Commissioner's File: CIS/392/1994

SOCIAL SECURITY ACT 1986 
SOCIAL SECURITY CONTRIBUTIONS AND BENEFITS ACT 1992 
SOCIAL SECURITY ADMINISTRATION ACT 1992 
APPEAL FROM DECISION OF SOCIAL SECURITY APPEAL TRIBUNAL ON A QUESTION OF LAW 
DECISION OF THE SOCIAL SECURITY COMMISSIONER

Social Security Appeal Tribunal: Wigan

1. This is a claimant's appeal, brought by leave of the chairman of the social security appeal tribunal, against a decision of that tribunal dated 10 September 1993 (the lengthy hearing having been held on 2 September 1993) which varied a decision issued by the adjudication officer on 9 February 1993 and subsequently revised by the adjudication officer on 14 May 1993. My own decision is that the aforesaid decision of the appeal tribunal is not erroneous in point of law. 

2. The claimant's appeal is brought on a narrow front; but I am afraid that it really is hopeless. The case concerns the housing costs which were payable to the claimant as a component of her income support. She is now aged about 38. She appears to have had a reasonably good job; but that job disappeared with the collapse, early in 1991, of a company of which the claimant had once been an employee but for which she had latterly become an independent sub-contractor. She had bought her home with the assistance of a mortgage from the Nationwide Building Society. In February 1990, however, that mortgage was replaced by a mortgage from Abbey Life. The sum advanced under that latter mortgage was £65,264.00. £45,062 went to discharging the Nationwide mortgage; and the balance of the advanced sum was devoted to purposes which are not within the scope of Schedule 3 ("Housing Costs") to the Income Support (General) Regulations 1987 ("the General Regulations"). 

3. Various complexities bedevilled the computation of the housing costs to be added - from time to time - to the claimant's income support. For present purposes I need not go into those complexities. After two adjournments, the case was carefully examined by the appeal tribunal at the hearing held on 2 September 1993. Before that tribunal were both of the adjudication officer's decisions to which I have referred in paragraph 1 above. The chairman of the appeal tribunal is to be congratulated upon the admirably full and careful manner in which the relevant form AT3 was completed. (I am in no way surprised that the form AT3 was not signed until 10 September 1993.) The complexities were unscrambled and the determination was clear. As I said in paragraph 2 above, the claimant's appeal is confined to a narrow front. That front can be shortly explained. 

4. There is not in the papers any copy of the Abbey Life mortgage or of any document containing terms collateral to that mortgage. It is not in dispute, however, that at some time the claimant had agreed that if the payments due under the mortgage fell into arrears, Abbey Life would be entitled to carry additional charges into the mortgage account. In the papers which are before me, information about those additional charges is scant indeed. On 8 January 1992 a pro-forma (issued by the Department of Social Security) was completed on behalf of Abbey Life. Upon that pro-forma the following was written in block-capital manuscript: 
"A £52 admin charge is added to all accounts over 1.5 months in arrears." 
Returned with the completed pro-forma, was Abbey Life's statement of the mortgage account. In every month there is shown a debit of £52.00. Until June 1991, that debit is described as "Admin Fee". From July 1991 the description is "Arrears Fee". In a printed-out statement prepared by the claimant for the appeal tribunal hearing, the column at the extreme right is headed "Other building society costs". £52.00 features regularly in that column - and so do other, somewhat more substantial, sums, although there is no indication of what those further sums represent. In any event, the entries in the column total £2,242.56. The appeal tribunal decided that no part of that total could be carried into the mortgage sum in respect of which interest was payable by way of housing costs. It is that part of the appeal tribunal's decision - and that part only - which is the subject of this appeal. 

5. In her submission to the appeal tribunal, dated 15 July 1993, the claimant had contended thus: 
"Our housing costs include an amount in respect of administration and other fees charged to our account by Abbey Life, including penalties due as a result of our arrears. I submit that these charges fall to be included as eligible housing costs under Sch 3 Para 1(h) IS Regs." 
Paragraph 1 of Schedule 3 to the General Regulations contains a tersely worded list of the items which can be the subject of housing costs. I need not here set out that list; it appears in the papers and both the claimant and her appeal tribunal representative are obviously quite familiar with it. As was made plain in R(IS) 3/94, paragraph 1 of Schedule 3 only lists the types of expenses that fall to be considered as eligible housing costs. Such expenses are only payable to a claimant subject to the remaining paragraphs of the Schedule. For example, the first item on the list reads thus: 
"(a) mortgage interest payments". 
It by no means follows that a11 mortgage interest payments qualify. One has to go to the detailed and relatively lengthy provisions of paragraphs 7 and 8 of the Schedule to find out exactly what does qualify. 

