Decision of the Upper Tribunal
(Administrative Appeals Chamber)
As the decision of the Leicester appeal tribunal (held on 18 January 2008 under reference 038/07/02335) involved the making of an error in point of law, it is SET ASIDE under section 12(2)(a) and (b)(ii) of the Tribunals, Courts and Enforcement Act 2007 and the decision is RE-MADE.
The decision is to confirm the Secretary of State’s decision on the housing costs element of the claimant’s award of state pension credit. 

Reasons for Decision
Section							Paragraphs
A	Jurisdiction						1
B	The issue and how it arises			2-9
C	The oral hearing					10-11
D	The legislation					12-14
E	What the tribunal decided and why	15-17
F	The claimant’s case				18
G	The additional bedrooms			19
H	The number of bedrooms			20-22
I	The size of the bedrooms			23-27
J	The timing of the loan				28-35
K	The utility room					36-38
L	The fees						39-44
M	Disposal						45

A.	Jurisdiction 
1.	This case began as an appeal by the claimant to the appeal tribunal followed by an appeal by the Secretary of State to a Social Security Commissioner. The social security jurisdiction of the appeal tribunal and the Commissioners was transferred on 3 November 2008 to the First-tier Tribunal and Upper Tribunal respectively. The proceedings before the Commissioner were transferred to the Upper Tribunal under the Transfer of Tribunal Functions Order 2008 (No 2833). This has not affected my decision on the issues raised by the appeal.
B.	The issue and how it arises
2.	The claimant was born on 6 January 1941. After qualifying, he worked as an electrical engineer, rising to installation manager. He was then severely injured in a road traffic accident. After a prolonged recovery, he was left with disabilities and worked as a self-employed electrician. He retired in due course and, on 6 January 2006, made a claim for state pension credit, which was awarded from 10 April 2006. He subsequently returned to work part-time. This appeal concerns his entitlement in respect of housing costs. 
3.	The relevant facts are not in dispute. The precise amounts are not relevant to the legal issue. 
4.	The claimant purchased a three bedroom house in 1971 with the aid of a mortgage. This was an interest only mortgage. He saved and repaid part of the capital. 
5.	In the course of the 1970s, he had three children. The first two were boys; the third was a girl. In 1979 following the birth of his daughter, he decided to extend his house so that the children could each have their own bedroom. This required a fourth bedroom. He also built on a utility room for added convenience and moved the central heating boiler there. In order to avoid the utility room having a flat roof, he added a fifth small bedroom above it. This work was mostly done by the claimant and his wife over a period of about 10 years. The smallest bedroom in the house is sufficient to hold an adult-size bed, but little else.
6.	All the decisions that the claimant made were sensible at the time, taken with the best interests of his family in mind. No one can criticism him for these decisions. However, the issue is whether his award of state pension credit can include the interest that is now payable in respect of those works. 
7.	In order to finance the extension, the claimant remortgaged his house. In doing so: (i) he redeemed and refinanced the outstanding amount of the original mortgage; (ii) he obtained a facility to cover the cost of the extension, which he drew down as required; and (iii) he incurred fees relating to the extension of the property including those for a solicitor and an architect. Again the mortgage was interest only. The claimant saved to repay capital intermittently. At the date of the hearing before me, the outstanding capital was still £70,000 with sufficient saved to pay off a further lump sum.
8.	In determining housing costs, the Secretary of State only took account of (i). On appeal, the appeal tribunal decided that (i), (ii) and (iii) should be taken into account. The issue for me is whether the tribunal directed itself correctly on the law and applied it accurately to the facts of the case. 
9.	I believe that there was a further remortgage in 2001, but that does not affect the legal analysis. 
C.	The oral hearing 
10.	The hearing took place at Harp House on 17 November 2008. The Secretary of State was represented by David Blundell, of counsel, instructed by the Solicitor to the Department for Work and Pensions. The claimant attended with his wife and spoke on his own behalf; he had not taken my advice to obtain representation. I am grateful to both the claimant and Mr Blundell for their contributions to the hearing. I am also grateful to the claimant for sending me a typed statement of the case he put at the hearing. 
11.	At the conclusion of the hearing, Mr Blundell undertook to provide a written argument on the nature and size of rooms that could constitute sleeping accommodation. He has now provided that argument and the claimant has had a chance to comment on it. 
D.	The legislation
12.	State pension credit is governed by the State Pension Credit Act 2002. Section 2(3) provides:
‘(3)	The appropriate minimum guarantee shall be the total of-
(a)	the standard minimum guarantee; and
(b)	such prescribed additional amounts as may be applicable.’
