The Loans for Mortgage Interest Regulations 2017

Citation and commencement

1.—(1) These Regulations may be cited as the Loans for Mortgage Interest Regulations 2017.

(2) These Regulations come into force—

(a) for the purposes of regulations 18 to 21, on 6th April 2018;

(b) for all other purposes, on 27th July 2017.

Interpretation

2.—(1) In these Regulations—

“the Act” means the Welfare Reform and Work Act 2016;

“alternative finance payments” has the meaning given in paragraph 5(3) of Schedule 1 to these Regulations;

“applicable amount” means—

(a)

in the case of employment and support allowance, the claimant’s weekly applicable amount under regulations 67 to 70 of the ESA Regulations(1);

(b)

in the case of income support, the claimant’s weekly applicable amount under regulations 17 to 21AA of the IS Regulations(2);

(c)

in the case of jobseeker’s allowance, the claimant’s weekly applicable amount under regulations 83 to 86C of the JSA Regulations(3);

(d)

in the case of an SPC claimant, the claimant’s weekly appropriate minimum guarantee under section 2 of the State Pension Credit Act 2002(4);

(e)

in the case of a UC claimant, the maximum amount of a claimant’s award of universal credit under regulation 23(1) of the UC Regulations(5);

“assessment period” has the meaning given in regulation 21 of the UC Regulations(6);

“benefit unit” means a single claimant and his or her partner (if any) or joint claimants;

“benefit week” has the meaning given—

(a)

in the case of employment and support allowance, in regulation 2 of the ESA Regulations(7);

(b)

in the case of income support, in paragraph 4 of Schedule 7 to the Claims and Payment Regulations(8);

(c)

in the case of jobseeker’s allowance, in regulation 1 of the JSA Regulations(9);

(d)

in the case of state pension credit, in regulation 1 of the SPC Regulations(10);

“charge by way of legal mortgage” has the meaning given in section 132(1) of the Land Registration Act 2002(11);

“child” means a person under the age of 16;

“claimant” means a single claimant or each of joint claimants;

“Claims and Payment Regulations” means the Social Security (Claims and Payments) Regulations 1987(12);

“close relative” means a parent, parent-in-law, son, son-in-law, daughter, daughter-in-law, step-parent, step-son, step-daughter, brother, sister, or, if any of the preceding persons is one member of a couple, the other member of that couple;

“couple” means—

(a)

two people who are married to, or civil partners of, each other and are members of the same household;

(b)

two people who are not married to, or civil partners of, each other but are living together as a married couple or civil partners;

“disabled person” has the meaning given—

(a)

in the case of employment and support allowance, in paragraph 1(3) of Schedule 6 to the ESA Regulations(13);

(b)

in the case of income support, in paragraph 1(3) of Schedule 3 to the IS Regulations(14);

(c)

in the case of jobseeker’s allowance, in paragraph 1(3) of Schedule 2 to the JSA Regulations(15);

(d)

in the case of state pension credit, in paragraph 1(2)(a) of Schedule 2 to the SPC Regulations(16);

(e)

in the case of universal credit, in paragraph 14(3) of Schedule 3 to these Regulations;

“dwelling”—

(a)

in England and Wales, means a dwelling within the meaning of Part 1 of the Local Government Finance Act 1992(17);

(b)

in Scotland, means a dwelling within the meaning of Part 2 of that Act;

“earned income” has the meaning given in Chapter 2 of Part 6 of the UC Regulations;

“ESA Regulations” means the Employment and Support Allowance Regulations 2008(18);

“existing claimant” means a claimant who is entitled to a qualifying benefit, including an amount for owner-occupier payments, on 5th April 2018;

“financial year” has the meaning given in section 25(2) of the Budget Responsibility and National Audit Act 2011(19);

“income” means any income which is, or which is treated as, an individual’s, including payments which are treated as earnings, and which is not disregarded, under—

(a)

in the case of employment and support allowance, Part 10 of the ESA Regulations;

(b)

in the case of income support, Part 5 of the IS Regulations;

(c)

in the case of jobseeker’s allowance, Part 8 of the JSA Regulations;

(d)

in the case of state pension credit, Part 3 of the SPC Regulations;

“IS Regulations” means the Income Support (General) Regulations 1987(20);

“joint claimants”—

(a)

in the case of jobseeker’s allowance means—

(i)

members of a joint-claim couple who have jointly made a claim for, and are entitled to, income-based jobseeker’s allowance; or

(ii)

where Schedule 5 applies, members of a joint-claim couple who have made a claim for, but are not entitled to, such a benefit by reason only that they have income equal to or exceeding the applicable amount but less than the sum of that applicable amount and the amount of a loan payment they would receive under regulation 10 if they were so entitled;

(b)

in the case of universal credit means—

(i)

members of a couple who have jointly made a claim for, and are entitled to, universal credit; or

(ii)

where Schedule 5 applies, members of a couple who have made a claim for, but are not entitled to, such a benefit by reason only that they have unearned income equal to or exceeding the applicable amount but less than the sum of that applicable amount and the amount of a loan payment they would receive under regulation 10 if they were so entitled;

