[2008] UKSSCSC CH_1849_2007 (17 January 2008)

CH/1849/2007

DECISION OF THE SOCIAL SECURITY COMMISSIONER

1.	The claimant’s appeal fails.  The decision of the Fox Court Tribunal given on 5 February 2007 (the tribunal) is not erroneous in point of law. I confirm the tribunal’s decision that the claimant is treated as not liable to make payment in respect of his dwelling. He is therefore not entitled to payment of housing benefit in respect of his claim made on  12.1.2006.

2.	Leave to appeal in this case was granted by a Commissioner who asked the parties to consider various points arising from the outset of the original tenancy.  Neither party has been able to cast much further light on these events and  in deciding the appeal I have paid particular attention to the history as set out in the tribunal’s record of proceedings, as well as the few older documents contained in the bundle.

3.	The claimant did not himself attend the oral hearing of his appeal.  However his son, who is also his landlord, did attend and the claimant was represented by a firm of solicitors.  The claimant first became his son’s tenant in June 1995.  He claimed, and was awarded, housing benefit in respect of his rental liability, which I see from the record of proceedings was stated to be a little under £300 per week at that time.  In 1997 the local authority reviewed the award of housing benefit.  It considered that the tenancy was non‑commercial in nature and ceased payment of housing benefit.  It is common ground that the claimant has made no payment in respect of his rental liability since housing benefit ceased in 1997.

4.	The claimant appealed the local authority’s removal of housing benefit to a housing benefit review board but this confirmed the local authority’s decision.  On 7 December 1999 the claimant made a further claim to housing benefit.  This was also refused on grounds of non‑commerciality.  The claimant again appealed to the Housing Benefit Review Board, which confirmed the local authority’s decision.  The local authority’s case is that no further claims to housing benefit were made from then until 12 January 2006.  The claimant’s solicitors dispute this, but the response at page 104 of the bundle is equivocal and there is other evidence (see below) which leads me to the conclusion that intervening claims for housing benefit were not made.  At paragraph 5 on that page, the claimant’s solicitors say:

	“[The claimant] did make application every year.  The Council has acknowledged they may have confused the housing application forms as housing benefit application forms and as such there was no record of receiving housing benefit applications for each year.  However the time to go through the whole process on one appeal was so long that [the claimant] did not make claims each year given that each application including appeal was taking over a year to resolve.  [The claimant] has been advised by housing benefit that there was no need to make an application given the outstanding appeal.  Since 2006 our client has been advised by the Council that he does not need to submit a further application due to a change in the pension system.  However, every year our client has submitted a housing benefit application and this year had to force the Council to accept receipt of an application even though initially they refused to take the same.”

I must confess to being confused by this statement that the claimant did make an application every year, followed a few sentences later by a statement that he did not make claims each year.  I am satisfied from the account given by the local authority, which has no interest in misrepresenting the situation, that the claimant did not make a claim between the refused claim of December 1999 and the claim involved in the present appeal, which is that made on 12 January  2006.  I presume that a claim was made for council tax benefit most, but probably not all, years, and this may have led to some confusion in the mind of the claimant and those advising him.  Most local authorities have a joint form for claiming housing benefit and council tax benefit, and a person who wishes to claim council tax benefit only will complete the same form as those seeking both benefits.  However, I am not even sure that a council tax benefit claim was made each year because I note from page 107 of the bundle that the claimant had council tax arrears of £2,393 00 for the period 1 April 1998 to 31 March 2003 which had led to a hearing at the Magistrates Court.  Page 31 of the papers, which is a local authority memorandum dated 22 May 2000, states that an award of council tax benefit had been made, and therefore the arrears suggest that the council tax benefit perhaps did not cover the whole amount of council tax due, otherwise it is difficult to imagine how such substantial arrears accrued.  The housing benefit application made on 12 January 2006 is reproduced in the bundle and for some reason it does not contain any financial information about the claimant.  The claim form sets out that the dwelling in respect of which the application is made is a one bed roomed flat, owned by the claimant’s son, of which he has been the tenant since 1 July 1995 and the current tenancy is for the period 1 July 2005 to 30 June 2006.  The contractual rent is £380 per week and he was said to be  418 weeks in arrears with his rent.  

