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Local Housing Allowance Direct Payments – changing the “payee”

Landlords have been left horrified – and out of pocket –  after local authorities re-directed Local Housing Allowance direct payments from landlords to tenants, without explanation. Here welfare expert and RLA trainer Bill Irvine talks through what can be done if this happens and looks at the case law surrounding the issue.

“One of my clients recently contacted me, in something of a panic, when one of the councils it deals with, completely out of the blue, decided to send all its tenants (200+) a pro forma, seeking their bank details, with the clear intention of changing the Local Housing Allowance “payee” to the tenant, without alerting my clients to what it was proposing.

The same council, less than a year before had acknowledged each of the tenants, satisfied Local Housing Allowance “safeguarding” criteria, meriting redirection of payments to their landlord.

Once the “payee” is determined, it should remain in place and not simply be altered on the whim of the council.

Ordinarily, something needs to have changed, since the original determination, to justify redirection to the tenant. For example, the rent arrears, which contributed to the payments going to the landlord, in the first place, no longer exists.

Even then, the council would need to consider the views of both tenant and landlord and collate any relevant evidence, before deciding on whether to revert payment to the tenant.

Upper-tier HB caselaw confirms, the question to whom payment should be made, is an “intrinsic part of the HB/LHA decision”.

Regulation 90 (1) of the HBR, 20016 states: – “An authority SHALL notify in writing, any person, affected by a decision under these regulations”.

Once determined, and notified, the landlord is deemed a “person affected”.

The HB/Local Housing Allowance regulations 95 (mandatory eight weeks rule) and 96 (discretionary provision) provide landlords with rights and obligations, including the requirement to notify the council of any change in circumstances and the right of appeal, where the decision, in dispute, relates to whom payment should be made.

Councils, for their part, MUST notify landlords/agents of their intentions to alter who should receive Local Housing Allowance payment.

Where councils fail to adhere to the rules, guidance and decisions of the upper-tier tribunals, their actions should be ruled illegal.

In one such decision, the judge ruled: –

“The problem that has arisen in this case should not arise if the procedures are operated properly.

“ Local authorities have power to make enquiries before changing the payment arrangements and to suspend payment while they do so.

“The authority may make enquiries before deciding to pay housing benefit to the claimant instead.

“That will allow it, if appropriate, to substitute a decision under regulation 95(1)(b).

“Even if the local authority does not make enquiries or decides to pay the claimant instead of the landlord, it has to notify the landlord of its decision.

“That notice is generated by the local authority’s computer at the same time as the notice is generated for the claimant. “If that procedure is followed, the landlord will have a chance to apply for direct payment to be restored.

“This will provide the opportunity to make any (further) inquiries that are necessary before the change the payment arrangement is put into effect. In practice, no payment should be made until the appropriate payee has been identified.”

Later in that same decision, the Judge outlined two possible remedies for the landlord.

Para 44. “The tenant remains liable for the rent which has not been paid and the landlord may take civil proceedings for the rent or to recover possession of the premises. In the case of a tenant who is entitled to housing benefit, an action for the rent is unlikely to be effective and possession proceedings may take time and will involve costs.”

Para 45. “The other possibility is compensation from the local authority. This has been considered but refused in this case. I have no jurisdiction over this aspect of this case, but I invite the local authority to reconsider its refusal.

“The housing benefit was being paid direct to the landlord.

“This was changed without notification to the landlord. The local authority accepts that that was wrong.

“ What would have happened if the landlord had been notified? The notification would have been generated by the computer at the same time as the notification to the claimant.

“ The landlord would immediately have applied for the decision to be reversed under regulation 95(1)(b) or 96(1)(b). The local authority would then have investigated and decided.

“ The landlord could have produced the evidence on which the local authority has now accepted that regulation 95(1)(b) applies. In other words, the landlord would not have been out of pocket if the local authority had notified its decision.”

In my client’s case, the council was embarking on what it considered a simple administrative process.

For the reasons mentioned earlier, its conclusions were seriously flawed and needed to be corrected.

In my e-mail to the council, I said: “If you choose to ignore the HB regulations, DWP Guidance and UT caselaw, I will assist my clients pursue complaints of maladministration to the Local Government Ombudsman (LGO).

“We’ve already succeeded in securing full recompense, based on my client’s wholly unnecessary rental loss. Hopefully, we won’t have to pursue such a course, as it’s unnecessary; would simply result in tenants misusing the payments; jeopardising, in turn, their tenancies; and add to the already significant rental loss experienced by my clients.

The Council’s Appeals & Complaints officer responded promptly: –

“I apologise our letter is not as clear as it could be and I have withdrawn the use of this letter…………………I am in total agreement that once a decision has been made we would have to notify the claimant and the landlord of our decision including all the statutory rights that would accompany that decision.

“If we decided to pay the tenant the landlord would have the opportunity to provide evidence to support why payments should continue direct such as proper risk assessments carried out by the landlord, Medical Reports, Debt reports etc to substantiate vulnerabilities.”

Case closed, much to the relief of my clients, as the financial implications of handing payment to 200+ tenants could have bankrupted them.

The scenario explained above, happens every day, causing landlords, throughout the UK unnecessary rental loss. When it happens, challenge it, as the law is on your side.”

Blog Post from Residential Landlords Association

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