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Chapter F4: Support for owner occupiers

General ........................................................................................................F4001 Interpretation
F4010:Alternative finance payments
F4011:Earned income
F4012:Joint owner occupiers
F4013:Loan interest payments
F4014:Owner occupier
F4015:Qualifying period
F4016:Relevant payments
F4017:Standard rate
Circumstances where no amount of HCE will
be included in an award of UC
F4020:No HCE where owner occupier has earned income
F4030:No HCE for a QP
F4040:Qualifying period
F4050:QP where claimant also in receipt of JSA or ESA
F4055:QP where joint owner occupiers cease to be a couple
Calculation of the amount of HCE for owner-occupiers
F4070:Payments to be taken into account
F4080:The amount of HCE
F4081:Amount for interest on loans
F4090:Loan taken out for necessary adaptations to home
F4091:Changes in the amount of capital owed on a loan
F4095:Amount for alternative finance arrangements
F4100:Standard rate
F4110:Amount for service charges payments
How to calculate a monthly average
F4112:weekly payments
F4120:Service charge free periods

Chapter F4: Housing Costs Element: Support for owner occupiers

F4001 General

This chapter provides guidance on how to calculate the amount of HCE to include in
an award of UC for claimants who are owner occupiers.

F4002

F4020 et seq gives guidance on circumstances where an amount of HCE will not be
included in an award of UC for some owner occupiers.

F4003

F4040 et seq gives guidance on the QP before an amount of HCE can be included
in an award of UC for owner occupiers.

F4004

F4070 et seq gives guidance on how to calculate the amount of HCE to include in an
award of UC for owner occupiers.

[F4005-F4009]

Interpretation

F4010 Alternative finance payments

Alternative finance payments has the meaning given in ADM chapter E21.
1 UC Regs, Sch 5, para 2

F4011 Earned income

Earned income has the meaning given in ADM chapters H3 and H4.

F4012 Joint owner occupiers F4103

Joint owner occupier means (1) joint claimants who are both liable to make owner
occupier payments.
1 UC Regs, Sch 5, para 1(2)

F4013 Loan interest payments

Loan interest payments has the meaning given in ADM Chapter E21.
1 UC Regs, Sch 5, para 2

F4014 Owner occupier

Owner occupier means a single owner occupier who is liable for owner occupier
payments, or each joint owner occupier (1).
1 UC Regs, Sch 5, para 1(2)

F4015 Qualifying period

QP has the meaning given in F4040 et seq (1).
1 UC Regs, Sch 5, para 2

F4016 Relevant payments

Relevant
payments (1) are one or more payments of
1. owner-occupier payments
2. service charge payments.
Note: See ADM chapter E2 for more guidance on the meaning of relevant
payments.
1 UC Regs, Sch 5, para 2 & 3

F4017 Standard rate

Standard rate has the meaning given in F4100 et seq (1).
1 UC Regs, Sch 5, para 2 & 12

F4018

- F4019
Circumstances where no amount of HCE will be included in an award of UC

F4020 No HCE where the owner-occupier has earned income F4002 F4021

No HCE will be included in an award of UC for an assessment period where (1)
1. the owner-occupier has any earned income or
2. if the owner occupier is a member of a couple, the other member of the
couple has any earned income.
Note: See ADM chapters H3 and H4 for more guidance on earned income.

1 UC Regs, Sch 5, para 4(1)

F4021

For the purposes of F4020 (1)
1. the nature of the work
2. its duration or
3. the amount earned
are not relevant when considering whether the claimant has earned income.

1 UC Regs, Sch 5, para 4(2)

F4022

Where the home is shared ownership the rental element will still be eligible for an
amount of HCE to be included in an award of UC (1).
Note: See ADM chapter F2 for the definition of shared ownership.
1 UC Regs, Sch 5, para 4(3)

[F4023-F4029]

F4030 No HCE for a QP

No HCE will be included in an owner occupier's award of UC until the beginning of
the assessment period that follows the assessment period in which the QP ends (1).
1 UC Regs, Sch 5, para 5(1)

Example

Chris claims and is awarded UC. He is an owner occupier and is liable to pay a
mortgage. His award of UC will not include any amount of HCE for the first 3
consecutive assessment periods but will be eligible to have them included in the one
immediately following.

