Housing benefit - 8 weeks arrears can be in advance

Note - the Landlord Law Blog has now moved to www.landlordlawblog.co.uk.

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Many thanks to the Nearly Legal Blog for reporting this Housing Benefit Appeal case which will be of great interest to all landlords whose tenants' rent is paid by Housing Benefit (HB) /local housing allowance (LHA).

Landlords can require the HB to be paid direct if the rent is more than 8 weeks in arrears under Regulation 95 of the Housing Benefit Regulations 2006. However where, under the tenancy agreement, rent is payable in advance (as is the case with practically all tenancy agreements), Local Authorities have been refusing to pay until the period for the rent has passed. So if a tenant fails to pay rent at the start of the second month, they would not pay rent direct until after the end of the second month. Meaning that landlords would lose a months rent. The reason the local authorities did this was because Housing Benefit Local Housing Allowance Guidance Manual told them so.

However in a recent decision in Coventry supported by the Guild of Residential Landlords the Judge held that this was wrong, and said that the landlord should be paid compensation, saying:

"Rent is in arrears once the contractual date for payment has passed irrespective of whether rent is due in advance or in arrear. Regulation 95 of the 2006 Regulations refers to a liability to pay rent and the liability in this case is to pay rent in advance"

The question now is, will all landlords who have suffered as a result of this rule in the past, be able to claim compensation ...

You will find a report of the decision on the Guild of Landlords website here.

LHA - initiative for reform from the British Property Federation and Eastern Landlords Association

Note - the Landlord Law Blog has now moved to www.landlordlawblog.co.uk.

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I have been informed of an initiative from the British Property Federation, relating to reform of the Local Housing Allowance system. I copy below an email I received from the Eastern Landlords Association (ELA) who are looking to collect evidence to support this. As many other landlords may want to support the initiative, I have agreed to publish it here. This is the information I received from Eastern Landlords:

"As you are aware, the implementation of local housing allowance (LHA) on 7 April 2008 has caused numerous problems for private sector landlords throughout the UK. A survey earlier this year painted a bleak picture. In many cases landlords are not being passed the rent money by their tenants, resulting in an average loss to landlords of £2,000. As a result of this, many landlords are refusing to offer properties to tenants claiming LHA, creating a shortage of housing for them.

Unfortunately, the survey was limited to the north-west of England. We have been working with the British Property Federation (BPF) on this issue and they have decided that an effective route is to compile evidence across the rest of the country. With enough evidence, our argument against the current LHA regime will have the most chance of winning over politicians in the run up to an election and convincing them of the need for reform."

The email from the ELA attached a survey form together with a template letter for you send to your MP (whose details you can find out from www.theyworkforyou.com). I have put these online, and you can download the survey form (which is in pdf format) from here and the letter (which is in word format) from here.

The survey form should be returned by 16th October to:

Andy Fretwell
Senior Administrator
Eastern Landlords Association
Suite A, St Francis House,
141-147 Queens Road,
Norwich, NR1 3PN

If you want to speak to the ELA, the telephone number is 01603 767101, or you can email them at officer@easternlandlords.org.uk.

Banks swiping our cash

An article in the Observer today 'Banks exploiting obscure law to raid accounts and recover debts' prompts me to remind readers on housing benefit (HB), or landlords of tenants on housing benefits, of the advantages of using Credit Unions.

If you find it difficult to keep your bank account under control, you are always at risk that your housing benefit is going to be used up and will not be available to pay out to your landlord, thus putting your home at risk. Under the new rules which came into force last year, the new housing benefit, Local Housing Allowance (LHA), has to be paid (save in a few circumstances) to the tenant. Whereas before tenants could ask that it be paid direct to landlords, to safeguard their home.

Quite a few credit unions offer a service whereby they will ringfence any HB/LHA paid in, so it gets paid out to the landlord and cannot be used for any other purpose. I am compiling a list of credit unions offering this service on my Landlord Law site which you can see here. If you know of, or work for, any other credit unions offering this service, please let me know and I will add them to the list.

