R(IS) 1/95
Mr. D. G. rice	CIS/526/1993
14.3.94
Housing costs ‑ loan taken out upon claimant transferring to his partner his interest in their home - whether applied for the purpose of “acquiring an interest” in the home
The claimant and his wife had purchased their home as joint tenants with the aid of a mortgage of £50,000. They separated but were later reconciled on terms that the claimant transferred his interest in the house to his wife so that she became the sole owner. In order to effect this, a new mortgage for £100,000 was taken out to pay off the existing mortgage and to compensate the claimant for his share in the property. The claimant returned to live with his wife before the transfer and continued to do so thereafter.
The question for the social security appeal tribunal was whether “eligible interest” for the purpose of entitlement to housing costs was on the new mortgage of £100,000, or on £46,000 which was the outstanding balance on the original mortgage. The tribunal decided it was on £46,000. The claimant appealed to the Commissioner. 
Held that:
where the claimant and his partner already own between them the entire interest in a house, any transfer between them does not constitute an acquisition of a interest for the purpose of paragraph 7(3)(a) of Schedule 3 to the Income Support (General) Regulations. They had to be treated as one entity in the light of the overriding principle that in the case of a married or unmarried couple a claim by one of them necessarily relates to both. Accordingly, the relevant figure for determining the eligible interest in this case was £46,000.

