Editors --- "Assets test: meaning of 'homeowner', whether has reasonable security of tenure, tenancy at will" [2007] SocSecRpr 38; (2007) 9(3) Social Security Reporter, Article 12

• LOUNTZIS and SECRETARY, DEPARTMENT TO THE DFaCSIA
• Background
• The issue
• The law
• Discussion
• Formal decision

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Assets test: meaning of ‘homeowner’, whether has reasonable security of tenure, tenancy at will

LOUNTZIS and SECRETARY, DEPARTMENT TO THE DFaCSIA

(2007/1473)

Decided: 3rd July 2007 by E. Fice

Background

In November 2004Lountzis’ rate of age pension was reduced due to the combined value of his and his partner’s assets. Centrelink had determined that he was a homeowner.

Until 19 September 2001 Lountzis and his wife owned and resided at Rosehill Rd, Niddrie(‘the Niddrie property’). On 19 June 2000, Lountzis and his son Alex became tenants in common of a property at Cahill Street, Bulla(‘the Bulla property’). Alex paid the deposit and needed a loan on the balance of the purchase price of $236,000. Alex said that the bank would not loan him the money because his income was too low without his father holding a share in the property. Alex made all the mortgage repayments on the Bulla property and paid all the maintenance and insurance.

Lountzis and his wife moved from the Niddrie property to live in the Bulla property after settlement. Alex lived with his parents at the Bulla property until 2003. Lountzis rented out the Niddrie property between 2001 and2003.

A few years after the purchase of the Bulla property Lountzis signed a Trust Deed (undated) that provided he held his half share in the Bulla property on behalf of his son Alex and agreed to transfer his half interest to Alex at such time and in such manner as Alex directed.

Alex married in 2003 and he and his wife moved in to Lountzis’ Niddrie property. Neither Lountzis nor Alex charged each other rent for occupying the other’s property.

The issue

The AAT considered whether Lountzis was a homeowner, therefore determining which Assets Value Limit applied in his case.

The law

Under the Social Security Act 1991 (the Act) the rate of age pension payable is subject to an assets test. Centrelink is required to work out whether the value of the person’s assets exceeds the person’s Asset Value Limit. The Assets Value Limit varies considerably depending on whether the person or their partner is a homeowner.

Section 11(4) of the Act provides:

11.(4) For the purposes of this Act:

(a) ................

(b) a person who is a member of a couple is a homeowner if:

(i) the person, or the person’s partner, has a right or interest in one residence that is:

(A) the person’s principal home; or

(B) the partner’s principal home; or

(C) the principal home of both of them; and

(ii) the person’s right or interest, or the partner’s right or interest, in the home gives the person, or the person’s partner, reasonable security of tenure in the home; and

(c) .....................

Section 11A(10) provides:

11A.(10) If a person has a right or interest in the person’s principal home, the person is to be taken to have a right or interest that gives the person reasonable security of tenure in the home unless the Secretary is satisfied that the right or interest does not give the person reasonable security of tenure in the home.

The AAT noted that whilst there is no onus of proof in the Tribunal, a person clearly bears an evidentiary onus to put before the Tribunal sufficient evidence for it to be satisfied that the right or interest which that person may have in their principal home does not give that person reasonable security of tenure.

Discussion

There was no dispute that the Bulla property was Lountzis’ principal home, and that he still owned the Niddrie property. The first issue the AAT determined was whether Lountzis, by reason of the fact that he was one of two tenants in common of the Bulla property, was a homeowner.

The AAT found Lountzis satisfied s.11(4)(b) as he had a legal interest in his principal home. It then turned to the second element, that is, whether the principal home provided Lountzis with reasonable security of tenure. Lountzis argued that he was not the beneficial owner of the Bulla property, but merely held his interest in trust for Alex. The AAT held that the evidence before it, particularly the Trust Deed, disclosed that Lountzis held his half share in the Bulla property as a bare trustee.

The AAT then discussed the expression ‘right or interest’ and noted that whilst not defined in the Act, it has been held to be synonymous with a right or interest in real property (see Delos Reyes and Secretary, Department of Social Security [1993] AATA 384; (1993) 32 ALD 287 at290). An interest in real property maybe legal or equitable.

DFaCSIA argued that Lountzis ’occupation of the Bulla property resulted from the fact that he was a tenant at will. This is where a tenant occupies land as a tenant on the basis that either party may terminate the tenancy at any time, there is no agreement as to duration, and usually no agreement as to payment of rent. The AAT accepted that Lountzis and his wife appeared to be tenants at will under an undocumented arrangement with their son Alex.

The AAT referred to the decision in Secretary, Department of Employment & Workplace Relations and Vanderpluym (reported in this issue of SSR). In Vanderpluym, Greenwood J explained that s.11(4)(b) of the Act contemplates an interest which is either a legal or equitable interest. It also contemplates a class or species of right which may not necessarily involve a legal or equitable interest in the residence. The AAT summarised:

In other words, something short of an interest in the principal residence, for example, a contract which gives rise to bare rights in respect of a residence which is the principal home of a person who is an applicant for a Social Security payment, will suffice. Of course even such a limited right must give rise to reasonable security of tenure in the principal home. As Greenwood J concluded in Vanderpluym;

...It is the conjunction of the character of the right or interest and the circumstances in which it arises that conveys an objective sense of whether the right or interest confers reasonable security of tenure in the home. ...

The AAT concluded that the arrangement between Lountzis and his son Alex was one where Alex had agreed that Lountsiz and his wife should be sole occupants of the Bulla premises. In exchange for the right of exclusive occupation, Lountzis agreed that Alex and his wife have exclusive occupation of the Niddrie property. Alex’s evidence was that even if he and his wife decided to return to the Bulla property, it was likely that his parents would continue to live there. The AAT concluded that Lountzis’ occupation of the Bulla property created an equitable interest in the residence. ‘It has all the hallmarks of a tenancy at will.’ (Reasons, para.32). The AAT held even if it was wrong the right created gave Lountzis reasonable security of tenure in his home.

Formal decision

The AAT found that Lountzis was a homeowner for the purpose of the Act.

[J.F.]