It is a fact of life that in a recession there will be significant numbers of people out of work. Our social security system is set up to provide those people with assistance, including housing. In some cases, local councils are able to place unemployed people in houses owned by the council. However, councils are increasingly relying on the private rental sector to provide housing, and councils are therefore responsible for making rental payments to those private landlords.
In the past, the council would pay the tenant’s rent directly to the landlord. However, councils then changed their approach, and with the aim of empowering tenants and providing them with the skills required to get them back to work, councils now pay the rent directly to the tenants, trusting them to pass that on to the landlords. Perhaps predictably, huge numbers of council tenants are failing to pass on the rent to their landlords, leaving the landlords significantly out of pocket and having to take legal action to evict the tenants. In fact, recent estimates are that millions of pounds of housing benefit are being “stolen” by tenants and in some areas evictions have shot up by around 90%.
Some advocate refusing to rent property to those in receipt of housing benefit. Others will argue that not all those people in receipt of housing benefits fail to pay their rent, and some people may already be in occupation of properties when they lose their jobs and start to take housing benefits.
Where tenants do default on handing over rent to their landlord, the landlord can apply to the local authority for rent to be paid directly to them rather than to the tenant. However, councils generally only take this action if the tenant is eight weeks in arrears or if the council knows from experience that the tenant is unlikely to pay. Even then, the application for payment to be made directly to the landlord may take another eight weeks to process. Landlords therefore face the prospect of receiving no rent for a property for around 16 weeks, which could amount to thousands of pounds.
The key for a landlord is to be aware of the risks involved where a tenant is in receipt of housing benefits and to be aware of the options available if the tenant defaults. Any application to the local authority for rent to be paid directly to the landlord should be made without delay as soon as a tenant has defaulted on rent for the necessary period. If a landlord instead wants to evict a tenant, the landlord must again act without delay but must follow the set procedures laid down by the courts. Failure to follow those procedures to the letter often results in landlords having to start all over again and this obviously involves significant further loss for the landlord.