UK Social Security and Child Support Commissioners' Decisions

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[2008] UKSSCSC CH_1973_2008 (24 September 2008)

PLH Commissioner's File: CH 1973/08

SOCIAL SECURITY ACTS 1992-2000

APPEAL FROM DECISION OF APPEAL TRIBUNAL

ON A QUESTION OF LAW

DECISION OF THE SOCIAL SECURITY COMMISSIONER

Appellant: Leeds City Council

Respondent: [the claimant]

Claim for: Housing Benefit

Appeal Tribunal: Leeds

Tribunal Case Ref: 007/07/01254

Tribunal date: 30 January 2008

Reasons issued: 13 February 2008

This appeal by the housing benefit authority, the Leeds City Council, succeeds. The decision of the Leeds appeal tribunal on 30 January 2008 (Mr D Kenningham, chairman, sitting alone) was erroneous in point of law in holding that the claimant's liability for the rent on her dwelling had not been transmitted when her original landlords ("S and G") assigned the entirety of their freehold reversionary interest to their son ("W") by deed on 13 May 1998, and in rejecting the council's submission that as W was the father of the claimant's children, she ceased to be entitled to claim housing benefit from that date because of the excluding provision in regulation 9(1)(d) Housing Benefit Regulations SI 2006 No. 213.

I set the tribunal decision aside and in exercise of the power in paragraph 8(5)(a) Schedule 7 Child Support, Pensions and Social Security Act 2000 substitute the decision I am satisfied the tribunal ought to have given on the facts and evidence before it: namely to confirm the council's original decision of 10 January 2007 superseding and revoking the previous awards of housing benefit made to the claimant for the periods from 18 May 1998 to 8 September 2003 both dates inclusive, and determining instead that she had had no entitlement to housing benefit at any time during those periods and consequently that the total of £23,098.31 housing benefit paid to her, made up as shown in the council's decision letter dated 10 January 2007 at pages 54-55, had been wrongly overpaid to her and the full amount of that overpayment is recoverable from her under section 75 Social Security Administration Act 1992.

The claimant is a woman now aged 35, who before the events giving rise to this appeal had been living with W and had two children by him. In 1997 the claimant and W split up and the house they had been living in was sold. It was then arranged that the claimant and the children would move to another property owned by W's parents, S and G, which she was to rent from them. From 15 March 1997 she occupied this property under an informal tenancy from S and G paying a rent which was originally agreed at £500 per month but then reduced to £400 per month when she applied for housing benefit and the eligible rent was set at £327.17. The claimant was awarded housing benefit from 15 March 1997 and for the first year this was paid direct to S and G as her landlords, she making up the shortfall to the £400 out of her own resources. After that the housing benefit was paid to the claimant direct and she made rental payments of £400 per month periodically to S and G in cash. There was no rent book, no receipt was ever given, and no written tenancy agreement was provided.

On 13 May 1998 S and G sold and transferred to W the entirety of their freehold reversionary interest in the property which the claimant and her children continued to occupy. According to her evidence which was accepted by the tribunal, she was unaware of this development and simply continued to pay her rent in cash to S and G as before. The land registry transfer of 13 May 1998, executed by S, G and W as a deed, shows that the transaction was a full title sale for a consideration of £60,000 paid to S and G the receipt of which they acknowledged (page 51) and the ensuing land registry entries show that W became registered as the freehold owner of the property with title absolute, without any proprietorship restrictions other than a charge to secure a mortgage advance obtained by him: pages 52-53. Initially this was £45,000 from the Abbey National to enable him to complete the purchase from his parents, but in 2001 he remortgaged the property with a Bank of Scotland subsidiary for £75,000 to provide additional funds for the purchase of a holiday home in Spain, completed towards the end of that year in the names of his parents. Again according to the evidence accepted by the tribunal, the claimant had throughout continued making her rent payments periodically to the parents, mainly in practice to G, W's mother, in cash; and these had then been paid into W's own account with the Abbey National and used for the mortgage repayments and other outgoings on the property.

At the beginning of September 2003 the claimant and W were reconciled and he came to live with her and the children in the property. Quite properly she informed the council that they were both living together again so that she no longer qualified for benefit, and housing benefit accordingly ceased to be paid to her after 8 September 2003. The following year W further remortgaged the property, this time for £120,000 from the Birmingham Midshires. At no point had the claimant or anyone else involved informed the council that the legal ownership of the property had been transferred to W as long ago as May 1998, and the facts only came to light in the course of an investigation in 2005-6.

It was not until the start of 2007 that the council made the further determination which has given rise to these proceedings, in the letter dated 10 January 2007 already noted at pages 54-55. This said that although the claim had been paid on the basis that the claimant had been renting her property from S and G, the council now had evidence that it had in fact been sold to W on 13 May 1998 and that she had not been eligible for housing benefit at all from that date since he was the father of her children. For housing benefit purposes that meant she had to be treated as not liable to make payments in respect of her dwelling since she was responsible for a child of W, and from that date he was the person to whom she was liable for the rent under the tenancy agreement pursuant to which she was occupying the property: see regulation 9(1)(d) already cited. The letter further set out a calculation of the resulting overpayment which was determined to be recoverable from the claimant. No dispute has at any point been raised over the calculation of the amount of housing benefit involved, a total of £23,098.31 over the entire period from 18 May 1998 to 8 September 2003 inclusive.

