Latest Landlord News by: Madalena Penny
Information published concerning direct housing benefit payments and housing benefit reductions are still causing confusion to a majority of landlords. There are still a number of questions landlords have regarding the changes and the criteria set by local authorities in which housing benefit can be paid direct to the landlord and not the tenant.
One of the main questions posed relates to benefit tenants and top-ups.
As many tenants in receipt of LHA already pay a top-up of their benefit allowance, if a landlord accepts the drop in the rates set by the local authority, can a landlord still receive direct payment if the tenant is paying a top-up?
No, the new reduction in LHA rental rates set by the local authority are aimed at creating affordable rents for LHA tenants and to exert a downward pressure on rents in this sector. To apply for direct payments, landlords will need to produce a new tenancy agreement, (once negotiations with local authorities have been accepted) reflecting the new, reduced rent set at the local authority rate.
If a landlord is already charging rents that are classed as affordable and already fall within the new reduced rates set by the local authority, can the landlord apply for direct payment?
No, direct payments to landlords will only be given when, (a) the present rent is negotiated to the new affordable rate from a higher rate; (b) the tenant has accumulated 8 weeks arrears. If a landlord is already charging within the local authority reduced rate, it may be worth his/her time to create a new tenancy at a higher rate of rent so that he/she can then negotiate the new reduced rent with the local authority to receive direct payment.
The direct payments offered to landlords are only applicable when tenants face eviction, due to the result of the new reduced rate and their current rate as stated on the tenancy agreement is higher than the new reduced rate. For a landlord to receive direct payments he/she must accept the reduced rate set by the local authority rather than the current rent stated in the current tenancy agreement. (The rent on the current and existing tenancy agreement must be higher than the reduced rate).
TIP: Landlords still need to enter into tenancy agreements at the normal higher rent rate, so as to negotiate for landlord direct payment in return for the lower rate. DO NOT OFFER TENANCIES AT THE NEW RATE UNTIL YOU AND THE TENANT HAVE NEGOTIATED WITH THE LOCAL AUTHORITY FOR DIRECT PAYMENT.
This is applicable for new tenancies as of 1 April 2011, existing tenancies will be affected as of January 2012. Landlords need to discuss with their existing tenants and decide if they will reduce rents for existing LHA tenants and if not, landlords are advised to communicate this to tenants to allow them enough time to relocate. Likewise, letting agents should communicate with their landlords to discuss the options.
For the new LHA rates across England click here
Download Government Guidelines (PDF) Housng+Benefits+Direct+Payment+April+11