“joint-claim couple” has the meaning in section 1(4) of the Jobseekers Act 1995;

“JSA Regulations” means the Jobseeker’s Allowance Regulations 1996(21);

“legacy benefit” means income-related employment and support allowance, income support or income-based jobseeker’s allowance;

“legacy benefit claimant” means a claimant who is entitled to a legacy benefit;

“legal estate” means any of the legal estates set out in section 1(1) of the Law of Property Act 1925(22);

“legal owner” means the owner, whether alone or with others, of a legal estate or, in Scotland, a heritable or registered interest, in the relevant accommodation;

“loan agreement” means an agreement entered into by a single claimant and his or her partner (if any), or each joint claimant, and the Secretary of State, which sets out the terms and conditions upon which the loan payments are made to the claimant;

“loan payments” means one or more payments, calculated under regulation 10, in respect of a claimant’s liability to make owner-occupier payments in respect of the relevant accommodation;

“loan payments offer date” means the day on which the Secretary of State sends the loan agreement to a claimant;

“Modified Rules” means the Social Security (Housing Costs Special Arrangements) (Amendment and Modification) Regulations 2008(23);

“new claimant partner” has the meaning given in regulation 7 of the Transitional Provisions Regulations (24);

“non-dependant” has the meaning given—

(a)

in the case of employment and support allowance, in regulation 71 of the ESA Regulations;

(b)

in the case of income support, in regulation 3 of the IS Regulations(25);

(c)

in the case of jobseeker’s allowance, in regulation 2 of the JSA Regulations(26);

(d)

in the case of state pension credit, in paragraph 1(4) of Schedule 2 to the SPC Regulations;

“owner-occupier payments” has the meaning given in regulation 3(2)(a);

“partner” means—

(a)

where a claimant is a member of a couple, the other member of that couple;

(b)

where a claimant is married polygamously to two or more members of the claimant’s household, all such members;

“person who lacks capacity”—

(a)

in England and Wales, has the meaning given in section 2 of the Mental Capacity Act 2005(27);

(b)

in Scotland, means a person who is incapable under section 1(6) of the Adults with Incapacity (Scotland) Act 2000(28);

“polygamous marriage” means a marriage during which a party to it is married to more than one person and which took place under the laws of a country which permits polygamy;

“qualifying benefit” means income-related employment and support allowance, income support, income-based jobseeker’s allowance, state pension credit or universal credit;

“qualifying lender” has the meaning given in section 19(7) of the Act;

“qualifying loan” means—

(a)

in the case of a legacy benefit or state pension credit, a loan which qualifies under paragraph 2(2) or (4) of Schedule 1 to these Regulations;

(b)

in the case of universal credit, a loan which qualifies under paragraph 5(2) of Schedule 1 to these Regulations;

“qualifying period” means a period of—

(a)

nine consecutive assessment periods in which a claimant has been entitled to universal credit;

(b)

39 consecutive weeks in which a claimant—

(i)

has been entitled to a legacy benefit; or

(ii)

is treated as having been entitled to such a benefit under —

(aa)

paragraph 14 of Schedule 3 to the IS Regulations(29);

(bb)

paragraph 13 of Schedule 2 to the JSA Regulations(30); or

(cc)

paragraph 15 of Schedule 6 to the ESA Regulations(31);

“qualifying young person” has the meaning given—

(a)

in the case of a legacy benefit, in section 142 of the Social Security Contributions and Benefits Act 1992(32);

(b)

in the case of state pension credit, in regulation 4A of the SPC Regulations(33);

(c)

in the case of universal credit, in regulation 5 of the UC Regulations;

“relevant accommodation” means the accommodation which the claimant occupies, or is treated as occupying, as the claimant’s home under Schedule 3;

“relevant date”, apart from in regulation 21, means the first day with respect to which a claimant’s liability to make owner-occupier payments is met by a loan payment;

“single claimant” means—

(a)

an individual who has made a claim for, and is entitled to, a qualifying benefit as a single person; or

(b)

where Schedule 5 applies, an individual who has made a claim for, but is not entitled to, a qualifying benefit as a single person by reason only that the individual has income or, in the case of universal credit, unearned income, equal to or exceeding the applicable amount but less than the sum of that applicable amount and the amount of a loan payment he or she would receive under regulation 10 if he or she were so entitled;

“single person” means an individual who is not a member of a couple;

“SPC claimant” means a claimant who is entitled to state pension credit;

“SPC Regulations” means the State Pension Credit Regulations 2002(34);

“standard security” has the meaning in Part 2 of the Conveyancing and Feudal Reform (Scotland) Act 1970(35);

“transitional end day” has the meaning given in regulations 19(1) and 20(2);

“Transitional Provisions Regulations” means the Universal Credit (Transitional Provisions) Regulations 2014(36);

“UC claimant” means a claimant who is entitled to universal credit;

“UC Regulations” means the Universal Credit Regulations 2013(37); and

“unearned income” has the meaning given in Chapter 3 of Part 6 of the UC Regulations.