[F4031-F4039]

F4040 Qualifying period F4003 F4015 F4041 F4041 F4050 F4057

QP
means (1) a period of
1. in the case of a new award 3 consecutive assessment periods
1.1 for which the owner-occupier has been receiving UC and
1.2 in relation to which an amount of HCE for owner occupiers would, but
for the QP, be included in that award.
2. in any case where an amount of HCE for owner occupiers ceases, for any
reason to be included in the award of UC, 3 consecutive assessment periods
in relation to which an amount of HCE for owner occupiers would, but for the
QP, be included in that award.
1 UC Regs, Sch 5, para 5(2)

Example

Jane has already completed her initial QP and her award of UC now includes the
HCE to help with her mortgage. Jane starts work for a two week period. The HCE
ceases to be included in her award for the assessment period that includes those
two weeks. No HCE can be included in her award for a subsequent 3 assessment
periods following that assessment period.

F4041

Where the QP in F4040 is interrupted for any reason
1. that QP stops running and
2. a new QP starts only when the owner occupier next satisfies F4040.
1 UC Regs, Sch 5, para 5(3)

Example

Rosie claimed and was awarded UC. She is an owner occupier and is liable to pay a
mortgage. Her award of UC will not include any amount of HCE for the first 3
consecutive assessment periods. In the 2nd assessment period of her UC award
she works for 4 weeks. The work spans 2 assessment periods and the QP stops
running for those two assessment periods. No HCE can be included in her award for
a further 3 consecutive assessment periods following the last of those 2 assessment
periods.

[F4042-F4049]

F4050 QP where claimant also in receipt of JSA or ESA

Where an owner occupier is in receipt of JSA or ESA immediately before the start of
an award of UC the QP in F4040 will include days the claimant was receiving JSA or
ESA (1). The days the claimant was receiving JSA or ESA will
1. be treated as the whole or part of one or more assessment periods and
2. be determined by the number of days the claimant was in receipt of JSA or
ESA.
1 UC Regs, Sch 5, para 6

Example

Joseph lives alone, has HCE, and is entitled to JSA. His girlfriend moves in and he
therefore becomes part of a couple and claims UC. The period he was in receipt of
JSA counts towards the QP for housing costs. Joseph was in receipt of JSA from
10.09.14 and made his claim to UC on 17.10.14. Taking into account the days
Joseph has been in receipt of JSA he will satisfy the QP for his housing costs in UC
on 10.12.14. This is in the assessment period which runs from 17.11.14 to 16.12.14.
In UC any changes within an assessment period takes effect from the beginning of
the assessment period. Joseph's housing costs would be allowed from 17.11.14 and
would be paid in arrears on 16.12.14.

F4051

JSA (1) and ESA (2) in 4050 refer to JSA and ESA in prescribed legislation.
1 JSA Regs 13; 2 ESA Regs 13

[F4052-F4054]

F4055 QP where joint owner-occupiers cease to be a couple F4056 F4057 F4058

Where
1. joint owner-occupiers cease to be entitled to UC because the award has been
terminated because they are no longer a couple and
2. a further award is made to one or both of them and
3. in relation to that further award, or awards, the occupation condition is met in
respect of the same home as that occupied by the joint owner-occupiers
the QP will be calculated with reference to F4057 or F4058 (1).

1 UC Regs, Sch 5, para 7(1)

F4056

For the purposes of F4055 1. it is irrelevant whether the further award is made (1) on a
claim or is made under prescribed legislation (2) without a claim.

1 UC Regs, Sch 5, para 7(4); UC, PIP & WaB (C&P) Regs, reg 10(6)

F4057 F4055

When calculating the QP in F4040 et seq for any further award in the circumstances
of F4055 the whole or part of any assessment period which would have counted in
relation to the award that has been terminated is
1. carried forward and
2. taken into account for the further award (1).
1 UC Regs, Sch 5, para 7(2)

Example 1

Dave and his partner Joanne are in receipt of an award of UC and are in the 2nd
month of a QP. They split up and Joanne makes a further claim to UC, she also
stays in the same home. Joanne only has to wait for the remaining assessment
periods before an amount of HCE can be included in her award of UC. Joanne is
only able to use the previous spell of QP from the joint claim as she is remaining in
the property she and Dave previously occupied.

Example 2

Caroline and her partner Paul are in receipt of an award of UC and are in the 2nd
month of a QP. They split up and Paul makes a further claim to UC, he moves and
has a mortgage on a different property. Paul has to wait for the full QP before an
amount of HCE can be included in his award of UC.

F4058 F4055

Where (1)
1. an amount of HCE for owner occupiers was included in a joint owner-
occupiers award of UC immediately before that award ended and
2. a further award is made in the circumstances of F4055
there is no requirement to serve a QP and the UC award can include the HCE at the
outset.
1 UC Regs, Sch 5, para 7(3)

Example 1

Kevin and his civil partner John are in receipt of UC that includes an amount of HCE
for owner-occupier payments. Kevin and John split up and Kevin leaves the
household. John makes a further clam to UC. The HCE for owner occupier
payments is included in John's further award of UC until he first ceases to be entitled
to the HCE of UC.

