The Residential Landlords Association (RLA) has discovered that there has been a change of policy on the payment of housing benefit. Previously it was thought that under the new Universal Credit regime the housing component would almost always be paid to the tenant, leaving the landlord out of pocket if the tenant spent it on something else. It was believed that landlords would only receive payment direct in exceptional circumstances. However it now seems that the government has had a change of heart. This will be welcomed by those landlord insurance clients who are in the social housing sector or thinking about entering it.
The RLA has scrutinised a circular published by the Department of Work and Pensions and found a statement to the effect that landlords will be able to claim direct payment as soon as the tenant is two months in arrears. If the arrears are less that two months the landlord can still notify Universal Credit who will contact the claimant to discuss the non payment as part of the Personal Budgeting Support process.
This circular applies in the pathfinder areas for Universal Credit and it remains to be seen whether the new approach will apply when the scheme goes national. The RLA has welcomed the new guidance but is lobbying for a shorter period of arrears before the landlord is paid direct. RLA have publicly thanked the RLA trainer Bill Irvine for bringing this to their attention. Check the RLA website for more information.
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It is certainly true that cashflow is a major issue for all landlords. If there is a mortgage to pay the lenders will expect the monthly payment to be made even if the tenant has defaulted and so social landlords will be very pleased by this news. In the private sector there is always a risk of a tenant losing his or her job or suffering some other crisis and so not having the cash available to pay the rent at the end of the month. Rent guarantee insurance is something to consider but prevention is better than cure so it is always essential to undertake through checks on the credit worthiness of potential tenants. If a guarantee is being provided it is important to check the credit status of the guarantor as well.
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