Universal Credit – here comes the homelessness

[Update 22 November 2018. In the Budget, the Govt has said that:

a) the 7 days without any payment after UC claim will be scrapped
b) For those with existing HB/LHA claims, there will be a two week overlap of existing HB/LHA payments after the UC claim date (not clear if repayable and if so when)
c) There will be a 100% advance payment of UC for the first month available (repayable by deduction from UC over the next 12 months)

This may go some way to mitigate the initial and immediate rent arrears problem set out below. But on the other hand, stores up long term debt. No word on easing conditions for direct payments to landlords.]

Social landlords have been panicking about Universal Credit for a bit, particularly those with experience in the pilot areas. But private landlords have been panicking too, and their panic takes a rather blunter and more immediately brutal form.

GAP Property, a large landlord in the Grimsby area, has been staring at the introduction of Universal Credit in their area on 13 December 2017, and they don’t like what they see. In a letter apparently sent to all their tenants (many of whom apparently now receive LHA), GAP issued dire warnings and served everyone with a section 21 notice. The full letter is at the end of this post.

The key issue, of course, is the 6 week delay in payment on any new Universal Credit claim. That is – just in case you have had your head in the sand – 6 weeks with no payment at all.

GAP’s letter, from mid November, says (in part)

Serving Notice

Given that the whole thesis of the letter is ‘you won’t have any money, and you’ll have to pay your rent, so figure it out now, because we are gearing up to evict you if there are any arrears’, it is a bit of a stretch to say it is ‘not intended to cause alarm’. It is. And it certainly will.

But, while GAP’s letter could certainly have been better worded (and their strategy of serving s.21 notices is probably not great in practice, for reasons I’ll come back to), it would be foolish to simply say ‘bad landlord’ and ignore the very real and serious problem that this landlord and many others are facing.

Realistically,  landlords, social or private, could not sustain a sudden escalation of rent arrears to about 6 weeks worth across a large section of their tenant base. There will always be a degree of individual issues, and a relatively consistent averaged-out level of arrears, but the hit of a sudden escalation of arrears across a large part of their tenant base is a different matter entirely.

(And before anyone starts wittering on about ‘well they should budget’, this is, by definition, almost entirely about people on low or no income. How the hell do you budget for savings to cover six weeks rent and living costs?)

So, whether or not you consider the letter to be well judged (it isn’t, it really really isn’t), it is to a degree a rational response to a situation that will not be sustainable. And of course, private landlords are not constricted by the rent arrears pre-action protocol, which will stifle social landlords from taking immediate possession steps within or due to the six week UC delay.

Let us be blunt. This is a direct consequence of the 6 week delay in Universal Credit payment from claim. There will be a lot more of this. There will also be many more private landlords refusing to let to prospective tenants on Universal Credit,

And yes, there will be a rise in PRS evictions in UC areas (I don’t know if anyone has stats for the pilot areas? Difficult as they don’t match court regions for possession claims). There will be a rise in homelessness from PRS tenancies, already the single largest cause in the rising homeless figures. Councils’ homeless prevention strategies will be blown out of the water.

Now, on to what this approach means in law.

Since this letter got into other people’s hands, I’ve been asked a few times ‘is this legal’? The simple answer is yes.

But there are complications.

In general, if the fixed term of the tenancy has more than two months left to run, the section 21 notice cannot expire before the end of the fixed term. So section 21 notices to a large number of tenants cannot be simply standardised – they have to be tailored to the facts of each tenancy.

And then for any tenancy that started on or after 1 October 2015 (which one suspects that a lot of GAP’s will be):

If the tenancy is a first tenancy and within its first 4 months, the s.21 notice will not be valid. (and of course still can’t expire before the end of any fixed term).

The section 21 notice expires 6 months after the date of service (so there is at best a four month window to use it for possession proceedings).  On this timetable, GAP could only start proceedings on the s.21 notices served now between mid January and mid May 2018.

But then Universal Credit claims will not be coming in one swift wedge in December in that area, but continually from then onwards… So, if GAP (and any other landlord adopting this approach), want to have a valid section 21 notice continually available, they will have to serve a fresh section 21 on all their tenants every four months. (To have a new section 21 becoming valid in mid May 2018, it would have to be served in mid March 2018, and so onwards). And that is assuming no new or renewal tenancies granted, just continuous statutory periodic tenancies.