Example 2

Janet and John are a couple and are in receipt of UC that includes an amount of
HCE for owner occupiers. They have a mortgage on the property and a loan also
secured on the property. They separate but continue to live in the same home as
they cannot sell it immediately. They both have further awards of UC. The mortgage
is included in Janet's UC award whilst John is liable for the separate loan. Both loans
are included from the outset and there is no requirement to serve a further QP.

[F4059-F4069]

Calculation of the amount of HCE for owner-occupiers

F4070 Payments to be taken into account F4004 F4080

Where an owner occupier meets the payment, liability and occupation condition
(ADM chapter F2) for one or more relevant payments and the QP has ended, each
relevant payment will be taken into account when calculating the HCE (1).

1 UC Regs, Sch 5, para 8(1)

F4071

Any amount of a relevant payment where the owner occupier does not meet the
payment, liability and occupation conditions in respect of that amount will not be
taken into account when calculating the HCE (1)

1 UC Regs, Sch 5, para 8(2)

F4072

Any relevant payment for which an owner occupier is liable can only be taken into
account once whether in relation to
1. the same owner occupier or
2. a different owner occupier
but this does not prevent different payments of the same type being taken into
account in respect of an assessment period (1).
1 UC Regs, Sch 5, para 8(3)

[F4073-F4079]

F4080 The amount of HCE

The amount of an owner-occupier's HCE is the aggregate of the amount resulting
from the calculations at F4082 to F4121 of all relevant owner occupier payments
taken into account under F4070 et seq (1).
1 UC Regs, Sch 5, para 9

F4081 Amount for interest on loans

Paragraph F4082 et seq gives guidance on how to calculate the amount to include in
an owner-occupier's HCE for relevant payments which are loan interest payments.

1 UC Regs, Sch 5, para 10

F4082 F4080 F4081

Except where F4090 et seq apply calculate the amount in respect of the loan, or
loans, to which the relevant payments relate by (1)
1. finding the amount of capital owed for each loan (2) then
2. if there is more than one loan adding together the amounts from 1.3 then
3. identifying the lower of
3.1
the amount found at 1. or, where relevant, 2. and
3.2
200,000
if both amounts are the same that is the identified amount (4) then
4. applying the formula
(AxSR) 12 where
A
is the amount resulting from 3.
SR
is the standard rate (see F4100) that applies at the date of the
determination.
The result is the amount to be included for loan interest payments (5).
1 UC Regs, Sch 5, para 10 (2); 2 Step 1; 3 Step 2; 4 Step 3; 5 Step 4

Example 1

John gets a 200,000 mortgage, 175,000 to acquire the home he lives in, with an
additional amount of 5,000 to buy a car and 20,000 to improve the home. The
whole loan is secured on the property he is occupying. 175,000 to acquire the
home will be allowed. The extra 25,000 will be allowed as it is secured on the
property. Total owner-occupier payments allowed 200,000. To determine the
monthly amount the 200,000 is multiplied by the SR and that figure is divided by 12.

Example 2

Amanda gets a 60,000 mortgage to acquire the home, and has two separate loans
of 10,000 to consolidate her debts (not secured on the property) and 5,000 for
home improvements (or anything else) that is secured on the property. 60,000 to
acquire the home will be allowed. The 5,000 loan that is secured on the
property will be allowed. The 10,000 loans will not be allowed as they are not
secured on the property. Total owner-occupier payments allowed 65,000. To
determine the monthly amount the 65,000 is multiplied by the SR and that figure is
divided by 12.

Example 3

Stan has a 30,000 mortgage to acquire the home, and has a separate loan
of 45,000 to repair and improve the home (or anything else). The 45,000
loan is not secured on the property he is occupying. 30,000 will be allowed. The
extra 45,000 will not be allowed as the loan is not secured on the property. Total
owner-occupier payments 30,000. To determine the monthly amount the 30,000 is
multiplied by the SR and that figure is divided by 12.

Example 4

Brian has a 250,000 mortgage to acquire the home, and has a separate loan
of 25,000 to buy a car (or anything else). The loan for the car is secured on the
property he is occupying. The capital limit applies and only 200,000 of the mortgage
will be allowed. To determine the monthly amount the 200,000 is multiplied by the
SR and that figure is divided by 12.

