Council tax for HMO’s with tenants on benefits?

Background: For HMO’s, the landlord is responsible for paying the Council Tax (CT), and will then add CT to the general costs of managing and maintaining the property, which in turn influences the rent each tenant is asked to pay. The DWP is rolling out Universal Credit (UC) and the rent payment part of UC is called Housing Cost Element (HCE); this is the equivalent to Housing Benefit, which will run alongside HCE since some tenancies are exempt from the move to UC. HCE cannot be used to pay CT.

As an aside, my son was receiving HB for eight years, and was forced to move to UC (the DWP stop HB payments if you decline to move to UC/HCE), and when he applied for HCE, his claim was rejected due to the tenancy being deemed to be “contrived”. A robust legal letter caused them to change their decision and he was awarded HCE in January, 5 months after the HCE application date.

He received no rent payments during this time, as HB stops on the day you start the UC claim process. I know of several people who have the same experience; claims are rejected, in the hope, I assume, that the claimant simply gives up at that point. Robust challenges solicit a decision reversal, but take several months during which no rent benefits are paid.

The problem: The issue is that HCE does not pay CT, and the Renters’ Rights Act requires tenancies to state whether CT is, or is not, to be paid by the tenant. For non-HMO tenancies, this, of course, means that the tenant pays the CT, which is understood and normal. Equally, landlords cannot refuse a tenancy to a benefits claimant under the new act. So my query is whether anyone has resolved what the tenancy agreement should say with regard to the payment or otherwise of CT, in the case where the tenancy is an HMO and the tenant is on benefits?

The government website advising on the impacts of the new Act, says this:

Council tax: You can include a payment for council tax within the rent where this is agreed in the tenancy agreement.   (my note: perhaps you can do this, but if you do, the DWP will not pay it the CT component of rent in the HCE payment, but see a possible solution to this below)

If payments for council tax are not included in the rent, you can include a term in the tenancy agreement requiring the tenant to pay council tax to the relevant local authority.   (my note: not applicable if it’s an HMO, because the Landlord will get the CT bill, not the tenant)

You cannot require a tenant to pay a separate, additional payment for council tax to you directly. (my note: so side payments from personal contributions to rent just for CT, or any part of CT, are illegal).

Possible solution?

The answer might be that if the rent is more than the HCE payment, the tenant makes a personal contribution (since tenants, whether on benefits or not, are able to make an additional personal contribution to the rent if they choose to rent somewhere where the rent is more than the HCE payment for their location), AND the personal contribution is equal to, or more than, the CT component. This means that HCE is not being used to pay any CT. The landlord would have to be able to show that the CT bill has been split between the tenants in the HMO, and that the tenant’s personal contribution was at least enough to cover the CT component. Does anyone know whether this is a legal solution?

More generally: Is there a solution that ensures the law is met and the tenant (on benefits and in a HMO) gets the HCE they need to meet the rent, even if they have to make a personal contribution? If they are unable to make a personal contribution, does that allow a landlord to reject a tenant on benefits on the grounds that any tenant has to be able to pay the rent required, regardless of whether they are on benefits or not?

I’d appreciate any perspective on this.

Thanks,

Steve