Universal Credit – more woes

I may well be late to the party here, but a couple of specific issues with Universal Credit have been pointed out to me that I, at least, had not heard before. So, in case I am not alone, I pass these on. They both amount to a significant departure from the ‘legacy benefit’ position and therefore a restriction on housing costs payable.

The Universal Credit Regulations 2013 contain certain exclusions from the housing element of Universal Credit.

1. Ground Rent

Schedule 1, s.3 of the Regulation expressly excludes ground rent.

Payments excluded from being rent payments

3. The following are excluded from being “rent payments”—

(a) payments of ground rent;

The Government’s justification for this, in the passage of the Regulations was, and I don’t even paraphrase, ‘well it isn’t very much’.

Granted this was before the extent of the leasehold ground rent scandal became apparent, with high initial ground rents, and large rates of increase in ground rents. But that strikes me as a remarkably blasé assumption by the DWP there. Did anyone both to look into it at all?

Obviously, for someone faced with a fairly high ground rent – over £1000 pa, say – who finds themselves on Universal Credit, whether employed or not, this is going to be a significant problem (and one that could result in ground 8 possession proceedings where the lease is actually an assured shorthold).

2. Mesne Profits

As you may have noticed in the passage from the parliamentary briefing, mesne profits are also excluded as housing costs, as not included in Schedule 1 para 2. Unless mesne profits can somehow be classed as ‘payment for a licence or permission to occupy’ (Sch 1, 2 (b)) then they are not payable under UC, even if demanded by the ‘landlord’.

(Mesne profits are what is demanded from the occupier of a property when the landlord does not accept that the occupier has any right to occupation – it is, in effect, the ‘profit’ the occupier has made. In most tenancy cases, it would be the equivalent of the rent.)

This may produce some serious issues.

For example, a social landlord decides that a tenant is not occupying as their primary or only residence. A notice to quit is served, terminating a contractual tenancy (as it is alleged to be), followed by possession proceedings based on that NTQ. From the point of the expiry of the NTQ, mesne profits are demanded, but the landlord has the intention to and then does seek possession. Mesne profits in those circumstances would be hard to describe as a licence fee or payment for permission to occupy.

And then the matter comes to trial and the tenant wins, the possession claim is defeated and the tenants security of tenure established. Then what? What of the arrears over the months, maybe many months between NTQ and trial?

Similar issues would arise for, say, those people occupying after the death of a tenant where there is no permitted successor. While notice and possession proceedings play out, mesne profits are demanded, but are they for a licence or permission to occupy? That seems hard to accept where steps to gain possession are underway.

Both these exclusions seem to me to be ill thought out and short sighted. The Govt’s stated view at the time only confirms that everyone should have a housing lawyer with them at all times (and listen to them). As the roll out of UC continues, these exclusions will inevitably cause some serious problems, and quite possibly cause people to lose their homes.

 

 

 

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 Benefits, Benefits and care, Housing law - All, Possession and tagged .

17 Comments

  1. I am really looking forward to having long discussions with UC claim managers about what mesne profits are (and how to pronounce them). I did court desk possession until 2015 and often came across solicitors, counsel and judges who thought that rent stopped and mesne (often pronounced “meznee”) profits started from the date of a possession order on an AST (harking back to the bad old days of tolerated trespassers), I’m not convinced the DWP are going to be on top of this.

    Anybody who has a client getting UC whose rent is supposed to be paid directly to the landlord under APA may be interested to know that there seems to be a widespread and poorly publicised issue with additional delays on payments. As an example, I have three clients (tenants) who claimed UC in August, but we didn’t receive our first monthly rent payment until 16 October (in a batch run). So because of UC these tenants are now fluctuating between five and ten weeks in arrears (on top of any real arrears they had before). I have another client who applied in July and we still haven’t received anything (although the DWP have told him a) we haven’t confirmed his tenancy details, and b) we have been paid – both untrue). When we try to chase up the DWP we get nowhere. I mention this here because it’s certainly something I’d have wanted to know about when defending possession proceedings for a UC claimant. So landlords are left having to serve notice and start proceedings to safeguard their position, which will presumably increase the burden on the courts.

