|An excerpt from Lawpack's Residential Lettings: The Complete Guide.|
Tessa Shepperson, a legal expert in residential landlord and tenancy law, outlines how landlords can protect their position and prevent arrears when tenants receive Local Housing Allowance directly.
The Local Housing Allowance (LHA) is a flat-rate allowance based on the area in which the tenant lives and the size of their household.
LHA is paid directly to the tenant, and it can only be paid directly to the landlord or letting agent if the tenant is deemed to be ‘vulnerable’.
Landlords can ask for the housing benefit to be paid directly to them if the tenant is eight weeks or more in arrears.
Many landlords are very concerned about the prohibition against rent being paid direct to them, except in the case of vulnerable tenants. They feel this will result in tenants spending their rental money and accruing rent arrears.
If you're worried about how to protect yourself from rent arrears, here are some of the steps you can take to protect your position:
1. Is your tenant vulnerable?
Generally, tenants will be classed as vulnerable if they are considered incapable of managing their affairs.
Examples of vulnerability are as follows:
If any of these apply to your tenant, make sure that the local authority is informed as soon as possible as it will take time for them to investigate this and make a decision.
They will generally need evidence, such as medical reports, information about past rent arrears and the like.
2. Is your tenant already in rent arrears?
If your tenant falls into rent arrears, arrange to serve a Section 8 notice on the tenant citing the mandatory rent arrears ground as soon as the rent is technically in arrears of two months.
This will be the day after the second month’s rent falls due (notwithstanding the fact that housing benefit is generally paid in arrears).
Send a copy of the notice to the local authority informing them that you will be considering eviction proceedings if arrangements are not made to have the benefit paid to you direct; local authorities will not want the tenant to be made homeless and should therefore deal with this as a priority.
3. Get the tenant to sign a letter of authority
Suggest to your tenant that they ask for the LHA to be paid into a separate Credit Union account which can be kept solely for the Housing Benefit with an arrangement for the money to then be paid to you by standing order. Many Credit Unions will be happy to set this up.
The account can be ring fenced so that the money is kept just for rent and not used to pay other debts or absorbed into an existing overdraft.
Note that the Housing Benefit Regulations 2006, Section 94(3) provide for the benefit to be paid to someone other than the entitled tenant, if the tenant requests this in writing.
Further information about Credit Union and how you can find a Credit Union near you can be found on their website.
Published on: May 17, 2012