It is also assuming, of course, that the landlord has complied with the other requirements for a valid s.21 ( that is serving EPC certificate, gas safety certificate if a gas supply, the DCLG ‘How to Rent’ Booklet – of the latest edition at the start of the tenancy – and deposit scheme compliance).  Many don’t manage this.

The practicalities and admin will be a hefty burden, with much to get wrong. Yet it is possible.

We thought the Deregulation Act had brought a close to the ‘Sword of Damocles’ section 21 notice – as it used to be served with the tenancy agreement at the start – but this would be the new version, with immediate, undefendable possession proceedings facing tenants at the slightest hint of rent arrears. And it is wholly due to the ludicrous decision to delay payment of Universal Credit for 6 weeks.

Just watch the homeless figures rise….

GAP letter 1GAP letter 2

About Giles Peaker

Giles Peaker is a solicitor and partner in the Housing and Public Law team at Anthony Gold Solicitors in South London. You can find him on Linkedin and on Twitter. Known as NL round these parts, and still is Nearly Legal on Google +.
Posted in Assured Shorthold tenancy, Benefits, Housing law - All, Possession and tagged , .

48 Comments

  1. Many related aspects of huge concern. Agree with general view that such a response to be expected and that PRS evictions will rise as finial risk too far. Yet where do evicted tenants then go? Oh a new UC claim with a social landlord (assuming SRS availability and SRS landlord will accommodate.)

    Follow that line and proverbial hits fan very quickly thus this is far more sinister than the usual “No DSS” scenario we are all familiar with.

    The UC arrears to eviction to homeless pathway becomes systemic as does SRS landlords applying for and getting APAs which deepens poverty and exacerbates that pathway.

    Smelliest Brown stuff and largest diameter fan imaginable

  2. Interesting comment ‘ And of course, private landlords are not constricted by the rent arrears pre-action protocol, which will stifle social landlords from ——
    . Is the blog* from Anthony Gold on Nov 7th aimed only at Social landlords? for the untrained this seems to muddy the waters?

    *The new pre-action protocol for debt claims; what this means for residential landlords

  3. Ah Guy Piggott, lovely bloke. He rents to people that can’t get anywhere else and only if they have a guarantor with assets that he can go for if they don’t pay.

    He does however follow the rules (generally speaking) and complies with Court Orders. I say this as someone that beat him at County Court on a deposit issue (Piggott -v- Slaven 2009).

    Hopefully I might get some housing enquiries out of this.

    Nice to see Grimsby getting into the news twice in the week.
    1. bullying landlord
    2. Voted Leave but now wants free port exemption.

    The people are honest but have been forgotten by Westminster and dumped on generally from a great height by anyone with a bit of money.

    • As I said in the post, whether or not you approve of the tactic by the landlord, it is undeniably a response to an untenable situation.

  4. The whole point of social security was to provide for the speedy relief of poverty as and when it occurred – it used to do what it said on the tin.

    A 6 week delay in payment upends that principle. If you’re poor and then you are told you will have no income for 6 weeks, you are completely shafted. Welfare Reform is coming to a disastrous conclusion.

    Somebody try telling a Tory it’s cheaper and more humane to pay decent social security than to mop up after crime and homelessness. Prison will be the new welfare dependency, at a greater cost in both human and money terms.

  5. While the tone of the letter is really unfortunate, it does actually lay out to the recipients what’s going to happen to them when they are switched to universal credit. And, in defence of the landlord, they are claiming that large numbers of non-paying tenants could put them out of business and they’re simply being pro-active about things.

    The great pity is that the DWP hasn’t sent out a similarly blunt letter (without the s21) explaining the consequences of being switched over to the new mechanism. Many benefits recipients don’t have a clue about what’s coming.

    Housing benefits are currently paid in arrears, with most tenancy agreements showing rent due in advance by default and this discrepancy is ignored as “how things are”.

    A delay of six weeks will drop many tenants into more than two month’s arrears, which lines them up perfectly for a Section 8 ground 8 notice – which has a 2 week expiry.

    It’s almost as if it’s been specifically designed to cause evictions.

    • It is hard to understand the rationale for it at all, save a hope that might save some money for the treasury. There is no practical sense to the 6 week delay, not an iota.

