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Five ways for landlords to ensure payment of housing benefit

October 18, 2011 by Tessa J Shepperson

CashOne of the problems with housing benefit, or local housing allowance (LHA) is that it is, by default, paid direct to the tenant. This is one reason why many landlords do not want to take in tenants on benefit.

Landlords can demand direct payment if the tenant falls into arrears of over 8 weeks. However landlords will generally prefer rent to be paid direct to them from the start so that the arrears never happen. Here are five ways that this can be done.

1. Credit Unions

Many credit unions provide a service where benefit payments are made to a special account and then passed on to the landlord. There are quite a few credit unions that will do this (I have a page with a list of all credit unions that I am aware of).

However credit unions can normally only take on local customers, and not all of them are able to deal with benefit payments, so you may not have one in your area able to offer this service.

2. Tasker Payment Services

There is also a new service, Tasker Payment Services, set up by Leanne Tasker. This is very similar to the credit union service. The Tasker service however is open to all tenants wherever they are located.

Fully registered with the FSA, this is a good choice for tenants who do not have a bank account, or who have a big overdraft. You can read more and find the forms online at the Tasker Payment Services website.

3. Using guarantors

This is the approach developed by Steve Perrons which he described in our podcast in March.

Essentially it involves signing up a relative of the tenant as a guarantor, and then arranging for the benefit payments to go to the guarantor rather than the tenant. The guarantor is then responsible for paying the benefit over to the landlord and ensuring that any shortfall is made up.

Steve has used this method for years and says it works very well. Find out more by listening to the podcast here.

4. Direct payment for vulnerable tenants

If the tenant is a person who finds it difficult to manage their financial affairs or who is unlikely to pay for some reason, an application can be made to the Local Authority for direct payment, to protect the tenant.

This may be appropriate if, for example the tenant has learning difficulties, or is illiterate or cannot speak English. An application needs to be made to the local authority supported by evidence which they will then assess. You can read more about this process in Chapters 5 and 6 of the LHA Guidance Manual here.

5. Direct payment for ‘affordable rents’

Finally, there is the new rule, which came into force in April 2011, which allows local authorities to pay direct to landlords to ‘safeguard affordable rents’. This was brought into force to ‘help exert a downward pressure on rents’ and will be available if a landlord is willing to drop his rent to make it ‘affordable’ to the tenant.

You can read about it in Chapter 7 of the LHA Guidance Manual.

As one is constantly reading about the massive rise in rents recently, this would suggest that landlords are more likely to want to get HB tenants out so they can rent to someone willing to pay more, rather than reduce their rents so HB can be paid direct. It would be interesting to know whether this new power has actually been used yet.

A caveat

Finally, it might be worth mentioning that there are advantages in not having rent paid direct to the landlord. If rent is paid direct the landlord is vulnerable to ‘clawback’ if it is later found that the payments should not have been made to the tenant.

This used to be a big problem when direct payment of benefit to landlords was the norm. The problem does not occur where payments are made via a credit union (or the new Tasker service) or via the guarantor approach pioneerd by Steve Perrons.

Rent Arrears

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Filed Under: Tips and How to Tagged With: five things you didn't know, Housing benefit, Local Housing Allowance

IMPORTANT: Please check the date of the post above - remember, if it is an old post, the law may have changed since it was written.

You should always get independent legal advice before taking any action.

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About Tessa J Shepperson

Tessa is a specialist landlord & tenant lawyer and the creator of this site! She is a director of Landlord Law Services which runs Landlord Law and Easy Law Training.

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Comments

  1. Ben Reeve-Lewis says

    October 18, 2011 at 8:35 AM

    Yes Tessa we use the affordable rents version in Lewisham but the take up is small as there are so many non HB tenants looking for homes so the landlord doesnt have to drop rents.We have lost over 2,000 from the housing benefit register in the last few months, probably priced oput of the borough.

    However many reports are citing a slight turn in the market as people get priced out by higher rents which is putting pressure on landlords to lower, in London anyway

  2. JS says

    October 18, 2011 at 2:06 PM

    There’s one council in south London, I understand, who shall remain nameless but is often associated with a palace and a walk, who, when recovering HB overpayments, does it from the landlord in a lump sum regardless of anything. The landlord then often tries to then get out the tenant and claiming this is rent arrears.

    What’s the argument like that this isn’t arrears because it’s not rent; the rent was already paid when the Council made a Housing Benefit payment directly to the landlord. If it’s been clawed back then it’s a debt the tenant may owe but is not rent, surely?

  3. Tessa Shepperson says

    October 18, 2011 at 2:23 PM

    Hmm. I would have thought that it was rent arrears. After all the landlord doesn’t have the rent does he?

    I would look on it rather like a cheque bouncing. We don’t say, after the cheque has bounced, that the landlord has had his money and so the tenant does not owe it any more.

  4. JS says

    October 18, 2011 at 8:49 PM

    Except the difference is that a cheque bouncing is where the money never, as such, enters into the landlord’s account in cleared funds. Here, the Housing Benefit can be taken back weeks or even months down the line. Cleared funds have already been in the landlord’s account, therefore, the rent at that time was paid, surely.

  5. Ryan says

    November 3, 2011 at 10:16 AM

    At the time the rent was paid yes, however it’s been claimed back.
    For example if I buy a chocolate bar from you, at the time it is paid for, however if somebody then comes round to yours and claims that money back saying it was never mine to spend in the first place, the chocolate bar is once again not paid for because you don’t have the money for it.

  6. Tessa Shepperson says

    November 3, 2011 at 10:22 AM

    @JS I think that technically with a bounced cheque the money does go into the account and then is taken out again.

    But whatever the technicalities, here the landlord is left with less money than he is entitled to.

    I suspect a Judge on a claim for possession based on rent arrears would accept this. Or do you have authority to the contrary?

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