5.	The local authority wrote to the claimant on 5 April 2006 refusing council tax benefit on the ground that the tenancy was of a contrived nature.  The local authority must have intended to refer to the application for housing benefit, as questions concerning the tenancy are irrelevant to an award of council tax benefit.  Indeed, the claimant evidently understood it as such and on 5 May 2006 appealed against the refusal of housing benefit.  The statement attached to the notice of appeal states:

	“It should be noted that when we were prosecuted for non‑payment of council tax at the Magistrates Court at Horseferry Road it was accepted that they were genuinely [presumably ‘we were genuinely’] entitled to council tax benefit and should make an application.  If the Magistrates Court  recognises that the arrangement between myself and my son is at arms length they why should you come to a different decision.”

The implication of this statement is that the claimant had stopped claiming council tax benefit, and I note it is part not only of the general confusion as to whether claims were made or not, but also the failure to appreciate the fundamental differences between entitlement to council tax benefit and entitlement to housing benefit.  The nature of the tenancy is wholly irrelevant to questions of council tax benefit.  Section 131(3)(a) Social Security Contributions and Benefits Act 1992 sets out the primary condition for award of council tax benefit, which is that the person concerned must be liable to pay council tax in respect of a dwelling of which he is a resident.  Accordingly the Magistrates Court in dealing with council tax arrears was considering liability to council tax, not the nature of the arrangement subject to which the claimant occupied the dwelling.

6.	The supporting document to the notice of appeal states “it has been previously recognised that there was an arms length arrangement between myself and my parents [sic] and hence the payment of housing benefit .  There has been no change in the circumstances between myself and my son [sic] that would suggest such an arrangement should be interpreted in any other fashion”.  However, I can see nothing to show that the local authority ever accepted this.  It is true that the refusal of housing benefit in 1997 was on the basis that there was no rental liability (see the memorandum dated 22 May 2000 at page 31) but the local authority also made the decision that the tenancy had been created to take advantage of the housing benefit scheme (see letter dated 7 August 2001 at page 30).  The question of whether there is a rental liability – i.e. whether the supposed liability is a sham or otherwise does not give rise to a legally enforceable liability –is one that must be considered by an authority before it goes on to consider whether a tenancy is on a commercial basis.  The same factors will often influence each decision.  Accordingly, I am unable to accept the assertion in the appeal made on 5 May 2006 that the authority previously recognised there was an arms length agreement.    There is no copy of the original housing benefit  application  available and although the tribunal attempted to establish what had been said in that application, evidence given after such a length of time is likely to be speculative.  Suffice it to say that the local authority at some point during the currency of the initial award decided to examine the circumstances and then terminated the claimant’s award.

7.	Section 130(1)(a) Social Security Contributions and Benefits Act 1991 sets out the most basic condition of entitlement to housing benefit, namely that the claimant is liable to make payments in respect of a dwelling in Great Britain which he occupies as his home.  Both the local authority and the tribunal accepted that the claimant was liable to make payment.  This means it accepted that the tenancy agreement was not a sham and that each of the parties to it intended to be bound by that agreement.  However, regulation 7 of the Housing Benefit General Regulations 1987 set out circumstances in which a person was to be treated as not liable to make payments in respect of a dwelling.  Regulation7 has since been replaced by regulation 9 Housing Benefit Regulations 2006, which is in identical form.  However regulation 7 has existed in its present form only from 25 January 1999 and it provides a more prescriptive approach to the interpretation of “commerciality” than did its predecessor regulation, under which the original termination of benefit would have been made.  Regulation 7 was the regulation in force at the time of the decisions under appeal and therefore I will continue to refer to regulation 7.  It is common ground that the only provision the claimant fell foul of was regulation 7(1)(a), i.e. that the tenancy or other agreement pursuant to which he occupies the dwelling is not on a commercial basis.  There is no automatic exclusion of a tenancy between close relatives unless the liability is to a close relative who also resides in the dwelling.  That is not the case here.  Though an earlier disallowance by the local authority referred to contrivance, there is no suggestion in respect of the present claim that there is any element of contrivance.  Regulation 7(1A) provides that in determining whether a tenancy or other agreement pursuant to which a person occupies a dwelling is not on a commercial basis regard shall be had inter alia to whether the terms upon which the person occupies the dwelling include terms  which are not enforceable at law.  It is not suggested there are any such terms here.