  2. nofelix, I think the main reason for that consensus is that it’s correct. Mesne is derived from French, and anybody who was listening in their law lectures should know how to pronounce it.

  3. I am quite appalled to read this. I am a tenant of 30 odd years in the same property on a secure tenancy. 3 years ago the landlord gave me notice to quit on spurious grounds. I refused to accept and after 15 months the landlord dropped the case without it going to court. I continued paying the rent during that time, but landlord wrote saying that he was refusing rent but accepting my payments as mesne profits. I was not on any sort of benefits, but suppose this was now and I was on UC. At the point that I was given ntq and my rent became mesne profits I assume that I would no longer be entitled the rent part of my UC. So I now have to stop paying the landlord because I have no money. Does this now give landlord a non-spurious case enabling him to succeed? I can see this giving licence to unscrupulous landlords giving ntq on shaky grounds, tip off the authorities that tenant is not a tenant to make things difficult, as a way of getting people out. I am not a lawyer and I really hope that I am wrong on this, but if not I think this a dreadful way to treat people who are the poorest in society. On the other hand there might be some good from this. I paid my rent through the dispute period because my case was that I refused to accept that I was no longer a tenant – if landlord wanted to consider my payments as mesne profits that was a matter for him. If a court were to decide that failure to pay in such a situation would not affect a case it may dissuade disreputable landlords issuing spurious ntqs.

    • I think this highlights the problem quite nicely. Most people do not understand the fine distinctions between types of tenancy, and the rights and obligations that apply. And landlords (and their legal advisers, sadly) do not always know what they are talking about. It is common for landlords to say they are accepting mesne profits or a payment for use and occupation when in fact there is still a tenancy in place, so they are demanding rent. I think this is because of misconceptions about the legal consequences of continuing to accept rent after giving notice, or obtaining a possession order.

    • Yes, it should be clear that this absolutely doesn’t affect the position on a secure, assured or assured shorthold tenancy where an NSP is served and a possession order sought, right up to eviction. The tenancy persist so payments are of rent. This is specifically where security of tenure has (allegedly) been lost and a notice to quit served.

    • Yes, that is exactly the kind of issue – though if the landlord drops the case, or doesn’t take it to court, then either it has accepted the original tenancy is ongoing, or it has granted a new tenancy. It doesn’t matter if it still calls the rent mesne profits. Nonetheless, what happens in the meantime with UC?

  4. Thoughts on ground rent:

    Is “ground rent” a sufficiently clear term of art that it requires no definition in the UC Regs? Because it doesn’t have one. In my experience different people use the term “ground rent” to mean different things. For example in the social security world it is very common for practitioners to refer to the charge for a mobile home plot as (literally) ground rent, but UC certainly covers those charges. Is it open to a long leaseholder to appeal on the ground (sorry) that his/her rent is not ground rent because … well, where do the Regs say that it is? I don’t suppose it would succeed but it seems a bit casual to exclude what can be quite significant payments without defining them.

    Incidentally it was never possible to claim HB for ground rent if by ground rent we mean “rent under a long tenancy” – ground rent was traditionally funded by the DWP benefits which in pre-UC days were less generous than HB (normally a waiting period before housing costs can be paid and £1-for-£1 income taper). This disparity of treatment between long leaseholders and what UC calls “renters” has been carried forward into UC: long leaseholders have to wait a few months before they can get their service charges paid and they bet no help at all if they do any paid work. Neither of these rules applies to “renters”. That’s in addition to not having their ground rent paid.

    Thoughts on mesne profits:

    That Government response contradicts itself. The first two sentences say “don’t worry, it’s covered by rent/use & occ”, while the final sentence says it wouldn’t be fair to cover these payments. Er, which is it then?

    By the way, I grew up in Wigan where we have Mesnes Park, Mesnes Road and an area of town called Worsley Mesnes and we pronounce it “Mains”. Always amusing to hear TV news readers pronounce it MezNez

    • Ground rent is, I think, sufficiently certain. Certainly any appeal by a leaseholder of the kind you suggest would not get anywhere at all.

      Yes, it was a DWP housing costs benefit, not HB. But nothing in UC.

      On mesne profits, the response doesn’t make sense, full stop. It is a liability for housing related payments.