(2) For the purposes of these Regulations, a reference to—

(a) entitlement to a qualifying benefit is to be read as a reference to entitlement as determined under the ESA Regulations, IS Regulations, JSA Regulations, SPC Regulations and UC Regulations;

(b) the claimant’s family or to being a member of the claimant’s family means a reference to the claimant’s partner and any child or qualifying young person who is the responsibility of the claimant or the claimant’s partner, where that child or qualifying young person is a member of the claimant’s household;

(c) a person being responsible for a child or qualifying young person is to be read as a reference to a person being treated as responsible for a child or qualifying young person in the circumstances specified in—

(i) in the case of employment and support allowance, regulation 156(10) of the ESA Regulations(38);

(ii) in the case of income support, regulation 15 of the IS Regulations(39);

(iii) in the case of jobseeker’s allowance, regulation 77 of the JSA Regulations(40);

(iv) in the case of state pension credit and universal credit, regulation 4 of the UC Regulations(41);

(d) a person being a member of a household is to be read as a reference to a person being treated as a member of the household in the circumstances specified in—

(i) in the case of employment and support allowance, in regulation 156 of the ESA Regulations(42);

(ii) in the case of income support, in regulation 16 of the IS Regulations(43);

(iii) in the case of jobseeker’s allowance, in regulation 78 of the JSA Regulations(44);

(iv) in the case of state pension credit and universal credit, in regulation 5 of the SPC Regulations(45);

(e) a person being engaged in remunerative work is to be read as a reference to a person being treated as engaged in remunerative work—

(i) in the case of employment and support allowance, in regulations 41 to 43 of the ESA Regulations(46);

(ii) in the case of income support, in regulations 5 and 6 of the IS Regulations(47);

(iii) in the case of jobseeker’s allowance, in regulations 51 to 53 of the JSA Regulations(48);

(iv) in the case of state pension credit, in paragraph 2 of Schedule 2 to the SPC Regulations(49).

The offer of loan payments

3.—(1) The Secretary of State may make an offer of loan payments to a claimant in respect of any owner-occupier payments the claimant is, or is to be treated as, liable to make in respect of the accommodation which the claimant is, or is to be treated as, occupying as the claimant’s home, unless paragraph (4) applies.

(2) For the purposes of paragraph (1)—

(a) owner-occupier payments are—

(i) in the case of a legacy benefit claimant or SPC claimant, payments within the meaning of Part 1 of Schedule 1;

(ii) in the case of a UC claimant, payments within the meaning of Part 2 of Schedule 1;

(b) the circumstances in which a claimant is, or is to be treated as, liable to make owner-occupier payments are—

(i) in the case of a legacy benefit claimant or SPC claimant, the circumstances specified in Part 1 of Schedule 2;

(ii) in the case of a UC claimant, the circumstances specified in Part 2 of Schedule 2;

(c) the circumstances in which a claimant is, or is to be treated as, occupying accommodation as the claimant’s home are—

(i) in the case of a legacy benefit claimant or SPC claimant, the circumstances specified in Part 2 of Schedule 3;

(ii) in the case of a UC claimant, the circumstances specified in Part 3 of Schedule 3.

(3) Where the liability for owner-occupier payments is shared with a person not in the benefit unit, the claimant shall be, or shall be treated as, liable to make owner-occupier payments by reference to the appropriate proportion of the payments for which the claimant is responsible.

(4) A UC claimant shall not be eligible for the offer of loan payments if—

(a) where the claimant is a single person, the claimant has any earned income; or

(b) where the claimant is a member of a couple, either member of the couple has any earned income.

Acceptance of loan payments offer

4.  The offer of loan payments is accepted where the Secretary of State has received the loan agreement signed by, in the case of a single claimant, the claimant and his or her partner (if any), or, in the case of joint claimants, each member of the couple, and the documents referred to in regulation 5(2).

Conditions to meet before the loan payments can be made

5.—(1) The Secretary of State may make the loan payments if—

(a) the loan payments offer is accepted in accordance with regulation 4; and

(b) the conditions in paragraph (2) are met.

(2) The conditions are—

(a) in England and Wales—

(i) where all of the legal owners are within the benefit unit, each legal owner has executed a charge by way of legal mortgage in favour of the Secretary of State in respect of the relevant accommodation;

(ii) where one or more legal owners are not within the benefit unit, each legal owner within the benefit unit (if any) has executed an equitable charge in respect of their beneficial interest in the relevant accommodation;

(b) in Scotland, each legal owner within the benefit unit has executed a standard security in respect of his or her interest in the relevant accommodation;

(c) the Secretary of State has obtained the written consent referred to in paragraph (3); and

(d) the information condition in regulation 6 is met within the period of 6 months ending with the day on which the loan payments offer is accepted.

(3) The consent required by paragraph (2)(c) is consent given in writing to the creation of the charge or, in Scotland, the standard security by any person in the benefit unit in occupation of the relevant accommodation, who is not a legal owner.