The claimant appealed on the ground that she had been unaware of any transfer of ownership over the relevant period and considered she should remain entitled to the benefit. When the appeal first came before the tribunal the chairman himself intervened with the suggestion that the circumstances gave rise to a "tenancy by estoppel" for the period after S and G had divested themselves of the legal title to the property, and that on that footing the claimant's liability for the rent had continued to be owed to S and G and not to W, so the regulation relied on by the council did not apply. After an adjournment for the council to take legal advice and make further submissions on this suggestion, the case came again before the same chairman on 30 January 2008 when there was a full hearing at which W and his father S as well as the claimant gave evidence, all recorded in commendable detail by the chairman.

After noting S's express evidence that the transfer of legal title "was just a paper or sham transaction for the purposes of securing exemption from capital gains tax and raising some funds" and that he had considered himself to continue to be the beneficial owner of the property, the chairman reached the conclusion that the "tenancy by estoppel" argument he had suggested (and the claimant's representative had quite understandably adopted and pursued) was correct, and allowed the appeal on this ground, holding that the claimant's liability for the rent was not caught by regulation 9(1)(d). He dealt with the council's argument that as S and G had actually owned the property at the time the tenancy was created there was no scope for a tenancy by estoppel, and this was simply a case of her express liability having been assigned to W as transferee landlord, as follows:

"I reject this submission. The Local Authority has not established that [the claimant] was responsible to [W] for payment of rent under the Agreement. Her Agreement was with [S and G]. When they transferred legal title to the property to [W] there was no transfer of any obligation under the rental agreement. I accept that [the claimant] did not know that the transfer had taken place and she continued to make payments to [S and G]. It is not sufficient to say that because [W] became the legal owner he thereby became the landlord. The practical effect of the transfer of legal ownership was to convert the contractual tenancy between [S and G] and [the claimant] into a tenancy by estoppel. She continued to be responsible to them for payment of the rent though they had no longer legal title to the property."

In my judgment the council is right in its submission on this appeal that (as the passage just quoted demonstrates) the chairman's decision was based on a rather basic legal misconception. There is no doubt in my judgment that the effect of the land registry transfer deed in respect of the entire interest of S and G in the freehold of the property was that of an absolute assignment of their freehold reversionary interest to W, subject to the subsisting tenancy in favour of the claimant. As the submission on behalf of the council by Miss N Murphy dated 21 April 2008 at pages 501-504 succinctly points out, the effect of such a transaction is that the assignee becomes the landlord of the property. See Megarry and Wade, Law of Real Property, 7^th Edition, paragraph 17-114, stating the basic effect in law of an assignment of a landlord's freehold reversion in similar terms to those accurately submitted by Miss Murphy.

The claimant's original tenancy from S and G having been created in March 1997, after the coming into force of the Landlord and Tenant (Covenants) Act 1995, the position in law is in my judgment governed and conclusively determined by section 3(3)(b) of that Act, under which the effect of the absolute assignment of the landlord's freehold reversionary interest by S and G to W on 13 May 1998 meant that W thereby became entitled to the benefit of the claimant's obligations under her continuing tenancy agreement: in particular her liability to pay the rent under it.

It must in my judgment follow that for the purposes of regulation 9(1)(d) cited above W, as the person to whom the benefit of the claimant's rent liability under her agreement had thus been transmitted, became the person to whom she was in substance liable for the rent under the agreement even if she may not have become aware of it at the time; and accordingly as she was responsible for his children she could no longer be entitled to housing benefit from the date of the assignment, whether it was S and G or W that in practice continued to collect the rents contractually due from her.

I therefore agree with the council's submission that on the facts of this case no question of any tenancy having been created by estoppel arises, and the suggestion by the chairman that the concept was of some relevance in this case was unfortunately mistaken and the reliance placed on it by the claimant's representative misplaced. The basis of the council's original decision revoking the claimant's housing benefit from 13 May 1998 was correct, as from that date the claimant was disentitled from housing benefit by regulation 9(1)(d) as the benefit of her liability for rent under her (express and still subsisting) tenancy agreement had been legally assigned to W.

The frank avowal by S in the course of his evidence to the tribunal, apparently concurred in by W, that the purpose behind the sale and transfer of his and G's entire freehold reversion to W was some form of swindle on the tax authorities and mortgage lenders, makes no difference in my judgment to this conclusion. Whatever the purpose behind the assignment, the fact is that they did it; and the effect of the outright transfer by deed in favour of W was that he became the landlord, legally entitled as assignee to enforce the claimant's rent liability. The council should however draw the attention of the relevant authorities to what was said about the dishonest purposes of the transaction in case further action needs to be taken about that: if the claimant's evidence is accepted, the failure to give her the required written notice of assignment of the landlord's interest was a further criminal offence under section 3 Landlord and Tenant Act 1985.

As I have already noted no dispute has been raised about the amount of the calculation set out in the decision letter of 10 January 2007 at page 54 nor has any basis been identified or argument raised to suggest that the overpayment was in a non-recoverable category, so the council was also correct in determining the entire amount of housing benefit it paid to the claimant from 13 May 1998 while unaware of the assignment to W was legally recoverable from her.

The appeal is therefore allowed and my decision substituted in the terms set out in paragraph 2 above.

(Signed)

P L Howell

Commissioner

24 September 2008