13.	Regulation 6(6)(c) is made under the authority of section 2(3)(b). It provides for housing costs to be added to the standard minimum guarantee for the guarantee credit. The housing costs allowable are identified in Schedule II. Paragraph 11 of the Schedule applies
‘where the loan was taken out to defray monies applied for any of the following purposes-
(a)	acquiring an interest in the dwelling occupied as the home; or
(b)	paying off another loan to the extent that the other loan would have qualified under head (a) above had the loan not been paid off.’
The amount needed to redeem the claimant’s original mortgage is covered by this provision, It was allowed by the Secretary of State and confirmed by the appeal tribunal. It is not in dispute. 
14.	The issue in dispute concerns paragraph 12:
‘12.	Loans for repairs and improvements to the dwelling occupied as the home
‘(1)	A loan qualified under this paragraph where the loan was taken out, with or without security, for the purpose of-
(a)	carrying out repairs and improvements to the dwelling occupied as the home; …
and the loan was used for that purpose, or is used for that purpose within 6 months of the date of receipt or such further period as may be reasonable in the particular circumstances of the case.
(2)	In sub-paragraph (1), “repairs and improvements” means any of the following measures undertaken with a view to maintaining the fitness of the dwelling for human habitation or, where the dwelling forms part of a building, any part of the building containing that dwelling-
(a)	provision of a fixed bath, shower, wash basin, sink or lavatory, and necessary associated plumbing, including the provision of hot water not connected to a central heating system;
…
(l)	provision of separate sleeping accommodation for persons of different sexes aged 10 or over but under age 20 who live with the claimant or for whom the claimant or partner is responsible.’
E.	What the appeal tribunal decided and why
15.	The tribunal decided that the addition of two bedrooms was covered by paragraph 12(2)(l):
‘I formed the view that [the claimant] had simply taken out the loan and started the work when his daughter was born as something that was bound to happen as the children grew up and needed rooms and space of their own. Moreover, it did not matter how long it was that the loan was taken out, before the children attained the age of 10.’
16.	The tribunal also decided that the cost of the utility room was allowable as ‘a necessary sanitary addition’, but did not specify under which provision it was taken into account. 
17.	The tribunal’s decision included the fees, but the chairman’s reasons do not explain how this was allowable under the legislation. 
F.	The claimant’s case
18.	The claimant’s argument did not address the terms of the legislation. It was essentially that, regardless of the wording of the legislation, his award of state pension credit should include the interest on the whole of his mortgage because his decisions were sensible ones to make for the benefit of his family and this was necessary to help him in his present financial difficulties. I cannot accept that argument. State pension credit, like all social security benefits, can only be awarded in accordance with the terms of the legislation. 
G.	The additional bedrooms
19.	Mr Blundell argued that, in dealing with the additional bedroom, the tribunal had gone wrong in two respects: the existing bedrooms had been sufficient; and the loan had been taken out too long before the claimant’s daughter attained the age of 10. I have divided the first issue into two: the number of rooms and their size. 
H.	The number of bedrooms
20.	Mr Blundell argued that the claimant’s circumstances did not come within paragraph 12(2)(l). Under that provision, the original three bedrooms were sufficient: one for himself and his wife, one for their daughter and one for their two sons. Accordingly, the tribunal had been wrong to take account of the cost of providing the additional bedrooms. 
21.	The ‘provision of separate sleeping accommodation’ is a necessary but not a sufficient condition to satisfy paragraph 12(2). In addition, the provision must be ‘undertaken with a view to maintaining the fitness of the dwelling for human habitation’. The link between separate sleeping accommodation and fitness for human habitation was explained by Mr Commissioner Howell in CIS/14657/1996 in respect of the equivalent income support legislation (paragraph 16 of Schedule 3 to the Income Support (General) Regulations 1987):
‘21.	… the intention of para 16(2)(l) must in my judgment have been to extend income support to the necessary costs of making the dwelling comply with the requirements of the housing legislation about sleeping accommodation for children living in overcrowded houses. Those requirements are that the separate sleeping accommodation must be provided so that no two people of opposite sexes who are age 10 or over and are not living together as husband and wife should sleep in the same room: ss. 324-325 Housing Act 1985. If this requirement is infringed, the occupier of the building commits a criminal offence subject to certain exceptions.’
22.	I accept Mr Blundell’s argument. The claimant had no answer to it, given the clear wording of the legislation and the policy identified by Mr Howell. On the wording of paragraph 12(2)(l), the increase in the number of bedrooms to accommodate the claimant’s family was not covered. 