DECISION OF THE SOCIAL SECURITY COMMISSIONER

1.	My decision is that the decision of the social security appeal tribunal given on 15 April 1993 is erroneous in point of law, and accordingly I set it aside. As it is convenient that I myself give the decision in this case, I further decide that the claimant is entitled to have included in his income support, by way of housing costs, the interest on only £46,000 of the £100,000 mortgage loan.
2. 	This is an appeal by the claimant, brought with the leave of the tribunal chairman, against the decision of the social security appeal tribunal of 15 April 1993. The claimant asked for an oral hearing, a request which was acceded to. At that hearing, the claimant was present, but unrepresented, whilst the adjudication officer appeared by Mr. Lewis Varley of the Solicitor’s Office of the Department of Social Security.
3. 	The facts of this case would not appear to be in dispute. In 1983 the claimant purchased the property which is his home with the aid of a mortgage of £50,000. The freehold was vested in himself and his wife as joint tenants. At a date prior to Christmas 1990, the claimant and his wife become separated. However, they were subsequently reconciled, but on terms that the claimant transfer to his wife his interest in the house, so that she should be the sole owner. This was effected on 15 February 1991. However, in order to bring this arrangement about, a new mortgage was taken out for £100,000, which was used to pay off the existing mortgage, and to compensate the claimant for his share in the property. The claimant returned to live with his wife before 15 February 1991 and is still living with her.
4. 	The question for determination by the tribunal was whether the “eligible interest”, for the purposes of calculating the claimant’s entitlement to housing costs as part of his income support, was the interest on the new mortgage of £100,000, or the interest on the outstanding balance of the old mortgage, which had initially been £50,000. It was not in dispute that the balance had been reduced to £46,000. In the event, the tribunal, upholding in substance the approach of the adjudication officer, decided that the relevant figure for determining “eligible interest” was £46,000 and not £100,000.
5. 	The claimant’s contention before me was that his case fell within paragraph 7(3) of Schedule 3 to the Income Support (General) Regulations 1987, SI 1987 No. 1967. That provision reads as follows:
“7. (3)  … in this paragraph ‘eligible interest’ means the amount of interest on a loan, whether or not secured by way of a mortgage or, in Scotland under a heritable security, taken out to defray money applied for the purpose of–
(a)	acquiring an interest in the dwelling occupied as the home or
(b) 	paying off another loan but only to the extent that interest on that other loan would have been eligible interest had the loan not been paid off.”
6. 	The claimant’s contention was that his wife had acquired his half share in the property, and accordingly the interest on that part of the loan raised for this purpose was eligible interest. So too was the interest on that part of the loan raised to repay the outstanding mortgage. The new loan of £100,000 consisted of two elements, £50,000 to cover the cost of acquisition, and the other £50,000 to discharge the existing mortgage. In fact, the existing mortgage had been reduced to £46,000, so that the eligible interest was to be calculated by reference in all to £96,000, and not £100,000. This is clear from paragraph 7(5) which reads as follows:
“7. (5) Where a loan is applied only in part for the purposes specified in sub‑paragraphs (3) and (3A), only such proportion of the interest therein as is equal to the proportion of the loan applied for that purpose shall qualify as eligible interest.”
In the submission of the claimant, the combined operation of paragraph 7(3)(a) and (b) and paragraph 7(5) was to render the interest payable on £96,000 of the £100,000 loan eligible interest for the purposes of housing costs.
7. 	Mr. Varley did not seek to challenge the eligibility of the interest payable on that part of the loan used to discharge the existing loan, namely £46,000. However, he did contest the claimant’s contention that his wife had acquired an interest in the property within paragraph 7(3)(a), so that the interest payable on the loan raised for this purpose was to be taken into account. Mr. Varley pointed out that it would indeed be remarkable if, where a husband and wife were living together, and had to be treated as one for the purposes of claiming income support, the interest payable on a loan, raised by one of them to acquire the interest of the other in the home, should be treated as “eligible interest”. For the result would be that the couple could effectively obtain an interest‑free loan on a property already wholly owned between them. Mr. Varley contended that where a transfer of any interest took place between the claimant and his partner, it had to be treated as having no effect for the purposes of paragraph 7(3)(a). The claimant and his partner had to be regarded as one entity, and, if, as in the present case, they already owned between them the entire interest in the property, no subsequent transaction between them could give rise to “eligible interest”. Had, of course, both or either of them acquired some interest in the property from a third party, the position would have been different. Thus, had they only had between them a leasehold interest, and both, or either of them subsequently acquired the freehold interest, that would have been a proper acquisition falling within paragraph 7(3)(a) (cf. CIS/175/1992).
8. 	Although Mr. Varley conceded that there was nothing in the words of paragraph 7(3) to indicate that, in the case of a joint holding by a claimant and partner, they should be treated as one entity, he contended that such a construction must necessarily be adopted in the light of the overriding principle that, where two people were living together, a claim made by one of them necessarily related to both. He particularly referred to paragraphs 2 and 3(1)(a) of Schedule 3 where he contended this principle was implicit. The first paragraph reads as follows:
“2. Subject to the following provisions of this Schedule, the housing costs referred to in paragraph 1 shall be met where the claimant, or if he is one of a family, he or any member of his family is treated as responsible for the expenditure to which that costs relates in respect of the dwelling occupied as the home which he or any member of his family is treated as occupying.”
Paragraph 3(1) provides as follows:
“3.– (1) A person is to be treated as responsible for the expenditure which relates to housing costs where-
(a)	he or his partner is liable to meet those costs than to a member of the same household.”
9. 	In Mr. Varley’s submission, for acquisitions to be true acquisitions within paragraph 7(3)(a) they had to relate to a third party; acquisitions between a claimant and his partner did not fall within its contemplation.
10. 	I accept Mr. Varley’s submission. I am satisfied that where, as here, the claimant and his wife already held between them the entire interest in the home, they could derive no assistance from paragraph 7(3)(a). Any transfer between themselves took the matter no further for the purposes of claiming eligible interest. They had to be treated as one entity; any other view would result in a claimant and his partner being able to raise interest free loans on a home already acquired by them.
11. 	Unfortunately the tribunal, although they reached the right conclusion, relied on faulty reasoning. Accordingly I must set aside their decision as being erroneous in point of law. However it is unnecessary for me to remit the matter to a new tribunal for rehearing. I can conveniently substitute my own decision.
12. 	Accordingly, for the reasons given above, my decision is as set out in paragraph 1.

Date: 14 March 1994 	(signed) Mr. D. G. Rice 	Commissioner