Information condition

6.—(1) The information condition is that the Secretary of State has provided relevant information about the loan payments to a single claimant and his or her partner (if any) or each joint claimant.

(2) For the purposes of this regulation, “relevant information” is information about the loan payments which must include—

(a) a summary of the terms and conditions included within the loan agreement;

(b) where the circumstances in regulation 5(2)(a)(i) or (b) apply, an explanation that the Secretary of State will seek to obtain a charge or, in Scotland, a standard security in respect of the relevant accommodation;

(c) an explanation of the consent referred to in regulation 5(3); and

(d) information as to where a single claimant and his or her partner (if any) or each joint claimant can obtain further information and independent legal and financial advice regarding loan payments.

Time of each loan payment

7.  Each loan payment shall be made—

(a) in the case of a UC claimant, at monthly intervals in arrears; and

(b) in the case of a legacy benefit claimant or SPC claimant—

(i) where direct payments are made to a qualifying lender under regulation 17(1), at 4 weekly intervals in arrears; or

(ii) where payments are made to the claimant under regulation 17(3), at the same intervals as the qualifying benefit is paid.

Period covered by loan payments

8.—(1) The period in respect of which the loan payments shall be made shall begin on the later of—

(a) 6th April 2018;

(b) in the case of a UC claimant or legacy benefit claimant, the day after the day on which the qualifying period ends;

(c) in the case of an SPC claimant, the date of claim in respect of the claimant’s award of state pension credit;

(d) the transitional end day.

(2) For the purposes of paragraph (1)(c), “date of claim” has the meaning given by whichever is applicable of regulation 4F or regulation 19(2) and (3) of the Claims and Payments Regulations(50).

Duration of loan payments

9.—(1) Subject to paragraph (2), loan payments shall continue to be made indefinitely at the intervals specified in regulation 7.

(2) If one of the circumstances in paragraph (3) occurs, the Secretary of State shall terminate the loan payments immediately but subject to paragraph (4).

(3) The circumstances are that—

(a) the claimant ceases to be entitled to a qualifying benefit;

(b) the claimant ceases to be, or to be treated as, liable to make owner-occupier payments under Schedule 2;

(c) the claimant ceases to be, or to be treated as, occupying the relevant accommodation under Schedule 3;

(d) the loan agreement is terminated in accordance with its terms;

(e) in the case of a UC claimant only, regulation 3(4) applies.

(4) The Secretary of State shall make the loan payments direct to the claimant for the period specified in paragraph (6) if—

(a) a claimant ceases to be entitled to a legacy benefit by reason that, in the case of a single claimant, the claimant or his or her partner (if any), or, in the case of joint claimants, either member of the couple, is engaged in remunerative work; and

(b) the conditions in paragraph (5) are met.

(5) The conditions are that, in the case of a single claimant, the claimant or his or her partner (if any), or, in the case of joint claimants, either member of the couple—

(a) is engaged in remunerative work which is expected to last for a period of no less than 5 weeks;

(b) is still liable or treated as liable to make owner-occupier payments under Schedule 2;

(c) has, for a continuous period of 26 weeks ending with the day on which he or she commences the work referred to in sub-paragraph (a), been entitled to a legacy benefit; and

(d) was, on the day before the day on which he or she commenced the work referred to in sub-paragraph (a), receiving loan payments under these Regulations.

(6) The period specified is the period of 4 weeks commencing with the day on which the relevant person is first engaged in remunerative work.

(7) If a legacy benefit claimant ceases to be entitled to a legacy benefit but becomes entitled again to the legacy benefit within the period of 52 weeks beginning with the day the claimant ceased to be entitled to it, the claimant shall not be required to satisfy the qualifying period if the claimant wishes to receive loan payments on the basis of the new entitlement.

Calculation of each loan payment

10.  Subject to any deduction under regulation 14, each loan payment shall be the aggregate of the amounts resulting from regulations 11 and 12.

Calculation in respect of qualifying loans

11.—(1) Subject to paragraphs (3) and (4), the amount to be included in each loan payment for owner-occupier payments which are payments of interest on qualifying loans is determined as follows.

Step 1

Determine the amount of capital for the time being owing in connection with each qualifying loan to which the owner-occupier payments relate.

Step 2

If there is more than one qualifying loan, add together the amounts determined in step 1.

Step 3

Determine the identified amount which is the lower of—

(a) the amount resulting from step 1 or 2; and

(b) the capital limit specified in paragraph (2)(a) or (b).

If both amounts in (a) and (b) are the same, that is the identified amount.

Step 4

In respect of a legacy benefit claimant or SPC claimant, apply the following formula to achieve a weekly sum—

In respect of a UC claimant, apply the following formula to achieve a monthly sum —

In either case—

“A” is the identified amount in step 3,

“SR” is the standard rate that applies at the end of the calculation (see regulation 13), and

“I” is the amount of any income, in the case of a legacy benefit or SPC claimant, or unearned income, in the case of a UC claimant, above the claimant’s applicable amount.