Credit unions would also be a safe haven for money being saved up for other purposes, to keep it safe from regular banks offsetting it against debts, as described in the Observer article.

LHA direct payment e-petition

After my earlier post giving details of an e-petition against the governments licensing plans, I have now learned of another one here requesting Local Housing Allowance be paid direct to landlords.

Petitions seem to be taking off - it is a shame therefore that the government is no longer supporting them, according to this report on the parliament.uk blog.

NLA calls for changes in housing benefit/local housing allowance rules

The National Landlords Association (NLA) has recently started a campaign to change the rules for the payment of housing benefit/local housing allowance (LHA). As has been described elsewhere in this blog, LHA cannot normally be paid direct to the landlord in the way that housing benefit was. The NLA consider that this is unfair, particularly in view of the fact that LHA is paid direct to social landlords and local authority landlords.

LHA can be paid direct in limited circumstances, these are (1) if the tenant is deemed to be ‘vulnerable’ or if (2) he is in arrears of rent of over 8 weeks. However benefit offices are not acting consistently in interpreting these rules. For example many are refusing to accept that rent can be in arrears if it is payable in advance (benefit is paid in arrears) which means it can be well over three months before benefit starts to be paid direct to landlords where tenants are in default. Landlords are finding this unacceptable.

The NLA have recently carried out a survey of their members which shows that over 52% say they are less likely to take on tenants in receipt of benefit and 59% say that they are concerned about rent arrears or local authority maladministration.

They are asking for the following:

• an ‘automatic trigger’ for direct payment to landlords after one month’s rent arrears (as opposed to two months/8 weeks as now)
  
• Better local authority administration of LHA
  
• Better determination of the vulnerability of tenants by local authorities, with clear guidelines being laid down
  
• the creation of local authority links with local deposit guarantee schemes so each new LHA application is accompanied by a deposit guarantee bond.

You can read more about this on the NLA website here.

Credit Unions and Local Housing Allowance

As I have written about before, Credit Unions can provide a useful service to tenants who want their Local Housing Allowance payments to go direct to their landlords. Many tenants prefer this, as it prevents them spending the money by mistake and thereby making themselves vulnerable to being evicted. However under the new rules payment direct to landlords will only be done now in exceptional circumstances.

However some credit unions have a service where they arrange for a special bank account to be set up to receive the payment. They will then pay it over to the landlord. As the money is ring fenced and kept separate, there is no danger of it being swallowed up by the tenants overdraft, and their homes will be safe.

I am now compiling a list of credit unions who offer this service on my web-site www.landlordlaw.co.uk which you can see here. If you know of any other credit unions which offer this can you please let me know.

Local Housing Allowances – Credit Unions to the rescue

The Local Housing Allowance Scheme, discussed in my earlier article regarding landlords from Blackpool, is due to be rolled out across the country in 2008. The main criticism from landlords is that under the new scheme the rent cannot be paid to them direct any more. It has to be paid to the tenant, unless either the rent is in arrears of eight weeks, or if the tenant is adjudged to be 'vulnerable'. However in both of these cases the direct payment takes some time to be set up, during which time arrears may be accruing making the tenant vulnerable to a claim for repossession.

Many tenants also are unhappy about not being able to elect to have the rent paid to their landlord direct. They would much prefer to know that this is being done and that their home is not at risk. If they want rent to be paid direct, it seems ridiculous that they should not be allowed to have it.

The reason given on the DCLG web-site for the enforced payment to tenants is

"Personal responsibility: Empowering people to budget for and to pay their rent themselves, rather than having it paid for them, helps develop the skills unemployed tenants will need as they move back into work"

However it is noticeable that this personal responsibility is not being encouraged where the landlord is a social landlord, or where the benefit is for mortgage payments. Only the poor old private landlord (with considerably less political clout than the social landlords and the banks) is going to be vulnerable to having his rent spent on drink and drugs in an effort to encourage personal responsibility among his tenants.