    • Giles (or anyone else), can I ask (as a lay person and not a housing lawyer) more about the certainty over the meaning of the term “ground rent”? In Housing Benefit, the term is not used but HB is not payable for rent under a “long tenancy”, which is defined as a fixed term of more than 21 years. The way HB looks at it, all tenants pay rent under a tenancy, whether 6 months or 999 years, but 21 years is the cut-off for the scope of the HB scheme. But UC approaches it differently and excludes “ground rent” without telling us what it is.

      For UC purposes, which of the following would be excluded as “ground rent” and why?

      – leasehold house, 999 years
      – leasehold flat, 125 years
      – registered lease 10 years
      – unregistered but executed by deed – five years

      Is there a particular duration (eg 21) that is recognised in housing law as being associated with “ground rent” as opposed to just plain “rent”? Does it make a difference whether a premium was paid to acquire the tenancy? I realise this is probably obvious to anyone who has completed year one of a law degree. I am genuinely intrigued as to how an undefined term in the UC Regs will be applied with precision and certainty. Thanks!

    • Term of over 21 years. Generally accepted but also appears in legislation (eg Commonhold and Leasehold Reform Act 2002, section 76 on term, ‘ground rent’ at s.166).

  5. I think it will be hard to classify mesne profits as falling under “licence or permission to occupy” precisely because security of tenure has been lost and there is no such permission.

    I was concerned that service charges weren’t listed, but then noticed a separate heading for them further down in the schedule! I was just looking at the HB Regs 2006 about these yesterday, because I have a Local Authority tenant facing eviction and there is a suspension hearing on Monday afternoon. I’ll be arguing that either the LA should accept the weekly Heating Charge is eligible for payment by HB under reg 12(d)-(e) or remove it from the rent statement and reduce the rent arrears accordingly. Otherwise, isn’t that a case of the LA having its cake and eating it?

    • Payments eligible for HB on the one hand and payments that must be made in order to avoid eviction on the other are not coterminous. Parliament has decided that HB will not pay for certain items that are nevertheless payable as a condition of tenancy, and heating is one of them. Tenants have to pay that out of their own income.

      HB Reg 12(1)(d) – not a chance. See R v Bristol City Council ex parte Mrs J Jacobs (2000) 32 HLR 841 , recently discussed in [2018] UKUT 219 (AAC)

      HB Reg 12(1)(e) – service charges generally are eligible for HB, but subject to Schedule 1 which makes fuel charges ineligible. It would take a few hundred words to demonstrate how Schedule 1 is engaged, the provisions governing eligible rent are tortuous, but trust me Reg 12(1)(e) is not freestanding.

    • Thanks for that Peter. I won’t look quite so foolish at court on Monday now, unless the heating charge is for communal areas only, which is very unlikely!

  6. (Arguably) interesting points about mesne profits:

    1. The DWP decision making guidance manual “Advice for Decision Making” used to include a paragraph (ADM F2043) which stated categorically “Rent payments do not include mesne profits”. However this paragraph has been silently deleted entirely from the current version and there is now appears to be no formal guidance on whether mesne profits are payable

    2. Perhaps related or perhaps not, the DWP have in a number of cases I have seen actually been paying mesne profits at least to social landlords. It seems that if the cases are presented to the DWP as involving “occupancy fees” or some other similar language which avoids the suggestion that the claimant is actively trespassing on the land, then there appears to be a fair chance that the claim will be paid.

    I wonder if there has been some pressure put on them behind the scenes to pay in these circumstances or if this is simply the result of DWP decision makers not understanding anything about housing law.

  7. A colleague of mine has also noted that UC may not allow for payment of housing costs where rent has been paid in advance, as HB does. HB Regs 2006 Reg. 8(2): A person shall be treated as liable to make a payment in respect of a dwelling for the whole of the period in, or in respect of, which the payment is to be made notwithstanding that the liability is discharged in whole or in part either before or during that period …..

    There appears to be no UC equivalent of Reg.8(2) of the HB Regs that ‘treats’ you as liable notwithstanding that ‘the liability has been discharged’ by paying upfront.

Leave a Reply (We can't offer advice on individual issues)

This site uses Akismet to reduce spam. Learn how your comment data is processed.