Housing Benefit Tribunal makes landmark ruling in Landlords’ favour.

Last year, the old Housing Benefit system was replaced by Local Housing Allowance (LHA) for all new tenancies.

LHA is an incredibly badly designed, ill thought out system that manages to achieve the exact opposite of what should be its aims. The first change that it made was to pay rent directly to the tenant rather than to the landlord. This, of course, instantly guarantees that rent arrears and defaults will soar.

Once a tenant is eight weeks or more in arrears, their landlord can apply to the Local Authority for direct payment. However, some local authorities refuse to pay the landlords in this period on the grounds that most tenancy agreements ask for payment in advance, citing Department of Work and Pensions guidance which states that ‘a person cannot be in rent arrears in respect of a period that has not yet been served.’

A Coventry landlord took Coventry City Council to a Housing Benefits Tribunal on this point and obtained a ruling from the Chairman of Coventry Appeal Tribunal that: ‘rent is in arrears once the contractual date for payment has passed irrespective of whether rent is due in advance or in arrears.’

Are these tenants trying to escape from arrears?

This is a massive victory for common sense in these cases. The Housing Benefit system exists to ensure that the unemployed and low paid can obtain housing, for councils to waste public money fighting landlords tooth and nail to avoid paying them what they are entitled to is a complete disgrace. The sums involved are not small – during the 2009/2010 tax year £2.6 billion will be spent on LHA.

Regrettably, the decision does not set a legal precedent nor is it binding on future decisions, but it may be worthwhile for landlords in a similar position to highlight the decision to their local authority.

Richard Price, Director of Operations, National Landlords Association, commenting on the decision, said:

“It is quite clear that the normal rules of renting should apply to Local Housing Allowance. According to most tenancy agreements, rent is payable in advance. Yet local authorities pay their Housing Benefit claimants in arrears. Therefore, when it comes to assessing the length of rent areas, there is a significant difference in approach between councils and landlords. The aim of the LHA was to put those tenants in receipt of Housing Benefit on a level-playing field to those in the open market. The fact that rent is paid in arrears puts them at a major disadvantage.”