  6. We carry out annual research on local letting agents (usually around 100 agents) to check to see who will and who will not accept benefit recipients. The pool has remained fairly static over the last five years (approx. 20% will accept, many with caveats). However, what we are finding is that many of the landlords themselves do not want tenants in receipt of UC irrespective of the position of the letting agents. As the bad press on UC gets worse, the situation is, of course, only likely to deteriorate.

    As a UC pilot area, we have been seeing the problems caused for quite some time. The waiting period is a serious problem. Maladministration is also a huge issue…………

  7. Just 15% of our customers moving to UC are leaving work with a month’s full-time salary to take them through the 6/7 week-wait. Everyone else has been part-time, zero hours, weekly paid or coming off of legacy benefits. c.450 of our customers recently answered our UC customer survey, a staggering 31% have needed to use the food bank since claiming UC. Many are moving to UC after a difficult life-event such as bereavement, domestic abuse, onset of serious illness and relationship breakdown. I’ve worked in this arena for 20 years (can remember the tax credits roll-out) and have not seen destitution like it.

  8. Most of your administrative objections can be overcome by automating the S21 process which I have done using home brew software. I can issue S21’s to all 80 of my tenants with about one hour work on my part. Ten seconds to initiate production of the S21’s and then the computer does the rest including printing a certificate of posting and not producing documents for tenancies in the fixed term. Unfortunately I have yet to find an economical way of automating stuffing the window envelopes so this takes a half hour then a quick trip to the local post office to have all the Certificates of posting endorsed and the job is complete.
    Landlords are in business to provide accommodation to those tenants who pay the rent, those that do not, for any reason, must be evicted.

    • David, actually printing and sending the things is not the problem. It is working out when and for whom they are valid. As noted above, it is not just a fixed term issue…

      I was, in this post, trying to defend landlords faced with UC problems. You have just rather made that harder to do.

  9. I don’t want to defend UC because I am currently working as a benefits/debt/money adviser in a local authority housing department and I see some of the other effects of UC which I don’t like. But I think the six weeks issue is more complicated, and less severe, than people are suggesting.

    The status quo with LHA: landlords require monthly rent paid in advance, but HB is paid four weekly in arrears. This means that tenants usually end up paying the first month’s rent from some other source (perhaps with savings, or help from relatives or from the local authority, or with DHP). When the HB payments start four weeks later, it is in time effectively to be in advance for the second month. Anybody who already has a tenancy and is getting HB(LHA) is already managing to keep more or less a month in advance, despite getting their benefit four weeks in arrears. When they are transferred over to UC, their start date for UC will be the end date for HB so they will get paid up to that date, and then have to wait six weeks for their first UC payment. So in effect, it is only an extra two weeks of waiting.

    Of course it’s more complicated than that too, because HB is generally paid four weekly in arrears, but UC is monthly so will match ASTs better (although perhaps be out of phase for HMO tenants). UC can be paid at different frequencies as part of the considerable flexibility afforded by Alternative Payment Arrangements – although we’ll see how easy these are to arrange as time goes on.

    As I said, I’m not trying to defend UC, but I think it’s wrong to focus on the six weeks wait without acknowledging that there is a four weeks wait now. I’d also point out that the word on the street is that the recent publicity means the DWP is looking to reduce the six week wait.

    And then there is also DHP – although I’m not sure we’ll have enough money to plug all the gaps.

    As NL has pointed out, this is coming at a difficult time for local authorities as they try to adjust to the new homelessness prevention duties – it could be that much of the extra funding ends up going to PRS landlords to keep their UC tenants housed.

    Although there’s another point; it’s not like the DWP is suddenly going to move everybody over to UC – it’s going to take at least five years if previous benefits changes are anything to go by. The biggest effect is likely to be on new claimants and people moving home (until the government wakes up and sorts out the entirely unnecessary six week thing).

    • This is not, mostly, about the start of a tenancy, it is in the course of a tenancy. It is also only to a small degree about transition from existing benefits (at least for now). It is mostly people coming off short term working, or on zero hours, or some life event (as per Sarah’s comment above)where HB may well not have been in payment before.

      The proportion on monthly rent is not as high as you take it either.