The result is the amount to be included in each loan payment for owner-occupier payments which are payments of interest on qualifying loans.

(2) The capital limit is—

(a) £200,000—

(i) in the case of a legacy benefit claimant or SPC claimant where the Modified Rules apply;

(ii) in the case of a UC claimant;

(b) £100,000 in all other cases.

(3) In the application of paragraph (2) to a qualifying loan (or any part of a qualifying loan) which was taken out for the purpose of making necessary adaptations to the accommodation to meet the needs of a disabled person—

(a) the qualifying loan (or the part of the qualifying loan) is to be disregarded for the purposes of steps 2 and 3; and

(b) “A” in step 4 is to be read as the amount resulting from step 1 in respect of the qualifying loan (or the sum of those amounts if there is more than one qualifying loan taken out for the purpose of making such adaptations) plus the amount (if any) resulting from step 3 in relation to any other qualifying loan or loans.

(4) Subject to paragraph (5), any variation in the amount of capital for the time being owing in connection with a qualifying loan is not to be taken into account after the relevant date until such time as the Secretary of State recalculates the amount which shall occur—

(a) on the first anniversary of the relevant date; and

(b) in respect of any variation after the first anniversary, on the next anniversary which follows the date of the variation.

(5) In respect of an existing claimant, the Secretary of State shall recalculate the amount of capital owing in connection with a qualifying loan on the anniversary of the date on which the claimant’s qualifying benefit first included an amount for owner-occupier payments.

Calculation in respect of alternative finance payments

12.—(1) The amount to be included in each loan payment for owner-occupier payments which are alternative finance payments is determined as follows.

Step 1

Determine the purchase price of the accommodation to which the alternative finance payments relate.

Step 2

Determine the identified amount which is the lower of—

(a) the amount resulting from step 1; and

(b) the capital limit specified in paragraph (2)(a) or (b).

If both amounts are the same, that is the identified amount.

Step 3

In respect of an SPC claimant, apply the following formula to achieve a weekly sum—

In respect of a UC claimant, apply the following formula to achieve a monthly sum—

In either case—

“A” is the identified amount in step 2,

“SR” is the standard rate that applies at the date of the calculation (see regulation 13), and

“I” is the amount of any income, in the case of an SPC claimant, or unearned income, in the case of a UC claimant, above the claimant’s applicable amount.

The result is the amount to be included in each loan payment for owner-occupier payments which are alternative finance payments.

(2) The capital limit is—

(a) £200,000 in the case of an SPC claimant where the Modified Rules apply or a UC claimant;

(b) £100,000 in all other cases.

(3) For the purposes of paragraph (1), “purchase price” means the price paid by a party to the alternative finance arrangements other than the claimant in order to acquire the interest in the accommodation to which those arrangements relate less—

(a) the amount of any initial payment made by the claimant in connection with the acquisition of that interest; and

(b) the amount of any subsequent payments made by the claimant or any partner to another party to the alternative finance arrangements before—

(i) the relevant date; or

(ii) in the case of an existing claimant, the date on which the claimant’s qualifying benefit first included an amount for owner-occupier payments,

which reduce the amount owed by the claimant under the alternative finance arrangements.

(4) Subject to paragraph (5), any variation in the amount for the time being owing in connection with alternative finance arrangements is not to be taken into account after the relevant date until such time as the Secretary of State recalculates the amount which shall occur—

(a) on the first anniversary of the relevant date; and

(b) in respect of any variation after the first anniversary, on the next anniversary which follows the date of the variation.

(5) In respect of an existing claimant, the Secretary of State shall recalculate the amount for the time being owing in connection with a qualifying loan on the anniversary of the date on which the claimant’s qualifying benefit first included an amount for owner-occupier payments.

Standard rate to be applied under regulations 11 and 12

13.—(1) The standard rate is the average mortgage rate published by the Bank of England which has effect on the 5th April 2018.

(2) The standard rate is to be varied each time that paragraph (3) applies.

(3) This paragraph applies when, on any reference day, the Bank of England publishes an average mortgage rate which differs by 0.5 percentage points or more from the standard rate that applies on that reference day (whether it applies by virtue of paragraph (1) or by virtue of a previous application of this paragraph).

(4) The average mortgage rate published on that reference day then becomes the new standard rate in accordance with paragraph (5).

(5) Any variation in the standard rate by virtue of paragraphs (2) to (4) shall come into effect at the end of the period of 6 weeks beginning with the day referred to in paragraph (3).

(6) At least 7 days before a variation of the standard rate comes into effect under paragraph (5), the Secretary of State must arrange for notice to be published on a publicly accessible website of—

(a) the new standard rate; and

(b) the day on which the new standard rate comes into effect under paragraph (5).

(7) For the purposes of this Regulation—

“average mortgage rate” means the effective interest rate (non-seasonally adjusted) of United Kingdom resident banks and building societies for loans to households secured on dwellings, published by the Bank of England in respect of the most recent period specified for that rate at the time of publication; and

“reference day” means any day falling on or after 6th April 2018.

