for example, your mother will be responsible also for the arrears. As a joint owner, she can take up occupation whenever she likes.

Also, why do you think your mother's share of the 200k property is worth 50k, just a quarter of its value? How did you come up with that figure? Is this based on your contribution by mortgage/deposit? You need expert advice as to the figure that the DWP/local council will accept.

Cheeky_Monkey

BigAunty wrote: »

And if you lose your job, what then...? Also, you'd have to pay her council tax, too, she won't get a discount on that.

On the housing forum, we often see terrible problems when relatives buy each other's properties or become landlord/tenant. Once there are any financial issues, then the family relationship breaks down. We see broke relatives having to evict their parents, for example, or others experiencing repossession or parents that gift their properties to their children on the expectation of rent free living whose children then can't afford to do this. They lose properties and family ties once these things are enmeshed.

Ask about the potential issues regarding your plans on the housing forum - they can tell you about any inheritance/capital gains tax issues but also deprivation of assets issues from a care home perspective.

If your mother requires means tested care later, and has transferred her capital to you, then the council will take umbrage about this and there's no time limit about when they look back. In fact, if there are signs that she's now infirm or less capable, she is more likely to have an issue as there is a legal precedent from a case that means if a claimant could have anticipated future care, they shouldn't have given away their property. Claiming ESA/DLA already indicates a potential need for care.

See the Age UK website to understand the implications - they have a fact sheet on this. Councils have rarely tried to repossess the gifted properties once they've been transferred to relatives but Age UK believe this could become more common.

Also, you need to check with the housing forum members if your mother can ever extract herself from the mortgage. Only you can take it over if you show the mortgage company you've got sufficient means - she can't just take herself off the joint mortgage in the same way that the ownership can be changed. If you lose your job, then lose the property for example, your mother will be responsible also for the arrears. As a joint owner, she can take up occupation whenever she likes.

Also, why do you think your mother's share of the 200k property is worth 50k, just a quarter of its value? How did you come up with that figure? Is this based on your contribution by mortgage/deposit? You need expert advice as to the figure that the DWP/local council will accept.

I think it's because the property is worth £200k and they would buy it for £100k