Problems with Accepting Housing Benefit in England and Wales

For a landlord who owns a rental property this can be a very attractive proposition. Rental paid by the local authority (Council), however there are many drawbacks and a Housing Benefit tenant is often penalised before the process gets under way.

First of all the local authority has the right to “claw back” rent several months after it has been paid if they find that the tenant was not entitled to it. This means the Landlord who has received a direct payment has to pay this back and “try” to get it from his/her tenant. The same applies if a professional letting agent is involved and the rent is paid to the agent. The Agent would have to cover themselves in their terms of business and make the Landlord reimburse them. This usually puts many agents off from accepting these payments.

Alternatively the payment is made to the tenant direct. Sounds much better in theory, because if the claw back mechanism is used the tenant has to pay this back. The downside to this is that a) the tenant might not pay over the rent and spend it on other needs and if they suddenly have to reimburse the Council, they could have difficulty in paying future rent.

These local authority payments are also often four weeks in arrears and this is not so good for a landlord who likes to have the rent coming in one month in advance.

The owner of the property has taken out Legal Protection Insurance or a Rent Guarantee Policy. Unfortunately these do not normally work if the application has not been satisfactorily referenced. If the Tenant was working from the start was satisfactorily reverenced and lost his/her job etc, then this could be a different scenario, however most of these types of policies require sufficient income to cover the rent or a lump sum in advance and this will not normally work with Housing Benefit. This now means that the property owner cannot rely on the insurance policy to obtain the rental arrears or even possession.

At the end of a tenancy the Landlord might need the property back – returning owner-occupier. Etc. The tenant might be very happy to leave, however if he/she moves out and requires local authority accommodation the Tenant has made herself/himself intentionally homeless. The Local Authority would put the tenant/s right down on the housing waiting list. The alternative would be for the Tenant/s to wait for a court order to be evicted.

These often take a couple of months to arrange and can cost several hundred pounds in legal fees. At the same time rental arrears could be mounting up. You cannot often even use the deposit to offset some of the rent (assuming that there is no damage) as many local authorities no longer fund a deposit but have set up a deposit guarantee scheme whereby instead of paying a deposit they will guarantee a “paper” deposit.

Unfortunately Housing Benefit is not always an attractive proposition.