Can I operate tenants bank account for them with permission?

by Readers Question

13:26 PM, 30th October 2014
About 6 years ago

Can I operate tenants bank account for them with permission?

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Can I operate tenants bank account for them with permission?

As some of you know, I’m pretty experienced in Housing Benefit …. well I think I am! ha ha.

The letter below basically explains my question to you all, as I was gonna’ ring the bank, but the robots in India won’t have a clue.

And then I thought Property118.com – There’s usually always someone on there with a useful opinion – some fools that haven’t got a clue, but some that do genuinely know or have had the experience.

Further to my letter/question below, would we then be able to change the address to one of my offices, so that I get bank statements, new cards etc.?

“Dear HSBC,

Can you confirm for me if it is perfectly legal for a tenant of mine to open a bank account to get her Housing Benefit paid into, to use this account just for Housing Benefit, & for the tenant to then give the Landlord the cash card & pin number for him to deduct the Housing benefit amounts ie. £470 every 4 weeks, out the bank machine in the wall?

If he has a full permission letter from the tenant saying he can use bank card & number to withdraw the Housing benefit money to pay the rent on the Landlords house she is living in?

She wishes to do this, as getting the Housing Benefit paid into her bank where all other direct debits are going out, is getting her into a mess & sometimes the Housing Benefit money is being used to pay other bills, so she is then short of funds to pay her rent.

So a separate bank account, where she has no access, as she also gets temptation to spend the money, would massively benefit her.

Any queries, please call me.

Yours sincerely,

Mick”cash


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Comments

Sally T

18:05 PM, 30th October 2014
About 6 years ago

In that case the best thing you can do is arrange to go to the council with your tenant and explain that from now on you want payments made direct. They say no at first but if your tenant explains that they are useless with money and you throw the word eviction in they generally give in.
We had a tenants rent paid direct to us without her knowledge even though she was less than 8 weeks in arrears (we were gaining possession through the courts) 🙂

Mick Roberts

7:52 AM, 31st October 2014
About 6 years ago

Ooh here we go, doesn’t work? For who? Makes me feel better.
And actually for this particular council, putting two fingers up DOES work.
SIMPLE? Aah right, ALL councils pay direct to tenant if we ask them, do they?
Aah right, I must remember that. In fact, I’ll ask them at 9am when they open.
I don’t think this council is in Brighton though.

Arrange go council with tenant? I han’t got time for that, not done that for 15 years.
More time spent at Council is less time on the ski slope.
Yes, this particular council, if tenant writes in & says she useless with money, they quite often comply.
But like I said, I want to try this bank thing, different avenue. May give me another option in future with other tenants too.
I do quite often use the 8 weeks in advance rule, but didn’t want to use that trump card with this council.

Robert Mellors

19:14 PM, 31st October 2014
About 6 years ago

Hi Mick,

I fully understand where you are coming from. All those landlords suggesting that tenant sets up a standing order are presumably dealing with a completely different class of tenant to you and I (or have been extremely lucky so far).

As you have stated: HB is not paid on the same date each month, the amounts often vary, sometimes payments are suspended, so if tenant sets up a standing order or direct debit then there may be insufficient funds available on the date and the bank then charges the tenant for each transaction they could not pay because of insufficient funds. This of course then puts the tenant into a spiral of debt, and the bank will keep deducting their charges which mean tenant defaults of even more payments. Standing orders/direct debits are NOT the answer for DSS tenants.

Payment direct to landlord does potentially provide an answer, and in many cases you can get the Council to pay the HB direct to the landlord before 8 weeks arrears have accrued (e.g. if tenant is vulnerable or is unlikely to pay the rent). However, this is not guaranteed, and Council may wish to review this regularly. It also does not overcome the potential problem of HB "clawback" of overpaid HB, even when the overpayment is caused by Council errors, whereas if it was paid into an account in the tenants name then that would overcome the "clawback" problem.

Some Credit Unions (not all of them) do provide so called "jam jar" accounts, whereby they can pay money from the account to the person's landlord to pay the rent. This can work, but is not ideal because the Credit Union charges for this service, they take a while to pay the money, and the tenant can withdraw this permission, change where the money is paid to, close the account, etc. Therefore, this is not really much better than the HB landing in the tenant's bank account, as they still have the opportunity to access it and go and spend it on a new X-box, bag of heroin, 50" TV, holiday, or whatever else they want to spend it on!

Payment of HB into ANY account that is in the tenant's name carries the same risk, i.e. tenant can access it and spend it on something other than paying the rent, regardless of whether they have given you the bank card or not. They can also cancel your card, change the PIN, etc. Therefore, regardless of Mark's concerns about potential fraud accusations, it does not solve your problem anyway. Combine that with the potential fraud accusations issue, and I agree that this is a definite no no. Do not do it.