      Don’t forget that there is only a ‘4 week wait’ for HB now. The UC 6 weeks covers all other benefit equivalents, so it is not just going without rent, but all other income.

      DHP has far too many cracks to cover as it is…

    • The waiting times for other benefits are typically quite high too. For example, tax credits aim to make a decision within four weeks, but payment won’t be immediate. If you apply during one of their busy periods it can take a lot longer. And I helped a client with his ESA application four weeks ago, but he hadn’t received anything by last Friday (I’ll be chasing him up this afternoon to see if he’s had anything yet).

      There needs to be greater awareness of the availability of advance payments (also available with other benefits).

      Perhaps the proportion on monthly rent is a regional thing. I’ve been working in housing for eight years, mostly as a housing adviser so I have a reasonable amount of experience to draw on. Around here most PRS tenancies are monthly – pretty much the only weekly rents we come across are in HMOs and social housing.

      You’re right that UC will be a problem for people when they (first) come out of work for a short period. But as this post was about a PRS landlord who has served notice on people who are already getting HB, I didn’t think that was completely to the point. I can’t believe I find myself defending UC, but here I go again: one of the advantages of UC is that once you are on it, you are on it, and it will be much easier to dip in and out of work/benefits – although that mainly applies if your employer is on the HMRC real-time information system.

      And we can expect the wait to be reduced soon:-
      https://www.theguardian.com/society/2017/nov/15/six-week-wait-for-universal-credit-set-to-be-reduced

    • HMOs will be a high proportion of UC (certainly down here). This isn’t about transition – it is the roll out, so transition is a way down the line. It is about fresh claims.

      If the delay is reduced, good, but I’m not celebrating until it happens…

    • Another thing… if you had to claim because you’d stopped working then (depending on your NI contributions) you’d be able to claim contribution based JSA or ESA – which will remain outside UC. Although I’d concede that most of the poorest and most vulnerable people in the gig economy probably won’t have sufficient NI contributions.

  10. Good on the landlord for getting this important issue to the top of the agenda.
    I’m sure they are well aware of the intricacies of section 21 despite your concerns.
    A more pertinent point is why are they jumping through all the hoops of a section 21 ‘no fault’ eviction when there clearly is a reason. If section 8 were fit for purpose, this wouldn’t be necessary.

    • Not really, they are looking for a way to issue immediate possession claims. Service of a s.8 notice after arrears had accrued would delay that.

      If you don’t think a section 8 notice should be required, then I’m afraid you will get short shrift here.

  11. Interesting use of the word ‘immediate’.
    And no, I’m not saying a section 8 notice should not be required, just that it should be made a realistic way of evicting bad tenants. The way the system is now, good tenants pay the price for bad tenants- but you knew that already didn’t you?

    • ‘Immediate’ is right. What they are looking to do is to be able to issue a possession claim at the moment arrears arise.

      The section 8 process requires the breach alleged to be evidenced. This is wholly reasonable, because sometimes some landlords lie. If you are complaining about delays in the court process, we are all fed up with the crumbling of the massively underfunded courts. That has nothing to do with the s.8 process.

  12. If the section 8 process is so rosey, why do even the most incompetent of solicitors advise using ‘no fault’ section 21 instead of section 8 for rent arrears? (rhetorical question)

    • I shall repeat myself for rhetorical effect.

      Delays in court processes – which are now a very serious issue – have nothing to do with the section 8 process itself.

      Using s.21 is obviously easier because you don’t have to prove breach.

  13. Could be. Or it could be because s.8 is so easy to defend against.
    And sometimes some tenants lie.

  14. The problem with the section 8 process is that a tenant can pay “enough” of the rent on the day of the court case to stop the eviction, so forcing the landlord to repeat the court process every month (at great cost)……..

    • Any ground other then ground 8 is likely to result in the judge not having time, so the case getting delayed for many more months. If only the court system worked…………

    • At present the only option open to most landlords is to never rent to someone who they are unlikely to be able to get a large attachment of earning order against…… And now we are back to a even larger homeless problem created by the government.

  15. I consider this letter to be a very rational response, and to be very well worded. It is very possible that it will get the result they are looking for – a change in how UC payments are processed. It’s as if the letter was written for news paper readers, not for the tenants themselves….

