Recent legislation has removed the existing cap on the amount of mortgage debt that can be deducted from a property’s value, so that all mortgage debt will be deducted. The rule change, brought about by the Civil Legal Aid (Financial Resources and Payment for Services) (Amendment) Regulations 2020 (the Amendment Regulations), will particularly benefit survivors of domestic violence, with many more able to have legal representation in family proceedings, reducing the risk of being cross-examined by their abusers in court.
This means that more individuals will pass the financial eligibility criteria for civil legal aid.
The Government agreed to change the rules on ‘imaginary capital’ in response to the judgment in R (on the application of GR) v Director of Legal Aid Casework & Anor  EWHC 3140 (Admin), a challenge brought by Public Law Project on behalf of a domestic violence survivor and working mother of two who was denied legal aid for family proceedings. ‘Rebecca’ [not her real name] was told she was not eligible for legal aid because she owns her own home, even though there is almost no equity in the property.
Rebecca’s solicitor Daniel Rourke, PLP, said:
“Our justice system works best when everyone can use it on equal terms, with dignity and respect. A decision about whether someone can afford to pay for legal representation should not ignore the realities of their situation. It is plainly unfair to pretend someone has capital that simply does not exist.
“For victims of domestic violence, that has not been the case. The regulations laid … in Parliament will mean that many more vulnerable women on low incomes will be able to take part in family proceedings with the support of a lawyer, in a fairer and more equal way.
“Our client is earning a low wage, looks after two children and receives Universal Credit, yet she was denied legal aid because the rules on home ownership have not been updated in decades. They are completely out of touch with reality. This irrational rule ignored the fact that my client’s home was heavily mortgaged, and pretended that my client had capital which simply does not exist. The ‘imaginary capital’ prevented her from effectively participating in proceedings concerning her children.
“We are extremely grateful to the Law Society for protecting our client against costs in this case. Without their financial support and backing, it would not have been possible to bring this challenge, which has resulted in an important change in the rules.
“Our client has an upcoming hearing. We are keeping our fingers crossed that our client can obtain legal aid before the hearing takes place. If not, she may have to attend court without legal representation, where she would be expected to cross-examine her abusive ex-partner and make complicated legal arguments on her own.”
Law Society president David Greene said:
“The issue of mortgage debt is just one of many flaws in the means test that we have been highlighting to ministers. Our research has shown the means test is preventing even families living below the poverty line from accessing legal aid. This must be dealt with in the present government’s review of the means test.”
With the changes coming into effect on Thursday, 28th January 2021. It means that how solicitors deal with eligibility assessments will also change. A lot more people will have the access to justice they desperately need. It has been a long overdue change but one that will benefit so many.