Non-dependant deductions

14.—(1) In the case of a legacy benefit claimant or SPC claimant, a deduction from each loan payment shall be made in respect of any non-dependant in accordance with paragraph (2).

(2) The amount to be deducted is calculated as follows.

Step 1

Identify the amount which is the sum of the loan payment calculated under regulation 10 and the amount of housing costs (if any) paid to a claimant under—

(a) paragraph 17 of Schedule 3 to the IS Regulations(51);

(b) paragraph 16 of Schedule 2 to the JSA Regulations(52);

(c) paragraph 18 of Schedule 6 to the ESA Regulations; or

(d) paragraph 13 of Schedule 2 to the SPC Regulations(53).

Step 2

Identify the total amount of the non-dependant deductions applicable to the claimant under—

(a) paragraph 18 of Schedule 3 to the IS Regulations(54);

(b) paragraph 17 of Schedule 2 to the JSA Regulations(55);

(c) paragraph 19 of Schedule 6 to the ESA Regulations(56); or

(d) paragraph 14 of Schedule 2 to the SPC Regulations(57).

Step 3

Identify the proportion of the non-dependant deductions applicable to the loan payment and housing costs (if any) in Step 1 by applying the formula—

where—

“A” is the total amount of the non-dependant deductions identified in Step 2,

“B” is the amount of the loan payment calculated under regulation 10, and

“C” is the amount identified in Step 1.

The result is the amount of the non-dependant deduction to be made from each loan payment in the case of a legacy benefit claimant or SPC claimant.

Interest

15.—(1) The Secretary of State shall charge interest on the sum of the loan payments until the earlier of—

(a) the day on which the loan payments and accrued interest are repaid in full;

(b) the event referred to in regulation 16(1)(c).

(2) Interest at the relevant rate shall accrue daily, with effect from the first day a loan payment is made to a qualifying lender or the claimant under regulation 17, and shall be added to the outstanding amount at the end of each month (or part month).

(3) The relevant rate is the interest rate for the relevant period.

(4) For the purposes of this regulation and regulation 16, the outstanding amount is the sum of the loan payments and interest which has been charged under paragraph (1).

(5) The interest rate referred to in paragraph (3) is the weighted average interest rate on conventional gilts specified in the most recent report published before the start of the relevant period by the Office for Budget Responsibility under section 4(3) of the Budget Responsibility and National Audit Act 2011(58).

(6) The relevant period is the period starting on—

(a) 1st January and ending on 30th June in any year; or

(b) 1st July and ending on 31st December in any year.

Repayment

16.—(1) The outstanding amount shall become immediately due and payable, together with any further interest which accrues on that amount under regulation 15, where one of the following events occurs—

(a) the relevant accommodation is sold;

(b) legal or beneficial title in, or in Scotland, heritable or registered title to, the relevant accommodation is transferred, assigned or otherwise disposed of, unless paragraph (3) applies;

(c) in the case of a claimant with no partner, the claimant’s death, or, in the case of a claimant with a partner, the death of the last member of the benefit unit (“the relevant person”).

(2) Subject to paragraphs (4) to (7), repayment shall occur—

(a) in the event described in paragraph (1)(a) or (b), from the proceeds of sale, transfer, assignment or disposition;

(b) in the event described in paragraph (1)(c), from the relevant person’s estate.

(3) This paragraph applies where legal or beneficial title is transferred to—

(a) the claimant’s partner, following the death of the claimant, where the partner is in occupation of the relevant accommodation; or

(b) the claimant, from a former spouse or civil partner, under a court order or an agreement for maintenance where the claimant is in occupation of the relevant accommodation.

(4) Where, in England and Wales—

(a) the Secretary of State has a charge by way of legal mortgage over the relevant accommodation; and

(b) there is insufficient equity available in the relevant accommodation to discharge the outstanding amount,

repayment shall be limited to the amount of available equity in the relevant accommodation after any prior ranking charges by way of legal mortgage have been repaid, and, in the event described in paragraph (1)(c), this shall be taken to be the amount of equity at the date of death of the relevant person.

(5) Where, in England and Wales—

(a) the Secretary of State has an equitable charge over one legal owner’s equitable interest in the relevant accommodation, repayment shall be limited to the amount of that legal owner’s equitable interest in the relevant accommodation and, in the event described in paragraph (1)(c), this shall be taken to be the value of that equitable interest at the date of death of the relevant person;

(b) the Secretary of State has an equitable charge over more than one legal owner’s equitable interest in the relevant accommodation, repayment shall be limited to the sum of the equitable interests in the relevant accommodation of all legal owners within the benefit unit and, in the event described in paragraph (1)(c), this shall be taken to be the value of those equitable interests at the date of death of the relevant person.

(6) Where, in Scotland—

(a) the Secretary of State has a standard security over the whole or part of the relevant accommodation; and

(b) there is insufficient equity available in the whole or part of the relevant accommodation over which the standard security is held,

repayment shall be limited to the amount of available equity in the whole or part of the relevant accommodation over which the standard security is held after any prior ranking standard securities have been repaid, and, in the event described in paragraph (1)(c), this shall be taken to be the amount of equity at the date of death of the relevant person.