6. Sub-paragraph (h) of the list used to read thus: 
"(h) payments analogous to those mentioned in this paragraph". 
That sub-paragraph (in common with most "analogous" provisions) gave rise to much litigation. In consequence, the whole sub-paragraph was revoked with effect from 2 February 1993. The claimant is, however, entitled to pray that sub-paragraph in aid in respect of the period before its revocation. But its scope was - at best - somewhat limited. In The Secretary of State for Social Security v McSherry, in an opinion delivered on 17 March 1994, Lord Sutherland was at pains to point out that any "analogy" had to be found in respect of one or more of the listed items, each considered separately; and that no genus could be looked for as representing the totality of the listed items. 

7. The principal argument advanced by and on behalf of the claimant is that "the compulsory administration and legal charges levied on our mortgage account [should] be treated as service charges". That is wholly insupportable. Paragraph 16 of the Appendix common to R(IS) 3/91 and 4/91 (a decision of a Tribunal of Commissioners) reads thus: 
"16. But that is not the end of the matter. Even although a charge may fulfil the definition which we have just set out it may still fail to qualify as an eligible service charge being excluded by paragraph 1(g) of Schedule 1 to the Housing Benefit Regulations, because it is not connected with the adequacy of the accommodation." (My emphasis) 
If a claimant borrows money in order to assist in the purchase of a house, neither the interest payable on such loan nor any administration fees or penalties consequent upon arrears in the payment of such interest are in any way "connected with the adequacy of the [relevant] accommodation". What the claimant says in support of her service charges argument is equally true of mortgage interest payments. Mortgage interest payments quite certainly cannot be construed as "service charges"; and they are - as I have already observed - specifically dealt with in paragraphs 7 and 8 of Schedule 3. In a letter dated 21 October 1993, but obviously written in October 1994, the claimant prays in aid comparison with the housing benefit legislation. But the comparison is of no assistance to this claimant. The management and administration charges invoked by the claimant are charges levied by a landlord. They cannot validly be equated with charges levied by a lender by way of recoupment of the loss (time, trouble and the like) occasioned to him by a borrower's failure to make timely payment of instalments due pursuant to the loan. 

8. Nor is there any mileage in the "analogous to service charges" line of argument. The administration charges and other penalties debited to the claimant by Abbey Life bear no analogy whatsoever to service charges. If they are analogous to anything, it is to arrears of mortgage interest payments; and - with specific exceptions not relevant to this appeal - such arrears cannot be carried into the computation of the capital sum in respect of which interest payments fall to be borne by the income support fund. 

9. By way of an alternative - and I suspect that both the claimant and her representative appreciate that it is a really last-ditch alternative - sub-paragraph (d) of paragraph 1 of Schedule 3 is invoked: 
"(d) payments under a co-ownership scheme". 
In the letter to which I have referred in paragraph 7 above, that argument is developed thus: 
"Once mortgage payments are in arrears and conditional possession proceedings are brought before the courts, it is arguable that the ownership of the property is jointly divided, according to the relative amount of equity, between the householder and the mortgage lender." 
It is not so arguable. Regardless of the stage which possession or foreclosure proceedings have reached, there is never a point in time when the ownership of the relevant property is shared between the mortgagor and the mortgagee. To put it another way: at the moment when any part of the ownership passes from the mortgagor to the mortgagee, the whole of the ownership so passes. A fortiori, the Abbey Life's administration and legal charges cannot conceivably be regarded as "analogous" to payments under a co-ownership scheme. 

10. I close by reiterating that there has not been before me any document in which it was agreed between the claimant and Abbey Life that these administrative and legal charges should be payable to Abbey Life. For the purposes of this appeal, it is not, however, necessary for me to enquire as to whether those charges were properly debited to the claimant. Whether properly or improperly debited, they had no part to play in the computation of the claimant's housing costs. 

11. The claimant's appeal is disallowed. 

(Signed) J Mitchell 
Commissioner 

Date: 25 August 1995