8.	It is clear that both the local authority and the tribunal considered the question of legal liability to make a payment and were satisfied that there was such a liability.  Neither the local authority nor the claimant have in connection with this appeal suggested that the authority or the tribunal was wrong to accept this.  The fact that no rent was collected for over eight years might have caused some decision makers perhaps to query this, and I note that for a one bedroomed flat, the rent is very high even by London standards, which again might lead some to query whether the parties genuinely regarded themselves as bound by these terms. But it is no part of the task of an appellate authority, in the absence of any indication that the findings of fact are ill‑founded, to attempt to second guess the fact finding body.  Accordingly, I consider only the question of whether the tribunal was entitled to reach its conclusion that the arrangement was not commercial in nature.  

9.	In challenging the tribunal’s decision, the claimant’s advisers obtained counsel’s advice on the meaning of “on a commercial basis”.  As counsel correctly observed, “on a commercial basis”  does not have any precise or technical meaning.  Definitions include “engaged in trade” or “relating to trade”, and “viewed as a matter of profit or loss”.  I note that case law has focussed on whether the transaction is the sort which a landlord might have entered into with any other person.  A family relationship may be indicative that an arrangement is not on a commercial basis, but that is only one factor among many and  of itself is usually more relevant to the question of whether there is a legally enforceable liability than whether, if liability is accepted,  liability is on a commercial basis.  Case law accepts that profit is not a necessary element of commerciality, though avoiding making a loss might also be an important consideration.  I observe, for example, that charities enter into commercial relationships with tenants.  They are not necessarily concerned with making profit, but would generally be  concerned to avoid making a loss. The level of the rent is not of itself determinative, though I note that a very high rent brings into question whether payment is realistically expected.  While case law establishes that all the relevant circumstances must be taken into account, the weight to be given to them is a matter for the tribunal:  R(H) 8/04.

10.	The tribunal in this case took into account that before entering the tenancy with his son, the claimant had previously claimed housing benefit elsewhere. It also noted that despite the refusal of housing benefit, new short hold tenancy agreements had been entered into each year, the most recent being 30 June 2005 at around £1,647 per month.  However, the tribunal also noted that no rent had been paid since the end of 1997 when the rent was last paid by housing benefit.  It also noted that no proceedings had been issued for possession.  The tribunal correctly took into account that the burden of proof to show non‑commerciality rested on the local authority and that it had to look at all the circumstances.  It correctly recognised the fact that the parties are related does not by itself turn the agreement into a non‑commercial one,  though  the fact of relationship was a factor to take into account.  While it considered that the rent was set at a commercial level,  the key factor for the tribunal was that no rent had been paid since the end of 1997. This was decisive in reaching its conclusion that the agreement was not commercial in nature.  It was argued in support of the appeal that the landlord had felt unable to evict his parents because he had been given advice that if he did this, his parents would be treated as voluntarily homeless and therefore not rehoused.  The tribunal queried this, and I note at page 108, a document which was not before the tribunal, a letter from the local authority’s benefit service dated 17 June 2003 which advises the claimant that his options appear to be either to stay where he is without housing benefit or to move to another address where his landlord has no family and suggest that the claimant seeks advice and assistance about alternative accommodation either from the Citizens Advice Bureau or a local community association.  Though this is not a document which the tribunal could take into account, because it was not before it, it underlines the relevance of the tribunal’s observation that neither the landlord nor the tenant took any action to check the advice supposedly received in relation to the possession if the landlord evicted his father.  I am not suggesting that there was any deliberate failure to advise the tribunal of this correspondence.  The difficulty with recalling evidence over a period of years is that inaccuracies tend to creep into recollection.

11.	The 418 week arrears in which the rent was said to be at the date of the new claim to housing benefit in January 2006 represents over eight years rent.  Though the claimant was said to meet the cost of utilities and other costs of living, he had paid nothing towards his rental liability over this time. The tribunal was in my view fully entitled to reach its conclusion that the level of rent arrears, in combination with the failure to seek advice about alternative accommodation, and the fact of the relationship between landlord and tenant, all pointed to a conclusion that the agreement was not on a commercial basis.  

12.	I observe while landlords might refrain from enforcing arrears while awaiting the outcome of a an appeal against a refusal of benefit, the previous appeal in this case had failed several years earlier, and therefore this cannot explain the landlord’s lack of action in this case. The tribunal’s conclusion as to non‑commerciality was, in my view, inescapable on this evidence and accordingly the claimant’s appeal fails. 

				(Signed on the Original)	Mrs A Ramsay
								Deputy Commissioner 
                                               Date:                                          17 January 2008