R(IS) 7/93

Mr. M. H. Johnson	CIS/175/1991
2.10.92
Housing costs – tenant purchasing the freehold reversion of his home – whether “acquiring an interest in the dwelling”
The claimant was living with his wife and disabled adult son in leasehold property which was subject to a mortgage and on which ground rent was also payable. He had the opportunity to buy the freehold reversion and requested additional housing costs on the further advance of about £200, taken out to buy the freehold. The adjudication officer refused the request on the ground that the interest on the further loan was not “eligible interest” within the meaning of paragraph 7(3) of Schedule 3 of the Income Support (General) Regulations 1987. On appeal, a majority of the tribunal confirmed the adjudication officer’s decision. The claimant appealed to a social security Commissioner who held that the tribunal’s decision was erroneous in law and set it aside. The Commissioner remitted the case to an adjudication officer to recalculate the claimant’s housing costs from the date of his acquisition of the freehold.
Held that:
in circumstances such as those in this case there is nothing in the regulations to preclude a claimant acquiring a further and greater interest in the dwelling occupied as the home (para. 7).

DECISION OF THE SOCIAL SECURITY COMMISSIONER

1. 	My decision is that:
(a) 	the majority decision of the Wolverhampton social security appeal tribunal given on 14 August 1990 is erroneous in point of law and is accordingly set aside;
(b) 	the claimant’s entitlement to income support is to be reviewed and revised to include in his housing costs the appropriate payment in respect of the interest payable by him on a further loan obtained for the purpose of purchasing the freehold interest in his home.
2. 	The claimant, to whom I shall refer as Mr. C., appeals with leave of the Commissioner against the decision of the tribunal confirming the decision of the adjudication officer, issued on 4 June 1990, that Mr. C. was not entitled to any further amounts by way of housing costs.
3. 	I held an oral hearing on this appeal on 16 September 1992 when Mr. C. was represented by Ms. Gaynor Phelps of the Dudley Benefits Shop. The adjudication officer was represented by Mr. L. Scoon of the Office of the Solicitor to the Departments of Health and Social Security.
4. 	The facts are not in dispute. Mr. C. is a married man who at the material time was living with his wife and their disabled adult son in leasehold property, which was subject to a mortgage of some £3,700 and on which ground rent of £25 per annum was payable. Mr. C. had been in receipt of various benefits for some time, including supplementary benefit and, latterly, income support. On 5 April 1990 his housing costs for income support purposes were calculated as being the eligible interest on the outstanding loan; £454.66 a year, and the ground rent of £25 a year; a total of £554.66 or £8.75 a week. On 4 May 1990 Mr. C. informed the Department that he had the opportunity to buy the freehold reversion for £574.80. He had £400 and therefore required a further advance of about £200 from his building society; he sought additional housing costs to cover the interest on such a loan.
5. 	The adjudication officer rejected the application on the ground that the interest on the further loan would not be “eligible interest” within the meaning of paragraph 7(3) of Schedule 3 (“Housing Costs”) to the Income Support (General) Regulations 1987 [SI 1987 No. 1967]. Regulation 17(e) of the General Regulations provides that a claimant’s “applicable amount” for income support shall include:
“(e) 	any amounts determined in accordance with Schedule 3 (housing costs) which may be applicable to him in respect of mortgage interest payments ...”
And paragraph 7(3) of Schedule 3 defines a claimant’s “eligible interest” for the purposes of regulation 17 as meaning:
“(3) ... the amount of interest on a loan, whether or not secured by way of mortgage ... taken out to defray money applied for the purpose of -
(a) 	acquiring an interest in the dwelling occupied as a home;
(b) 	[not applicable].”
6. 	Mr. C. appealed and on 14 August 1990, having found facts essentially as set out above, the tribunal were divided in their decision. The reasons given by the majority for disallowing the appeal, summarised paragraph 7(3) of Schedule 3 and went on:
“It was the view of the adjudication officer and of the majority of the tribunal that as [Mr. and Mrs. C.] had already acquired an interest in the home it was not possible to regard any further interest payments as being eligible interest for the purpose of acquiring a further interest in the same property. The view of the majority is that the proposed new acquisition of the freehold reversion can no longer satisfy paragraph 7(3) of Schedule 3 by taking out further loans, which merely achieve the same or similar objective as the first loan.
In effect, this decision is tantamount to reading the word ‘an’ as meaning ‘one’.
For these reasons, the majority confirmed the decision made by the adjudication officer.”
The dissenting member’s reasons were as follows:
“The chairman accepts the submissions made on behalf of Mr. [C.] by Ms. M. S. Phelps of the Dudley Benefit Shop.
It is true that Mr. [C.] was already receiving interest on his mortgage by virtue of the provision dealing with the acquisition of an interest of the dwelling occupied as a home, but the chairman could identify nothing in the regulations which precluded a second payment under the same heading. Indeed, the use of the indefinite article ‘an’ as distinct from the definite article before the word ‘interest’ might in itself be an indication that there could be more than one interest.
As Ms. Phelps stated, an interest is a legal right or title and the right that would have been acquired, under the purchase of the freehold reversion would have been quite different from the right that had been acquired under the original lease. Indeed, upon acquiring the freehold reversion, Mr. [C.] would have become the absolute owner of the property in fee simple. In summary, it was the chairman’s view that the purchase of the freehold reversion would effectively have resulted in Mr. [C.) acquiring an interest in the dwelling occupied as a home and this fulfilled the requirement in sub‑paragraph (3) of paragraph 7 of Schedule 3.”
7. 	Having heard submissions from Ms. Phelps and Mr. Scoon who, incidentally, supported the appeal, I am satisfied that the dissenting opinion is correct. In my judgment, on a proper construction of the regulations, in circumstances such as those in the instant case there is nothing to preclude a claimant acquiring a further and greater interest on the dwelling house occupied as a home. As Mr. Scoon correctly points out, such a situation could arise, and would fall within the scope of paragraph 7(3), where property was jointly held and one partner wished, or indeed, needed in order to preserve the property as a home, to acquire the other partner’s interest. The regulations have provided for restriction of meeting housing costs, and paragraph 10 of Schedule 3 deals with such limitation where, for example, local authority property is purchased by a tenant, when housing costs are limited to “the eligible rent immediately before the acquisition”, with provision for appropriate increases. But plainly that is not this case.
8. 	In these circumstances I hold that the tribunal’s majority decision is erroneous in point of law and I set it aside. It is right in this case that I should exercise my discretion under section 23(7)(a)(i) of the Social Security Administration Act 1992 to give the decision which the tribunal should have given, and accordingly I do so in paragraph 1(b) above. The adjudication officer will need to recalculate Mr. C.’s housing costs in the light of the factual situation from the date of his acquisition of the freehold interest in the house, on which date ground rent will, of course, cease to be payable. In the event of any problem arising the matter is to be referred to me for determination.
9. 	The claimant’s appeal is allowed.

Date: 2 October 1992	(signed) Mr. M. H. Johnson
	Commissioner