There may though be an answer. I attended a Landlords Forum meeting at Suffolk Coastal Local Authority recently where a lady from a local Credit Union told me that they are now setting up special accounts for tenants so the rent can be paid in and then paid out to the landlord. This is better than having the LHA paid to the tenants bank account because, as it is only being used for the transfer of the housing allowance, the money is not at risk of being swallowed up by the tenants overdraft or being spent by the tenant (perhaps in error, perhaps while under the influence) on other things.

Even more interestingly, we were told by a gentleman giving a talk on Local Housing Allowances, that section 94(3) of the Housing Benefit Regulations 2006, provides for the tenant to request that the benefit be paid to another person. This is the statutory authority for setting up the Credit Union payment, however he speculated that the tenant may also be able to use this section to request that the rent be paid to the landlord!

Looking a little closer at the regs, section 94(1) seems to be providing against this. If this is the case though, that means that the only person the tenant is not allowed to request the rent be paid to is the landlord – the person he is legally liable to pay the rent to! How mad is that? Are there any human rights ramifications here?

Still, the Credit Union idea seems like a very good one, and I commend it to you.

Pathfinder scheme criticized in Blackpool

There is an interesting article here on the new government ‘pathfinder scheme’ for the payment of housing benefit. This was initially set up in 2003 in a few pilot areas and is gradually being rolled out across the country. A fixed rate of benefit, known as a local housing allowance, is paid for all properties of the same type, and which is not linked to individual rents. The tenant can therefore shop around, and if he finds a property with a cheaper rent, can keep the difference.

However the aspect of the pathfinder scheme which annoys landlords is that the option which the parties had under the old scheme for tenants to elect to have their rent paid direct to the landlord, is no longer available. Some of the Blackpool landlords are claiming that the rent payments are too much of a temptation for some tenants who are using the money for drink, drugs and lottery tickets.

The problem, they claim, is particularly acute in Blackpool as it has such a large private rented sector. It is also apparently the ‘drug death capital of the UK’, and a local coroner has recently claimed that benefit money is helping to fund the cities drug problem.

Landlords have been complaining about the pathfinder scheme ever since it was first set up in 2003, claiming that many tenants will not be able to resist the lure of these lump sums of money being paid to them, to fund their drug and similar problems. However areas where the scheme has been piloted have not apparently had that many problems. Skeptics claim that this is because the rate of benefit set in pathfinder pilot areas has been more generous than in other areas. When the scheme is rolled out nationwide, they claim, this generous rate will not continue and huge problems will result.

If a tenant in receipt of local housing allowance falls into arrears, there are two options for the landlord:

1. To try to persuade the Local Authority to pay the rent to him direct. There is a general rule that this will be done if the tenant is in arrears of more than 8 weeks. The DWP Resource Centre on benefit states on this point

"If rent arrears are owed, the local authority will arrange to make payments direct to the landlord unless it is not in the customer’s overriding interests to do so. However, landlords are encouraged not to wait for the 8-week period to be reached before contacting the local authority."

The landlord may also be able to persuade the Benefit Office to pay the rent direct on the basis that the tenant is ‘vulnerable’. Information on how Officers are to identify potentially vulnerable claimants can be found in paragraph 5.30 onwards in the Local Housing Benefit Allowance Guidance Manual, to be found online at the DWP web-site.

The main criticism of both of these options from landlords, is that it takes time for the benefit office to be persuaded and the new arrangement set up, during which time they are not receiving any rent.

2. To bring proceedings for possession. This is unpopular with landlords as it can take up to six months (more if the landlord is unlucky) to recover possession of the property, during which time he will not be receiving rent and will have to pay court and legal fees.

Also, although this will resolve (at a cost) the individual landlords problem, the tenant will still need housing, and his addiction problems will not be helped by being evicted from his home. The problem to society therefore will remain.

The Blackpool landlords suggest that landlords who are accredited should be permitted to have rent paid direct to them, if the tenants agree (and many probably would). The Local Authority say that they cannot do this as it is not permitted by the scheme rules. However the government might want to consider this option, if it wishes to encourage accreditation and thereby improve standards.