The following circumstances will generally prevent an eligible person from utilising his/her entitlement to a subsidised advance, or exercising portability.
A subsidised loan is not available to purchase land solely. However, where a client genuinely intends to proceed with the building of a home within a reasonable time and construction is to be completed within five years of settlement, a Certificate of Entitlement should not be refused merely because the advance will be applied initially to the purchase of the land only. The decision should be based on consideration of both the intended purpose and the intention to occupy. [Please also see Entitlement GO 3.7.6.]
A person who has been assisted under the Defence Service Homes Act 1918 and who discharged his/her liability prior to 9 December 1987 is not entitled to any further assistance unless assisted solely as a spouse. Where the previous liability was discharged in the period immediately prior to 9 December 1987, the date of registration of the discharge of mortgage should be ascertained to determine when the person ceased to be a borrower for the purposes of Section 19. [NOI 42 of 6 September 1995 also refers.]
A person who has received assistance under this Scheme and who has not discharged his/her liability is not entitled to DSH assistance. An exception may be made where, although the liability has not been repaid, the property has been returned to the administering department, or transferred to a family member.
A person who received money from the Commonwealth after 9 December 1987 by way of a cash grant instead of an advance under the Defence Service Homes Act 1918 or payment instead of such cash grant, received that payment on the written understanding that they would not be entitled to any further assistance under the Act.
Assistance will be not be granted where either the eligible person or spouse or de facto partner is the owner of a house other than the one which is the subject of the application. In deciding whether ownership exists, two elements must be tested. Firstly, the property must represent a suitable security for a loan having regard to the usual test - acceptable holdings, whether it is a house etc. Secondly, the applicant or spouse or de facto partner if applicable must not own another house as either a single tenant or as a joint tenant, no matter who the other joint tenant(s) may be. An interest should not be considered as ownership if it does not meet both elements of the test. Although holding other property as a company shareholder or as a company title shareholder might satisfy the first part of the test, it would not be considered ownership under the second part.
Though joint tenants as between themselves have separate rights as far as outsiders are concerned, each is treated as the single owner of the entire property. A Tenancy in Common is co-ownership under which each tenant has a distinct interest in the property, though no one tenant has a right to possession of any particular part of the property. A tenant in common could not as an individual, be regarded as the owner of another home, but rather is a person who has a share or interest in another home. Ownership of another home as a tenant in common, even where the only other tenant in common is the applicant's spouse or de facto partner, would not constitute ownership in terms of subsection 18(2)(b) or (e). Likewise ownership of shares in a company which owns another home does not make a shareholder an owner even where that person holds controlling shares in the company. A company is a legal entity separate and distinct from its shareholders and a shareholder has no legal or equitable interest in land registered in the name of a company. Notwithstanding that the legislation provides for assistance under company titles, a shareholder cannot be regarded as the owner of any property held in this way.
3.7.5.1 House. As a general principle, a structure may be considered to have the status of a house if it is legally able to be occupied; it is, or will be, able to satisfy the reasonable tests of a house (eg. provides sleeping and living accommodation, and facilities for ablutions, cooking, laundering etc.); and the title is an acceptable holding as defined in the legislation.
3.7.5.2 Owner. Includes any person who has purchased or contracted to purchase a house. Generally, for the purposes of the legislation, an owner is a person having a complete legal or equitable interest in a house. Thus properties in which the applicant and/or any proposed joint tenant of the applicant, share an interest with other persons as tenants in common will not result in refusal to grant assistance.
3.7.5.3 Ownership of another house by either the applicant's spouse or de facto partner will result in a refusal to grant assistance. Where the applicant has both a spouse and de facto partner, the delegate must be satisfied that neither of them owns another home. Alternatively, if one of them owns a home, the Delegate must be satisfied that the applicant is permanently separated from that spouse or de facto partner.
3.7.5.4 Issue of Certificate of Entitlement. A Certificate of Entitlement cannot normally be issued while the applicant or his/her spouse or de facto partner owns another home. Where the applicant owns another home which is to be sold, a Conditional Letter should be issued. An exception to this general rule may be made where contemporaneous settlements of the sale of one home and the purchase of another are to occur. Delegates are to exercise their discretion to ensure that clients are not disadvantaged in such circumstances. Where the home being sold is a Defence Service home, the amount box on the C of E should show "see special information box". The special information box might contain a statement along the lines of "amount of advance must not exceed the limit of the immediately preceding DSH advance/s, excluding any amount owing on essential repairs advances and/or widows'/widowers' advances."
A person must intend to use the house, which is the subject of the application, as a home for him/herself and dependants. An exception is where nurses are being assisted to acquire a hospital, sanatorium or nursing-home.
3.7.6.1 Intention. Whether there is a real likelihood of the intention being realised is a relevant consideration. It would be expected that a decision to refuse to issue a certificate of entitlement would be based on facts that generally are not capable of any other conclusion.
3.7.6.2 Time Limits. Whether the intention to use the house for the prescribed purpose will be met within a reasonable time is relevant to the genuineness of the intention. What is a reasonable time will vary having regard to the circumstances of each case, but where a certificate is issued to buy land and build a home and the funds are used for the purchase of land with the intention of building, it is a requirement that the home is completed within five years from settlement of the loan. Failure to complete construction of a house capable of being occupied within five years will result in cancellation of subsidy and a change in the rate of interest to the Bank's investment rates or alternative finance. Clients should be warned of these possible implications in such cases.
The most common meaning of home as it is used in the legislation is a person's usual or habitual place of residence. However, the term is capable of wider meaning and a house may be regarded as a home in some circumstances where there is not habitual or continuous residence.
Where a subsidy is being paid in respect of a person who becomes the spouse or de facto partner of another person who is also the beneficiary of a subsidy, the Secretary may cancel the subsidy in respect of one of the persons. Cancellation of subsidy under this section of the legislation [ss.26.(4)], is discretionary and should not be taken as a matter of course. [Please see Procedural GO 1.5 also]. The power to cancel subsidy has been in the legislation well before the insertion of the amendments allowing portability and the pooling of entitlements. Presuming both parties met the entitlement criteria (ie did not own another dwelling etc) at the time they received their Certificates of Entitlement, action to cancel one of the subsidies would not normally be taken.
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