Birmingham City Council has been ordered to pay a landlord over £1,200 in rent arrears after it agreed to pay rent directly to a benefit claimant with a history of arrears, who then left the property with the money, without paying the landlord. Initially, the council apologised for the error but refused to pay the landlord. However, a court has ruled it has made a mistake and must atone for that by paying the landlord the arrears in full.
This piece of news highlights that problems remain with the Universal Credit benefit and in instances where benefit recipients are permitted and expected to manage all their payments, in some cases they don’t or can’t. However, whether it’s a case of an inability to manage their finances or a lack of desire to do so, the result is the same; the landlord isn’t paid and their investment property begins to cost them money.
Birmingham council ‘overlooked’ vital information
Under the Universal Credit rules, the new benefit which was introduced in 2018, recipients are expected to receive a single monthly payment from which they manage their money and pay for various items, including their rent. It is possible, however, for landlords to request the housing benefit portion of Universal Credit is paid directly to them, if they have concerns with supporting evidence, that their tenant and benefit recipient, may not pay their rent.
Local councils are also expected to withhold the housing benefit portion of UC from the recipient if they are in rent arrears of 8 weeks or more and pay it directly to the landlord. Unfortunately, even though the tenant in Birmingham was already in arrears – a detail she noted on her application for her new claim for housing benefit – the council ‘overlooked’ that and paid her directly.
A lettings agent, who managed the rental property for the owner then began eviction proceedings against the tenant, who was living there but not paying her rent. She then left, leaving the landlord £1,269.20 out of pocket.
After an initial complaint to the council was met with an apology but no payment, the landlord took the complaint to the local ombudsman, who ruled the council was at fault and they must pay the landlord the rent that was owed.
“The council has accepted it is at fault. It should have paid the housing benefit to Mr X’s (letting agent) company,” the Ombudsman said.
“The council is right; it cannot pay housing benefit twice and Ms T (tenant) should have paid her rent. However, this does not mean it has not caused injustice. It should remedy that injustice. If the council had acted correctly it would have paid Mr X £1,269.20 towards Ms T’s rent. Mr X has no ability to reclaim this from Ms T,” it added.
Universal Credit a problem for some landlords
The Universal Credit benefit isn’t just a problem for that single landlord in Birmingham, it also being blamed for a sharp increase in rent arrears in West Lothian, Scotland.
Every ward in West Lothian has seen a rise in the level of rent arrears for benefit recipients and the complex application process, combined with the way housing benefit is paid directly to all tenants in the first instance, are said to be at fault.
In one area of West Lothian, Whitburn and Blackburn, the number of rent arrears cases has risen from 92 in 2018, to 384 since the roll-out of Universal Credit.
While this is a worry for some landlords, there are ways to limit the potential for benefit recipient tenants falling into rent arrears. One of them is to request the housing benefit portion of their Universal Credit payment is paid directly to you, the landlord.
As an additional measure, as a landlord, you can also request that your tenants provide a rental guarantor. This could be a family member or close friend, or another option is to use a rent guarantor service, like ours. This gives landlords peace of mind that no matter what happens; problems with benefit payments, job losses or other personal issues, the rent will always be paid.
