The Department for Work and Pensions (DWP) announced in November that where landlords ask for the rent to be paid directly to them because of 8 weeks/2 months rent arrears, they would deduct 20% of the tenant's universal credit to repay the rent arrears. This seemed like good news for landlords, but many of them have expressed concerns according to Sharon Betton, landlord advisor with the Bolton Bond Board and author of The Landlord Good Management and Practice Guide.
Benefit levels are not generous for single people; a single person under 25 receives £57.35 per week Job Seekers Allowance. 20% would be £11.46 per week reduction on benefit available for bills, food, bus fares and the expenses associated with job seeking. Someone over 25 years receives £72.40 per week. 20% of that is £14.48. Landlords envisage tenants struggling to pay their bills, not having adequate heating or food. They are more likely to abandon the property, probably without any notice period, than stay and suffer.
Many people have made representations to the DWP that a 20% deduction will create too much hardship, but with no success. Landlords that are owed 2 months rent, for example £720 in areas of the North West, may be expected to think that even at £14.48, this would take nearly a year to clear the arrears. In fact, landlords often have more empathy with their tenants than those that frame the legislation and regulations.
A landlord cannot ask the DWP to make a smaller deduction – it’s got to be 20% and there is no choice about it – if the landlord asks for direct payment without an agreement to pay the arrears, then a 20% deduction will be made.
Did you spot the escape clause sneakily inserted? Yes, if a landlord can discuss it with the tenant before he contacts DWP and negotiate a payment agreement, he can advise the DWP of this and they do not need to make deductions. Landlords must be prepared to discuss this properly with tenants, pointing out that an agreement to voluntarily pay the landlord £5 per week will leave them in a far better situation than they would be left in with action taken by the DWP.
Whether the tenants will believe the landlord, or chose not to and find themselves having to survive on a fifth less income, only time will tell. What must not happen, is landlords deciding not to approach the DWP for direct payments – difficult as it is, tenants will have to learn that they must be responsible for their rent payments.
For advice on buy to let – Ask Sharon