The Home Equity Access scheme (HEAS), previously known as the Pension Loans Scheme or PLS, will accept any property in Australia that you own title to (i.e. where you own the freehold title).
In most instances this is reasonably straightforward, however we’ve recently had a few applications where the legal ownership of property has been tested. In some cases our challenge has ended in success and in others it hasn’t.
Take a look at the cases and their outcomes below and get in touch if you’re not sure if your circumstances make you eligible to apply.
Company Title - a case study of the one that got away
A client based in an affluent suburb in Adelaide, Barry*, owned two units via a Company Title structure. Under Company Title structures, which preceded the more common strata title structures for apartment complexes, you own shares in the company that owns the property and those shares give you a right of occupation to a specified apartment/unit.
Barry had an existing mortgage loan over his shares in the Company from one of the big 4 banks and had reasonable net equity in his apartments. Barry applied for the PLS but was rejected on the basis that Centrelink/DSS required all other shareholders in the Company structure to guarantee his PLS loan obligation. This was of course not logical (why would a 3rd party go guarantee for an unrelated party’s debts) and so we assisted Barry to appeal the decision at the Administrative Appeals Tribunal.
Ultimately the appeal was rejected as the AAT took the view that Centrelink was within its rights to request the other shareholders in the Company to guarantee the obligations of the PLS applicant.
Whilst Barry’s was a test case for us, being our first Company Title application, our learnings are that Centrelink is unlikely to accept Company Title units as security, particularly if there is an existing loan secured by the shares.
We continue to dispute Centrelink’s approach here as it appears grossly inequitable and inconsistent with commercial banking practices (i.e Barry’s bank lender did not require the other shareholder guarantees).
Barry’s case is an example of where our money-back guarantee was applied.
For clarity, property owned by closely held companies is an acceptable HEAS security and we have a number of clients who have say 2-3 household members owning the company that owns the property and so they are in a position to guarantee their mutual obligations.
Whilst generally leasehold ownership is not permitted, being the primary reason many retirement villages are not acceptable security for the HEAS, there are exceptions.
One such exception is Crown leases (i.e. leases from the Commonwealth Government) such as exist in the ACT (where there are no freehold titles) and we now have a number of clients with Crown leases where their PLS applications have been approved.
Another exception that was recently approved was a lease from the Catholic Church. This client’s application was approved under the delegation of the relevant Centrelink officer (i.e. outside of Centrelink’s normal policy) on the basis that the lease still had a long time to run. In this case the Church had to consent to the HEAS caveat.
We recently had another client with a leasehold (within a residential strata plan) which had a long term still to run which was approved.
These cases indicate that Centrelink will accept certain leasehold arrangements and applications will be assessed on a case-by-case basis but it is implied that short term leaseholds may not be acceptable.
Whilst generally most retirement villages operate under leasehold arrangements (where you have a right or licence to occupy your dwelling but it is owned by the village operator) there are some villages that operate under strata title or ‘purple title’ structures.
These are acceptable security for the HEAS but the small number of clients we’ve had who have these structures have also had to provide the village operators consent to the HEAS application and the net equity in the dwelling has to be adjusted for all contractual rights the village operator may have (eg, deferred management fees, sales commissions, etc). For this reason, Centrelink also required all of the retirement village contracts to be provided.
Accessing the HEAS is not always a straight forward process which is why we work with Australian seniors to help them with the application and ongoing Centrelink communication.
Contact us on 1300 266 786 or click request a call below to talk to a specialist.