I.	The size of the bedrooms
23.	At the hearing, we discussed the size and use of bedrooms. Mr Blundell dealt with the issue in more detail in his further written argument. He referred me to the decision of the House of Lords in Puhlhofer v Hillingdon London Borough Council [1986] 1 AC 484. The House was there concerned with the meaning of ‘accommodation’ in the Housing (Homeless Persons) Act 1977. Mr Blundell relied on that decision for a number of propositions, principally:
•	what constitutes ‘sleeping accommodation’ is a question of fact;
•	the issue is whether particular accommodation may properly be described as sleeping accommodation;
•	‘accommodation’ is not qualified by words like ‘appropriate’ or ‘reasonable’;
•	it is only qualified by the need that it be capable of use for sleeping.
I accept those arguments.
24.	Paragraph 12(2)(l) refers to ‘separate sleeping accommodation’. That is narrower than ‘bedroom’. Nowadays many children use their bedrooms for more than sleeping. They use it as a room in which to do homework, pursue their hobbies and entertain their friends. As well as a bed and clothes, it may well house a desk, chairs, computer, television, DVD player, iPod station and all the other electronic equipment that is nowadays regarded as essential. 
25.	It is clear from what the claimant told me that, making due allowance for the advances in computer technology, this is what he had in mind for his children. However, that is not what is envisaged by the legislation. The language refers only to sleeping accommodation and, as explained by Mr Howell, that is concerned with the separate arrangements for children who have attained the age of 10. It is not permissible to have regard to any other consideration.
26.	It is not sufficient merely to count the number of rooms. Builders often add a small room, which is called a bedroom but which is for practical purposes just a small store room. It may take a cot for a baby or a small bed for a young child. But it is not sufficient to contain an adult size bed which would be needed for a teenager. 
27.	It seems to me that the language of paragraph 12(2)(l) requires a decision on the sleeping accommodation needed for particular children. It may be that a child with particular needs, such as disabilities, may require more spacious sleeping accommodation. However, that issue does not arise in this case. 
J.	The timing of the loan
28.	Two timing issues arise. How soon must a loan be used after it was taken out? This is covered by paragraph 12(1). And how soon before the youngest child attains 10 may the loan be taken out? This is covered by a number of decisions of the Social Security Commissioners on the equivalent income support provision.
29.	Mr Blundell argued that the loan had been taken out too far in advance of the claimant’s daughter attaining the age of 10. I accept that argument. In order to explain why, I must decide which of the conflicting decisions of the Commissioners I should follow. 
30.	In CIS/16936/1996, Mr Commissioner Goodman decided that, in order to qualify, a loan had to be taken out when the children had already attained the age of 10. The claimant’s solicitors had argued that this was not necessary:
‘8.	A question raised by the claimant’s Solicitors in detailed written submissions dated 14 August 1997 is at what date does one ascertain whether the children were “aged 10 or over”?.  Those Solicitors submit in effect that one can legitimately for this purpose look to the future.  If the purpose of the loan was to provide separate sleeping accommodation for children of different sexes it would not matter, they submit, that at the date e.g. of the loan or of the claim for Income Support those children were not yet aged 10 or over, if in fact it was envisaged that the claimant would go on living in the house and that the children would eventually become aged 10 or over.  That submission is supported also by a statement of the general consideration of it being better for a claimant and less expensive to improve an existing house than buy a new one where the whole of the mortgage to buy the new one would be normally allowable for housing costs.’
However, Mr Goodman rejected this argument. Having set out the legislation, he held:
‘10.	It is clear from the way in which that paragraph is structured that one must determine the question of whether or not a particular work constitutes allowable “repairs and improvements” must be determined at the time of taking out the loan and its purpose must be determined then.  That means in my judgment that at the time of taking out the loan the children of different sexes must already be aged 10 or over.  The provision of sub-paragraph (l) of paragraph 16(2) is clearly in the present tense.’
31.	In CIS/14657/1996, Mr Howell decided that the loan could be taken out before the date when the younger child attained 10:
‘22.	Moreover the condition that a loan must have been taken out “for the purpose of” the improvements within para 16(2)(l) is in my judgment wide enough to permit a tribunal to be satisfied on the facts and evidence before it that a loan falls within head (l) if incurred to provide children of each sex with a separate bedroom, in circumstances where only one is actually over the age of 10 at the date the borrowing or the building work takes place, but another of the opposite sex is going to be attaining that age within a year or so.’