My recommendations would be:

Get HB paid to you direct from day one, if possible (send in a "vulnerability letter").
Assist the tenant with their HB claim, and also make a DHP claim (if applicable).
Get DWP deductions from benefits if tenant gets into arrears.
Get DWP deductions from benefits if tenant also has to pay you service charges.
Challenge ALL overpaid HB decisions.
Get a rent guarantor if possible.
Get on-going commission every month for tenant's spend on their utility bills (contact me if you want details of how to do this).

All BankersAreBarstewards Smith

8:18 AM, 1st November 2014
About 6 years ago

Mick - I investigated having a joint account with a tenant a long time ago and the most serious reason that I decided against it, was the "financial association" of a joint account with someone who cannot handle money. Your own personal credit reference is worth so much more than the time it might take you to go to the council offices with your tenant.

Mick Roberts

9:51 AM, 1st November 2014
About 6 years ago

I know, some of ‘em han’t got a clue, have they. That’s why Mark likes me on here, he knows I’ll create a debate. He has the nice houses, but he also understands his rules don’t apply to our sector. Same as our rules don’t apply to his sector. And we dont’ pretend otherwise.

Yes I try to get a plan in action whereby get rid of the review FOREVER. This to me is very important if you have tenant with you for 15 years, a review takes 2 hours a year, x 15 years, 30 hours, x by the amount of houses me & u have & well yeah, that’s enough work for you’ve guessed it-More ski holidays.

You have some great points in there, nice to hear some bits of the same that I experience.

And I will definitely listen to the Smith fella-I’m not arguing with him ha ha. So the joint account is out the window.
Ooh yes very good point, I could jeopardise my own credit rating-Din’t think of that. That’s what I want to hear, people WHO KNOW!

Further to this post, I’ve rang the bank, higher up than phone staff, not illegal for tenant to give me their card, although they’' wouldn’t like their customer to do this.

All BankersAreBarstewards Smith

9:58 AM, 1st November 2014
About 6 years ago

If you do go ahead with the taking full control of the tenant's card - then i suggest you get a signed, witnessed statement from the tenant to the effect that s/he has given you her card and that you now have full control with her full consent .... you never know how LHA tenants behaviours change in the future when they are faced with eviction or loss of benefit.... it will all become your fault then and you have to prove you acted with integrity and full transparency.

Mick Roberts

7:03 AM, 2nd November 2014
About 6 years ago

Reply to the comment left by "All BankersAreBarstewards Smith" at "01/11/2014 - 09:58":

Yes, that's in me phone calendar to do, should I do it. Full signed permission letter from her.

Ooh a lot of my LHA tenants are brilliant at the beginning, when they want the house. Some brilliant all the way through.

Some at the end are the most nasty vicious horrible people u could meet.

Robert Mellors

11:39 AM, 2nd November 2014
About 6 years ago

Reply to the comment left by "Mick Roberts" at "02/11/2014 - 07:03":

As soon as they start falling into arrears, or messing up the house, they become defensive, blame you for everything, and then get hostile and nasty towards you. Their hostility and nastiness spirals, often correlating to the spiral of debt (or other problems) they are experiencing, but you as the landlord become the target for their hate (as landlords so often are). Sometimes it is done to your face, sometimes behind your back, but this is one of the risks you take when housing low income households, it goes with the job!

Don't get me wrong, some DSS tenants are great and always will be (I have some DSS tenants who are close friends and I would trust with anything), but some are in that position because of their inability to cope with life events and the slightest thing can "tip them over the edge" and turn them into those nasty horrible vile people you are referring to. I've seen this happen many many times.

I think this is another reason not to take control of their bank account, it will do you no favours in the long run. You will get the blame for everything that goes wrong in their life because you are "taking their money", or not letting them have their money.

Mick Roberts

7:20 AM, 3rd November 2014
About 6 years ago

Reply to the comment left by "Robert Mellors" at "02/11/2014 - 11:39":

That's exactly it, the debts they start accruing elsewhere with £5000 of goods from Brighthouse etc., this then tends to be out fault & we get it in the neck.

The debts they have clouds their judgement & all other rational decisions go out the window.

Bruce Hogarth-Jones

9:08 AM, 3rd November 2014
About 6 years ago

Why not get a lasting power of attorney from the tenant limited to operating the account in question? That way, the bank will acknowledge you have to right to access information, direct statements to your own address, transfer to your own account, set up S/Os etc but the name on the account is still the tenant's. Clearly the tenant needs to trust you if all their other benefit payments have to go into the same account but that's their risk, not yours.

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