(7) In the event that the relevant accommodation is sold or legal or beneficial title in, or in Scotland, heritable or registered title to, the relevant accommodation is transferred, assigned or otherwise disposed of for less than market value, the disposal shall be treated as if it occurred at market value for the purposes of repayment.

(8) Subject to paragraph (9), a claimant shall be permitted to repay some or all of the outstanding amount before an event in paragraph (1) occurs if the amount of each repayment is equal to or more than £100.

(9) Where the outstanding amount is less than £100, a claimant shall be permitted to repay that sum in full in one repayment.

Direct payments to qualifying lenders

17.—(1) Where the circumstances specified in paragraph (2) are met, the loan payments must be made by the Secretary of State direct to a claimant’s lender.

(2) The circumstances referred to in paragraph (1) are that—

(a) money was lent to the claimant in respect of which owner-occupier payments in respect of the relevant accommodation are payable to a qualifying lender; and

(b) those owner-occupier payments are taken into account in calculating the amount of each loan payment under regulation 10.

(3) Where the circumstances in paragraph (2) are not met, the loan payments must be made to the claimant.

(4) Schedule 4 has effect in relation to payments made under paragraph (1).

Consequential amendments

18.  The amendments in Schedule 5 have effect.

Transitional provision: existing claimants

19.—(1) Subject to regulation 20, in relation to an existing claimant the amendments made by Schedule 5 shall be treated as though they were not in force until the day that is the earlier of (“the transitional end day”)—

(a) the day referred to in paragraph (2); or

(b) the day immediately following the day on which entitlement to a qualifying benefit ends.

(2) The day referred to is the later of—

(a) the day immediately following the end of the first benefit week, in the case of a legacy benefit claimant or SPC claimant, or the end of the first assessment period, in the case of a UC claimant, that ends on or after 6th April 2018; or

(b) the day immediately following the day referred to in paragraph (3).

(3) The day referred to is the earliest of—

(a) the day on which the Secretary of State receives notification from the claimant that the claimant does not wish to accept the offer of loan payments;

(b) (i) where the Secretary of State has received both the loan agreement and the documents referred to in regulation 5 within the period of 6 weeks beginning with the loan payments offer date, the day referred to in paragraph (4); or

(ii) where the Secretary of State has not received both the loan agreement and the documents referred to in regulation 5 within the period of 6 weeks beginning with the loan payments offer date, the day on which that period ends.

(4) The day referred to is the last day of the period of 4 weeks beginning with the first day at the beginning of which the Secretary of State has received the loan agreement and documents referred to in regulation 5(2).

Transitional provision: lack of capacity

20.—(1) Paragraph (2) applies where the following conditions are met in relation to an existing claimant—

(a) the Secretary of State is satisfied on or before 5th April 2018, or later than that date but within 6 weeks beginning with the loan payments offer date, that the claimant is a person who lacks capacity to make some or all decisions about entering into the loan agreement;

(b) an application for a decision as referred to in paragraph (6) is made on or before 5th April 2018, or later than that date but within 6 weeks beginning with the loan payments offer date; and

(c) at the time the Secretary of State is satisfied as referred to in sub-paragraph (a), he has not received the loan agreement and the documents referred to in regulation 5 and has not received a notification from the claimant that the claimant does not wish to accept the offer of loan payments.

(2) Where this paragraph applies, the amendments made by Schedule 5 shall be treated as though they were not in force until the day that is the earlier of (“the transitional end day”)—

(a) the day referred to in paragraph (3); or

(b) the day immediately following the day on which entitlement to a qualifying benefit ends.

(3) The day referred to is the later of—

(a) the day immediately following the end of the first benefit week, in the case of a legacy benefit claimant or SPC claimant, or the end of the first assessment period, in the case of a UC claimant, that ends on or after 6th April 2018; or

(b) the day immediately following the day referred to in paragraph (4).

(4) The day referred to is the earlier of—

(a) the last day of the period of 6 weeks beginning with the day on which the relevant person makes a determination as to whether to make a decision referred to in paragraph (6); or

(b) the last day of the period of 6 weeks beginning with the day on which the relevant person receives notification that the application for such a decision is withdrawn.

(5) In paragraph (4), a relevant person makes a determination where the person makes a determination that is not dependent on receiving more information about the claimant’s circumstances.

