Is guarantor still liable for arrears if I allocate UC against current rent?

by Readers Question

14:13 PM, 22nd July 2020
About 2 months ago

Is guarantor still liable for arrears if I allocate UC against current rent?

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Is guarantor still liable for arrears if I allocate UC against current rent?

I have a tenant who has not paid any rent since late 2019. I obtained a possession order just before lockdown and was in the process of instructing county court bailiffs when Covid-19 caused everything to grind to a halt.

I managed to get Universal Credits to commence direct payments in April so the arrears are not increasing. In the meantime, I communicated with the guarantor who is clearly very savvy and pointed out that due to a clause in the tenancy agreement he is not liable for the rent from the date of the possession order, as on that date the tenancy ended (in March). Solicitors have confirmed this is correct.

Could anybody advise me whether the Universal Credits payments should be allocated against the oldest arrears or whether they should be allocated against the actual month in which I received payment? If the latter applies then the guarantor is still on the hook as the arrears accrued before the tenancy ended, so I am hoping there are rules or guidance from the government which would clarify this, which somebody could point me towards. I have never received a statement or any documentation from DWP or Universal Credit and they don’t respond when I email them.

If there are no rules relating to which date Universal Credit payment should be allocated against then the oldest arrears would presumably be cleared first and the guarantor is off the hook.

Any help would be greatly appreciated.

Kate



Comments

Ian Narbeth

15:31 PM, 22nd July 2020
About 2 months ago

Kate
As a general rule a creditor can allocate payments in whatever order they choose unless the payer has stipulated otherwise. There may be special rules for Universal Credit but as UC think they are paying for rent post April (and will not have told you payments were to clear arrears) you should claim the pre-possession order arrears from the guarantor.

Gunga Din

9:11 AM, 23rd July 2020
About 2 months ago

I've only received direct payments in one tenancy, and each one had a specific two week period associated with it.

Mick Roberts

10:37 AM, 23rd July 2020
About 2 months ago

Universal Credit UC, if u r getting monthly payments in the bank, let's say on the 24th August (Sat, Sun, Bank Hol, u get paid before), then the actual date period it applies to is 18th July to 17th August, always a month period for the previous month plus not counting the last week if I've explained that right.
So 24th Sep, period would be 18th Aug - 17th Sep.
So UC new payments are for u, not paying old arrears.

And yes u right, at moment we not getting any notifications to what payments go in the bank. It's a big complaint I & many Landlords have with UC at moment. So I can appreciate if u new to UC, u won't know what payment is for what.

Whereas HB for over 15 years email us 2 days before what's going in, for who & what date periods.

Luke P

12:31 PM, 23rd July 2020
About 2 months ago

Reply to the comment left by Ian Narbeth at 22/07/2020 - 15:31
Ian, what’s your view on the guarantor not being liable for the rent from the date of the possession order, as on that date the tenancy ended? I suppose there’s a question about the tenant’s/tenancy status between granting of a Possession Order and Bailiffs attendance and if so, what is it?

Ian Narbeth

12:57 PM, 23rd July 2020
About 2 months ago

Hi Luke
In this case the OP was asking about the guarantor getting off liability for arrears. Once the tenancy has ended then liability for rent ceases and the OP confirmed he had legal advice to that effect. Without seeing all the papers I cannot say they are wrong.

I would have to research the point about the status of the tenancy after possession order but before the tenant left.

It's going off at a tangent but I suspect the guarantee could have been better drafted to keep the guarantor on the hook longer.

Kate Mellor

16:22 PM, 23rd July 2020
About 2 months ago

Firstly, I agree with Mick and Ian, that the UC you are currently receiving is specifically being paid for the periods it relates to and is not for the pre-existing arrears. That money has been received by the tenant and not forwarded to you.
Secondly, in relation to whether your guarantor's obligation is ongoing or ended on the expiration of the notice period on the possession order, I would ensure that you have been advised by a housing specialist. The law itself states that the tenancy doesn't end until the execution of the possession order as per the updates made in the Housing Regeneration Act 2008. You mention a specific clause in your tenancy agreement and perhaps this is the reason for your woes. As Ian points out, we aren't privy to that information.

For the interest of anyone reading this, the Housing Act 1988 says the following:

21 Recovery of possession on expiry or termination of assured shorthold tenancy.
(1) Without prejudice to any right of the landlord under an assured shorthold tenancy to recover possession of the dwelling-house let on the tenancy in accordance with Chapter I above, on or after the coming to an end of an assured shorthold tenancy which was a fixed term tenancy, a court shall make an order for possession of the dwelling-house if it is satisfied—
(a) that the assured shorthold tenancy has come to an end and no further assured tenancy (whether shorthold or not) is for the time being in existence, other than [F1 an assured shorthold periodic tenancy (whether statutory or not)]; and
(b) the landlord or, in the case of joint landlords, at least one of them has given to the tenant not less than [F2 two months’] [F2 three months’] notice [F3 in writing] stating that he requires possession of the dwelling-house.
...
(3) Where a court makes an order for possession of a dwelling-house by virtue of subsection (1) above, any statutory periodic tenancy which has arisen on the coming to an end of the assured shorthold tenancy shall end (without further notice and regardless of the period) [F5 in accordance with section 5(1A)].

5 Security of tenure.
...
(1A) Where an order of the court for possession of the dwelling-house is obtained, the tenancy ends when the order is executed.]

Kate Mellor

16:22 PM, 23rd July 2020
About 2 months ago

Chris @ Possession Friend

19:08 PM, 23rd July 2020
About 2 months ago

Reply to the comment left by Kate Mellor at 23/07/2020 - 16:15
I aagree with kate, that tenancy ends when actual Possession is lawfully returned to the landlord, in this case by bailiff executing warrant.
As for the ' legal advice ' on the content of the tenancy agreement, - well that hasn't been provided so we can't comment on that.
A robust tenancy agreement and Guarantor clause would easily defeat the tenants - Guarantors argument.


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