[F4083-F4089]

F4090 Loan taken out for necessary adaptations to home F4082

[See memo ADM 6 14 [not found]] Where a loan, or part of a loan, was taken out to pay for
necessary adaptations to the home to meet the disability needs of a person to which F2183applies (1) the loan, or part of a loan, will be disregarded for the purposes of the
capital limit.
1 UC Regs; Sch 3, para 5, Sch 5, para 10(3)

Example

Jackie takes out a loan to adapt her home to meet her disability needs. The loan is
for 12,000.00 and is secured on her home. She also has a mortgage secured on
the property. The capital balance on her mortgage is 227,000.The mortgage is
subject to the capital limit so only 200,000 is allowable. The 12,000 loan taken out
to adapt her home is not subject to the capital limit. Her total capital allowable is
therefore 212,000.

F4091 Changes in the amount of capital owed on a loan

Any change in the amount of capital owed on a loan will not be taken into account
after the relevant date until
1. the first anniversary of the relevant date or
2. if the change in capital occurs after the first anniversary, the next anniversary
after the change (1).

1 UC Regs, Sch 5, para 10(4)

F4092 F4094

Relevant date means the date on which an amount of HCE is included in the owner
occupier's award (1).
1 UC Regs, Sch 5, para 10(5)

Example 1

Pierre is in receipt of UC. His HCE for loan interest payments is first awarded from
7.2.14. On 3.7.14 Pierre reports that his mortgage has increased with effect from
1.7.14. The increase can only be applied to his award from 7.2.15 (the first
anniversary of the relevant date after the change).

Example 2

Jacob is in receipt of UC. His HCE for loan interest payments is first awarded from
4.4.14. On 18.2.15 he reports that his outstanding balance has reduced on 15.2.15.
The decrease can only be applied to his award from 4.4.15 (the first anniversary of
the relevant date after the change).

Example 3

Paula is in receipt of UC. Her HCE for loan interest payments is first met on 19.1.14.
On 22.8.16 she reports that the capital outstanding on her mortgage has reduced.
The reduction can only be applied to her award from 19.1.17 (the next anniversary of
the relevant date after the change).

F4093 F4094

Where the amount of capital outstanding has increased because a new loan has
been taken out after the relevant date this will
1. be treated as a change of circumstances and
2. be taken into account in the UC award from the first day of the AP that the
loan was taken out.

F4094

Where F4093 applies any subsequent changes in the capital owed on the new loan
will be taken into account on the anniversary of the date on which the HCE was first
included in the owner-occupier's award (see F4092).

Example

Judith is in receipt of UC. Her HCE for loan interest payments is first met on 7.3.14.
She reports that on 22.8.16 she has increased her borrowing to buy a new car; this
loan is secured on the property. The increase is applied to her award from 7.8.16
(the first day in the AP). Any subsequent changes in the capital owed on the loan will
be taken into account on the anniversary date of 7.3.17, and each year thereafter on
7 March.

F4095 Amount for alternative finance arrangements

Paragraph F4096 et seq gives guidance on how to calculate the amount to include in
an owner-occupier's HCE for relevant payments which are alternative finance
payments. The definition of alternative finance payments is at E2046.

F4096 F4095 F4097

Calculate the amount for alternative finance payments by (1)
1. finding the purchase price of the home to which the alternative finance
payments relate (2)
2. identifying which is the lower of
2.1 the amount from 1. and
2.2 200,000
if both are the same that is the identified amount (3)
3. applying the formula
(AxSR) 12 where
A
is the amount resulting from 2.
SR is the standard interest that applies at the date of the determination (F4100)
The result is the amount to be included for alternative finance payments (4).

1 UC Regs, Sch 5, para 11 (2); 2 Step 1; 3 Step 2; 4 Step 3

F4097

[See DMG memo DMG 10 14] Purchase price for the purpose of F4096 1. is the amount
paid by a party to the alternative finance arrangements other than the owner-
occupier to acquire the interest in the property less the amount of any initial payment
made by the owner-occupier in connection with the acquisition of that interest (1).
1 UC Regs, Sch 5, para 11(3)

Example

Abhiram is a party to an alternative finance arrangement with his bank. The
purchase price of his property was 125,000. He paid an initial payment (by way of a
deposit) of 39,000. His lender paid 86,000The purchase price of the property
therefore is 86,000.

[F4098-F4099]

F4100 Standard rate F4017 F4082

The standard rate is based on the average mortgage rate published by the Bank of
England.

1 UC Regs, Sch 5, para 12(1)

F4101 F4102 F4102

[See DMG memo DMG 10 14] The standard rate will be changed when, on any reference
day, the Bank of England publishes an average mortgage rate that differs by 0.5% or
more from the standard rate on that reference day (1).