32.	In CIS/1678/1999, Mr Commissioner Angus decided that the date of the loan was not relevant. He disagreed with Mr Howell and found support in the report of the Social Security Advisory Committee on which the legislation was based and the Government’s response to that report:
‘26.	Therefore, since the intended effect of paragraph 16(2)(l) in all the circumstances which can arise is not clear from the text of the provision itself,  I have looked at Command Paper 2905 in which is published the Social Security Advisory Committee’s report to Parliament on its consideration of the draft of the 1995 Amendment Regulations.  That paper includes also the Secretary of State’s statement to Parliament made in compliance with section 174(2) of the Social Security Administration Act 1992, as to how those regulations give effect to the Committee’s recommendations and, where appropriate, the reasons for the regulations not having given effect to any such recommendation.  Appendix 2 to the Command paper is a copy of the memorandum submitted to the Committee by the Secretary of State with the draft regulations.
‘27.	In paragraph 16 of the memorandum (page 36 of the Command Paper) it is stated:-
“The Government further proposes that loans for improvements so that children of different sexes over the age of 10 should have separate sleeping arrangements, and provision for loans to adapt premises to meet the needs of a disabled person, should continue to be met.”.
On page 7 of the Command Paper it is recorded that the Advisory Committee’s recommendations included:-
	“(12)	That the list of repairs and improvements in the existing Schedule 3 is maintained as the minimum acceptable provision.”.
The Secretary of State’s response to that recommendation is recorded as including the following paragraph:-
“The memorandum on the proposals outlined that there would be a provision in the Regulations to allow a home to be adapted to meet the needs of the disabled and for provision of separate sleeping arrangements for children of different sexes aged 10 or over.  These have been included [in the 1995 Amendment Regulations as made by the Secretary of State and laid before Parliament] as specific provisions.”.
‘28.	I read those passages from the Command Paper, particularly paragraph 16 of the Secretary of State’s memorandum, as indicating that in 1995 the Secretary of State intended that the Amendment Regulations would leave the eligibility as housing costs of interest paid on a loan which had been obtained with a view to providing separate sleeping accommodation for children of different sexes over the age of 10 as it was under paragraph 8(3)(k) of the pre‑1995 version of the Schedule 3.  The effect of that provision was that interest on a loan which was taken out for the purpose of creating accommodation which at the date of any claim for Income Support was being used to provide separate sleeping accommodation for 10 year old children of different sexes would have been an eligible housing cost irrespective of the original purpose of the extra accommodation, irrespective of the ages of the children when the loan was taken out and irrespective of whether or not the borrower was a claimant for a Income Support when the loan was taken out.  Therefore, a literal interpretation of paragraph 16(2)(l) of the Schedule in its current version represents a limitation on the eligibility of housing costs which is not consistent with the ministerial policy evidenced by the Command Paper.  It is, therefore, necessary to adopt a purposive approach to the interpretation of paragraph 16(2)(l) and interpret it in such a way as gives effect to the stated policy behind it insofar as that can be done without ignoring a clear enactment to the contrary.’
33.	In CIS/5119/2001, Mr Commissioner Turnbull decided that the relevant time was the date of the loan and not the later date when the younger of the two children in that case attained the age of 10. It was not necessary, in the usual circumstances of that case, to decide how far in advance a loan could be taken out in order to qualify. The Commissioner preferred the view of Mr Howell to that of Mr Angus:
‘9.	I find the reasoning of Mr. Commissioner Howell in paras. 10 and 11, namely that the liabilities are fixed at the date when the loan is taken out, and that that necessarily places the focus on the nature and purpose of the original liability at the time it was taken out rather than any later date, utterly convincing. Further, Mr. Commissioner Angus’ primary reasons for reaching a contrary view were the much wider terms of the previous legislation and the extracts which he cited in his para. 27 from Command Paper 2905 and the Secretary of State’s response to it. However, with respect, I do not regard those extracts as indicating, and certainly not with sufficient clarity, that the new legislation would be intended to have the effect which Mr. Commissioner Angus attributed to it rather than that which Mr. Commissioner Howell has done. Indeed, those extracts seem to me to be entirely neutral on this question. It is true that under the previous legislation (which contained the wide words “other improvements which are reasonable in the circumstances”) it mattered not how old the children were when the loan was taken out. But the extracts cited from the Command Paper and the Secretary of State’s response do not in my judgment justify construing the much more limited terms of the new legislation in the way in which Mr. Commissioner Angus did.’
34.	I broadly agree with the approach of Mr Howell, endorsed by Mr Turnbull. This follows from Mr Howell’s explanation of the background to paragraph 12(2)(l), which I have already quoted. A parent has to have separate sleeping accommodation available once a child attains the age of 10 or be guilty of an offence. It is not appropriate to adopt an interpretation of that paragraph which puts a parent in the position of having to commit an offence in order that the interest may qualify for benefit purposes. That means that the loan can be taken out in advance of the child reaching 10. How far in advance will depend on the circumstances of the particular case. 