    Maybe by being so direct, they will save lots of other private sector landlords from having to take the same action. Have a look at the evidence that was given to the MPs committee looking at UC to see how strongly a lot of landlords feel about this. (Unless there are great changes I will NEVER take on a new tenant who gets benefits.)

    • I disagree strongly on the wording. But, as the post says, there is no question that the 6 week delay on UC claims is an impossible situation for all involved.

  16. Jeez I can see why my legal bills rack up – here we have a post about a welfare sh*t storm and a landlord’s rather clumsy reaction and cue a ton of bickering about the merits or not of the blinking process!! (this is said in kindness not spite, I do appreciate my legal advisors, honest)

  17. If you have any direct question, I wrote the letter JC was waving at PMQs. Followed this thread and the page for some time, although have never posted until now.

  18. I notice that the letter issued by GAP is factually incorrect as Universal Credit only replaces means tested (legacy) benefits, contribution benefits for ESA and JSA will remain.

    • A representative from the DWP visited my offices and made some minor amendments and recommendations, even the suggestion of the deletion of an entire paragraph surrounding the procedural implementation of UC after having sight of a draft copy. All of the changes I accepted and made. ESA & JSA are not my area of expertise, but if what you’re saying is correct then this was not highlighted by the DWP.

    • While the contribution based forms of ESA and JSA remain with UC full service – they are called “new style” ESA and JSA – anyone who gets them who in the past would have claimed Housing Benefit will now have to claim UC to get money for their rent. They will all be subject to the long delays that are inherent in new UC claims.

  19. Hello GAP,

    I have a direct question.

    Why did you serve ‘no fault’ section 21 when the real reason for eviction would be rent arrears?

    Were you being a typical nasty landlord abusing your tenants by seeking immediate possession claims via section 21 or were you just acting like any responsible business protecting itself, fully aware there isn’t a cat in hells chance of evicting using section 8 within a reasonable timeframe?

    • I use s.8 so as to not hand the decision making to a Judge.

      I am meeting with both George Freeman MP (chairman of the PM’s policy Board) and Shadow Minister for Housing if anybody would like me to ask anything specific.

      The general message coming from my local Labour MP is ‘people before profits’…essentially I should house people for free (or at least on long-term credit) because UC and the associated delays are not their fault and that it’s not nice to be evicted. She also believes I am ‘circumventing the law’ by serving s.21 notices. She believes it should be as difficult as possible for LLs to evict and only in dire circumstances and if a Judge agrees -failing that, a problem tenant is exactly that…your problem. How dare I take preventative action to ensure the viability of my business!

  20. The govt. line this week has been that whilst rent arrears have rocketed (not their term, that) initially in the areas subject to the roll-out of UC, the levels of arrears then decline. Would anyone know whether a consequence of the eviction a tenant who is in arrears will be that they will no longer count in the figures of those have rent arrears? So, if, for instance, the relevant statistic is the proportion of a particular landlord’s tenants who are in arrears—a proportion that rises steeply after UC is introduced—that would presumably then be reduced by evicting those who are—but obviously that reduction would hardly signal any social improvement or policy success.
    (And if anyone has yet to see it, Patricia Hollis’ introduction to the UC debate in the Lords yesterday was one of the most compelling speeches I’ve ever heard, even from her.)

    • In the social rented sector there are two measures that are most commonly used – arrears outstanding as a percentage of the annual charges (current tenants), and the collection rate – what you have collected as a percentage of the annual charge (current or former).

  21. The sheer aggro of the first three tenants on Universal Credit – one already evicted – means we now refuse potential tenants on UC regardless of their need. Two others are at high levels of arrears; even mothers with small children will have to be evicted. When there is a full rollout my friend will sell her two houses and retire, having evicted very long term older tenants, while I am going to downsize by 3-5 houses in the next 6 months and also evict tenants. I think a number of landlords, many of whom are in the older age bracket, will decide now is the time to retire and get out of the business. Consequences are: homelessness rises, more children into care, potential house price crash. Many vulnerable tenants refused social housing had to go to private rented so once evicted by private landlords also, where will they go?

  22. Pingback: Landlord Law Roundup Blog from 13th November

    • There has been pressure on this issue for quite some time. The letter may have contributed, but came too recently to have made a difference. The plans must have been underway for a while.

      Will wait for more detail from DWP tomorrow, but looks like it may help a bit.

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