1 UC Regs, Sch 5, para 12(2) & (3)

F4102

The average mortgage rate published on the day referred to in F4101 becomes the
new standard rate (1)
1. on the day after the reference day in F4101 (2) but
2. for the purposes of calculating the amount of HCE to be included in an owner
occupier's award of UC, on the day specified by the Secretary of State (3).
1 UC Regs, Sch 5, para 12(4); 2 12(5)

Example

Kevin's housing costs are calculated using the average mortgage rate published by
the Bank of England in August 2014, that rate is 3.63%. The Bank of England figure
published in October is 4.08%; this is only a difference of 0.45% over the rate used
as the SR so no change is required. The figure published in November is 4.30%; the
difference compared with the SR is greater than 0.5% at 0.67%. The Secretary of
State determines that the change should become effective on 1 December, and so
after that date Kevin's HCE is calculated using a rate of 4.30%.

F4103

At least 7 days before a variation of the standard rate comes into effect for the
purposes of F4012 2. the Secretary of State must publish (1)
1. the new standard rate and
2. the date that standard rate comes into effect for the purposes of calculating
the HCE
on a publicly accessible website.

1 UC Regs, Sch 5, para 12(6)

F4104

Average mortgage rate means the effective interest rate (non-seasonally adjusted)
of UK resident banks and building societies which is
1. for loans to households secured on dwellings and
2. published by the Bank of England in respect of the most recent period
specified for that rate at the date of publication.

1 UC Regs, Sch 5, para 12(7)

F4105

Reference day means any day falling after the commencement of the UC regulations
for owner-occupiers (1).
1 UC Regs, Sch 5, para 12(7)

F4106

- F4109

F4110 Amount for service charge payments

F4111 et seq gives guidance on how to calculate the amount to include in an owner
occupier's HCE for relevant payments which are service charge payments. Also see
HCG (05)0 for more guidance on service charge payments.

F4111 F4110

Calculate the amount of HCE to include for service charge payments by (1)
1. finding the amount of each service charge payment (2) and
2. determining the period the service charge payment is payable and convert
that into a monthly payment (3) (F4112 et seq) and
3. adding the amounts from 2. if there is more than one service charge payment (4)
The result is the amount of service charge payments
1 UC Regs, Sch 5, para 13(2); 2 step 1; 3 step 2; 4 step 3
How to calculate a monthly average

F4112 Weekly payments

Where a service charge payment is weekly the calendar monthly amount is
calculated by multiplying the weekly amount by 52 and dividing the total by 121. It will
always be assumed that there will be 52 weeks in a year.
1 UC Regs, Sch 5, para 13(3)(a)

Example

Anna's service charge payment is 12.50 a week. 12.50 x 52 / 12 = 54.17 Anna's calendar monthly rent is 54.17.

F4113 4 weekly payments

Where a service charge payment is due for a 4 weekly period the calendar monthly
average is calculated by multiplying the payment by 13 and dividing the total by 121.
1 UC Regs, Sch 5, para 13(3)(b)

Example

Wayne makes a service charge payment of 63 every 4 weeks. 63 x 13 / 12 = 68.25 Wayne's calendar monthly service charge payment is 68.25.

F4114 3 monthly payments

Where a service charge payment is due every 3 months the calendar monthly
average is calculated by multiplying the payment by 4 and dividing the total by 121.
1 UC Regs, Sch (5), para 13(3)(c)

Example

Isaac lives in one bedroom flat he pays his service charges quarterly. His quarterly payments are 125 every three months. 125 x 4 / 12 = 41.67 Isaac's calendar monthly rent is 41.67.

F4115 Annual payments

Where a relevant payment is due annually the payment will be divided by 121.
1 UC Regs, Sch 5, para 13(3)(d)

Example

Millie's service charge payment is paid annually and is 650 a year. 650/12 = 54.17 Millie's calendar monthly service charge payment is 54.17. F4116 - F4119

F4120 Service charge free periods

[See DMG memo DMG 10 14] Where
1. an owner-occupier is liable to pay service charge payments and
2. that liability includes periods where they have service charge free periods
to determine the monthly figure the amount of each payment must be multiplied by
the number of payments in a 12 month period (1). This number must then be divided
by 12 to find the calendar monthly amount.

Example

David pays service charges of 12.50 every week. His agreement allows him to
have 4 service charge free weeks.
52 - 4 = 48 weeks for which service charge payments are paid
48 x 12.50 / 12 = 50
David's calendar monthly service charge payment is 50.

1 UC Regs Sch 5, para 13(4)

F4121 F4080

A service charge free period is a period where the owner-occupier has no liability to
make one or more service charge payments (1).
1 UC Regs, Sch , para 13(5)