35.	Mr Howell’s approach to the interpretation and application of the provision is, with respect, sensible and realistic. However, it needs some adjustment. Assume that parents have a home with two bedrooms and have twins of opposite sexes. The children will attain the age of 10, and require separate rooms, on the same day, but they do not come within Mr Howell’s formulation. He assumed that the children would be of different ages. What he said was not intended to be a comprehensive statement covering all eventualities and should not be read as if it were. As I have said, the precise period will depend on the circumstances of the case. Mr Howell merely indicated the likely time scale within which separate accommodation could be provided. The precise time will depend on the ages of the children and nature of the works undertaken. For example: erecting a partition to divide a large room can be done much more quickly that building an extension. 
K.	The utility room
36.	Mr Blundell argued that the provision of utility room did not come within paragraph 12(2), because it was not added ‘with a view to maintaining the fitness of the dwelling for human habitation’. Accordingly, the tribunal had been wrong to decide that this could be taken into account as a necessary sanitary addition. 
37.	None of the work on the utility room fell within paragraph 12(2). The only item that might come within it is the sink. The claimant installed a sink in the new room; and the provision of a sink is within paragraph 12(2)(a). However, as I read it, that refers to the provision of a sink where none exists or perhaps to the replacement of one that is no longer functional, not to the provision of an additional sink. In this case, there was already a sink in the kitchen, which was in good condition, and the one in the utility room was additional. Accordingly, paragraph 12(2)(a) is not satisfied.
38.	I also accept Mr Blundell’s argument that the provision of another sink was not undertaken to maintain the fitness of the claimant’s home for human habitation. It was already fit for habitation before the utility room was built. That room was a useful addition to the accommodation, but it was not needed to maintain the fitness of the home for human habitation. 
L.	The fees
39.	Prior to the hearing before me, the fees were assumed to be legal fees relating to the remortgage and, perhaps, an arrangement fee. At the hearing, it became clear that the fees were in fact related to the extension rather than to the remortgage arrangement. 
40.	In the Secretary of State’s written submission (which was not prepared by Mr Blundell), the Secretary of State argued that there was a basic rule for fees contained in Guest v Chief Adjudication Officer as qualified by CIS/5110/1999. I accept that analysis.
41.	In Guest v Chief Adjudication Officer (reported as R(IS) 2/99), the Court of Appeal was concerned with the income support equivalent of paragraph 12. The claimant, being in financial difficulties, sold his home and bought a smaller one. The building society lent him the money for the purchase of his new home. However, as the proceeds of sale of the former home were not sufficient to cover the money owing to the society, it additionally took a charge over the new property to cover the shortfall. The Court decided that the equivalent of paragraph 12(1)(a) ‘is limited to loans for the purpose of effecting the actual purchase of the dwelling house itself, which is to be occupied as the home, together with incidental expenses incurred in connection therewith, e.g. legal fees, stamp duty etc.’
42.	In CIS/5110/1999, Mr Commissioner Angus decided that an arrangement fee payable on a remortgage could be taken into account in calculating housing costs:
‘19.	… There is no question that the claimant applied monies amounting to £49,000 for the purpose of paying off building society A and that of the £50,470 borrowed from the commercial lender £49,000 was a loan taken out to defray those monies.  Did the £1,470 represent monies applied by the claimant for the purpose of paying off building society A’s £49,000?  To my mind it was.’
43.	I respectfully agree with that analysis. The purpose of the arrangement fee fell within the statutory wording. It was as much payable for the purpose of paying off the previous loan as the legal fees and stamp duty mentioned in Guest. The same result is produced by an economic analysis. There is a price to pay for a mortgage. It is in part represented by the interest on the loan. However, there are other costs, such as arrangement fees, early repayment fees and tie-in periods after a fixed rate of interest has expired. An arrangement fee is merely part of the precise of the loan. As such it is appropriate to treat it in the same way as interest, which is taken into account. I do not need to consider whether such a fee should be apportioned if the loan is increased on remortgage. That may depend on whether the fee is related to the size of the new loan. 
44.	In this case, the information now available makes it clear that the fees in question were not related in any way to the remortgage. They were incurred to pay for costs related to the works undertaken by the claimant to extend his home. They cannot be taken into account under paragraph 12.
M.	Disposal
45.	The tribunal misdirected itself in law. I must set aside its decision. As there is no issue of fact in dispute, I am able to re-make the decision. I do so and confirm the Secretary of State’s decision on the housing costs element of the award of state pension credit. 

Signed on original
on 19 January 2009	Edward Jacobs
Upper Tribunal Judge