(6) The decisions referred to in paragraph (4) are—

(a) in England and Wales—

(i) a decision by the Court of Protection under section 16(2) of the Mental Capacity Act 2005(59) to appoint a deputy with power to act on the claimant’s behalf in respect of entering into a loan agreement;

(ii) the making of an order by the Court of Protection under section 16(2) of the Mental Capacity Act 2005 that embraces a decision on behalf of the claimant with respect to entering into a loan agreement; or

(iii) a decision by the Public Guardian to register a lasting power of attorney under the Mental Capacity Act 2005 where the power includes power to act on the claimant’s behalf in respect of entering into a loan agreement; or

(b) in Scotland—

(i) the making of an intervention order by the sheriff under section 53 of the Adults with Incapacity (Scotland) Act 2000(60) that embraces a decision on behalf of the claimant with respect to entering into a loan agreement;

(ii) the making of an order by the sheriff under section 58 of the Adults with Incapacity (Scotland) Act 2000(61) to appoint a guardian with power to act on the claimant’s behalf in respect of entering into a loan agreement; or

(iii) the making of an order by the sheriff or the Court of Session under the Judicial Factors Act 1849(62) to appoint a judicial factor with power to act on the claimant’s behalf in respect of entering into a loan agreement.

Transition from legacy benefit to universal credit

21.—(1) Paragraph (3) applies where—

(a) an award of universal credit is made to a claimant who—

(i) was entitled to a legacy benefit (a “relevant award”) at any time during the period of one month ending with the day on which the claim for universal credit was made or treated as made (or would have been so entitled were it not for termination of that award by virtue of an order made under section 150(3) of the Welfare Reform Act 2012(63) or the effect of the Transitional Provisions Regulations (64)); or

(ii) was at any time during the period of one month ending with the day on which the claim for universal credit was made or treated as made, the partner of a person (“P”) who was at that time entitled to a relevant award, where the award of universal credit is not a joint award to the claimant and P;

(b) on the relevant date—

(i) the relevant award included an amount in respect of housing costs under—

(aa) paragraphs 14 to 16 of Schedule 2 to the JSA Regulations(65);

(bb) paragraphs 16 to 18 of Schedule 6 to the ESA Regulations; or

(cc) paragraphs 15 to 17 of Schedule 3 to the IS Regulations(66); or

(ii) the claimant was entitled to loan payments under these Regulations; and

(c) the amendments made by Schedule 5 apply in relation to the award of universal credit.

(2) In this regulation, the “relevant date” means—

(a) where paragraph (1)(a)(i) applies and the claimant was not entitled to the relevant award on the date on which the claim for universal credit was made or treated as made, the date on which the relevant award terminated;

(b) where paragraph (1)(a)(i) applies, the claimant is not a new claimant partner and he or she was entitled to the relevant award on the date on which the claim for universal credit was made, that date;

(c) where paragraph (1)(a)(i) applies, the claimant is a new claimant partner and he or she was entitled to the relevant award on the date on which the claim for universal credit was treated as made, that date;

(d) where paragraph (1)(a)(ii) applies, the date on which the claimant ceased to be the partner of P or, if earlier, the date on which the relevant award terminated.

(3) Where this paragraph applies, regulation 8(1)(b) does not apply.

(4) Paragraph (5) applies where paragraph (1)(a) applies and the amendments made by Schedule 5 apply in relation to the award of universal credit, but—

(a) the relevant award did not include an amount in respect of housing costs because the claimant’s entitlement (or, as the case may be, P’s entitlement) was nil by virtue of—

(i) paragraph 7(1)(b) of Schedule 2 to the JSA Regulations(67);

(ii) paragraph 9(1)(b) of Schedule 6 to the ESA Regulations(68); or

(iii) paragraph 8(1)(b) of Schedule 3 to the IS Regulations(69); or

(b) the amendments made by Schedule 5 applied in relation to the relevant award but the claimant was not entitled to loan payments by virtue of regulation 8(1)(b).

(5) Where this paragraph applies—

(a) the definition of “qualifying period” in regulation 2(1) does not apply; and

(b) “qualifying period” means the period of 273 days starting with the first day on which the claimant (or, as the case may be, P) was entitled to the relevant award, taking into account any period which was treated as a period of continuing entitlement under—

(i) paragraph 13 of Schedule 2 to the JSA Regulations(70);

(ii) paragraph 15 of Schedule 6 to the ESA Regulations(71); or

(iii) paragraph 14 of Schedule 3 to the IS Regulations(72),

provided that, throughout that part of the qualifying period after the award of universal credit is made, receipt of universal credit is continuous and the claimant otherwise qualifies for loan payments under these Regulations.

(6) Paragraph (7) applies where—

(a) a claimant has an award of universal credit which becomes subject to the amendments made by Schedule 5; and

(b) regulation 29 of the Transitional Provisions Regulations(73) applied in relation to the award.

(7) Where this paragraph applies—

(a) where paragraph (3) of regulation 29 of the Transitional Provisions Regulations applied in relation to the award, regulation 8(1)(b) does not apply; and

(b) where paragraph (5) of regulation 29 of the Transitional Provisions Regulations applied in relation to the award, paragraph (5) of this regulation applies in relation to the award.

Delegation

22.  A function of the Secretary of State under these Regulations may be exercised by a person authorised for that purpose by the Secretary of State.

Signed by authority of the Secretary of State for Work and Pensions

Caroline Dinenage

Parliamentary Under-Secretary of State

Department for Work and Pensions

5th July 2017