LHA overpayment demand reversed without the need for a tribunal

by Readers Question

9:17 AM, 2nd September 2020
About 3 months ago

LHA overpayment demand reversed without the need for a tribunal

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LHA overpayment demand reversed without the need for a tribunal

Hi, One of my landlord clients recently received a demand for a £10,000 Housing Benefit overpayment.

The overpayment was caused by a failure on the part of both the tenant and my client reporting his change of address, to another of my client’s properties, to the Council’s Housing Benefit department.

As I’m sure you’re aware, when a tenant makes a claim for Housing Benefit (LHA) they, amongst other things, agree to notify the Council of any change that could impact on the level or duration of their award. Failure to comply with this obligation would invariably result in any overpayment being recoverable. However, when payment of the HB/LHA is made to the landlord or agent, this also creates a similar obligation, on their part, to report any material changes.

In this case, both accepted they were to blame, but as my client had received payment, the Council decided to pursue the landlord, rather than the tenant, for recovery of the sum.

However, in this case, the tenant in failing to report the change also received no HB/LHA for the new address. Had he done so, he clearly would have received payment at a level almost identical to what he had previously received. So, in this case, I challenged the local Council’s decision, on the basis there was no actual overpayment, as the tenant had an underlying entitlement to HB/LHA, at the new address, which the Decision Maker had not factored into his original decision.

The Council, after some weeks of deliberation, agreed, by firstly awarding HB/LHA at the new address and offsetting the sum, in question, against the original £10,000 overpayment leaving NIL to pay.

You could be forgiven for thinking this is rather a unique case. It’s not. This scenario plays out on an all too regular basis, with in most cases, councils pursuing the landlord for recovery of the overpayment caused by the tenant no longer being resident at the original address.

The offsetting rule only works where the same council administers HB/LHA for both addresses and there’s a number of conditions attached. One of the most common uses of the rule is where someone moves from one room in an HMO to another, fails to report the change and it’s discovered later by the Local Authority.

If you encounter any demand for overpayment at the very least query it, as the likelihood is, the Council or DWP has not properly considered the various factors which affect culpability and recoverability.

Bill


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Comments

Mick Roberts

12:02 PM, 3rd September 2020
About 3 months ago

Yes Bill, they only have to use common sense to allocate the money to the new house.
But as we know, Councils & Govt lack common sense.

I had a good one recently where joint tenant left, HB billed me £1200 overpayment 2 months. I said cause of all new rules protecting tenant, I can't just walk in his bedroom, tenant has all the rights. I suspected he left, but no evidence, tenant is always right.
HB quashed it. Loved it. Going after him for overpayment.

Bill irvine

13:51 PM, 3rd September 2020
About 3 months ago

Reply to the comment left by Mick Roberts at 03/09/2020 - 12:02Hi Mick
I spend more time helping landlords & agents challenge overpayment demands from councils and, more recently DWP, than any other part of my business.
In most cases, there have indeed been overpayments, but, by far the majority, have been caused by a failure on the part of the tenant to report changes to the Council or DWP. Despite this, where payment of LHA or UC's "housing costs" are being paid to the landlord, the authorities will invariably try and recover from them.
Why is that?
It's easier and quicker and for the administering councils it's a good way of generating income through DWP incentive subsidies. For example, if a local authority creates an overpayment and secures recovery via the landlord, the Council receives a 40% subsidy incentive. So, in a £1000 case, it receives £400 for simply recovering the full sum from the landlord.
However, the rules on who should be held culpable have changed on many occasions over the years. Nowadays, councils and DWP need to firstly identify the true cause of the overpayment first. This dictates to whom it should look to for repayment.
There is also a body of caselaw which ordinarily assists the position of the landlord. The key to success is knowing which Upper-tier decision(s) to employ to assist your client's case.
In successive years, DWP's performance in terms of overpayments has been heavily criticised. In 2018/19 overpayments amounted to £1.75 Billion which represents 10% of what was paid out. So, for every £10 paid, £1 represents an overpayment.
The rules on UC overpayments are more punitivethan in LHA. For example, even overpayments caused entirely by DWP are still "recoverable". In theory, DWP should ask itself before recovery starts - should we recover in this case? In practice that never happens.
As the numbers claiming UC have doubled in recent months to 5.6 Million with, probably another 5-6 million still to be added, over the next three years, this issue will come more to the fore. So, it's imperative landlords & agents should know what to do when that first letter or invoice drops on their desk.
Get yourself educated. Much of what you need to know is available through the internet, including how to seek a Mandatory Reconsideration and/or appeal. It's also important to react quickly as timecales apply at each stage in the process. If you feel you don't have the time to do this yourself, get yourself advice and, where the sum warrants it, representation. Most of the cases I deal with (except where my retainer clients are concerned) involve demands for £2000 or above.
I hope this note helps those of you who are likely to experience these issues.
Bill

Mick Roberts

9:32 AM, 4th September 2020
About 3 months ago

Reply to the comment left by Bill irvine at 03/09/2020 - 13:51
Wow, that's kept quiet then in't it, the 40% subsidy.

Yes I know many Landlords just pay these overpayments as they get scared & don't have the knowledge or know of services like yourselves.

And these £1.75 billion overpayments is shocking, I know some of these are caused by DWP refusing to engage with Landlord, trusting tenants word for it that the rent is X amount & that the house actually even exists. The old HB system always asked to see a rent proof from Landlord & almost always, sent Landlord letters & requested stuff etc. DWP excluding Landlord is rendering many thousands of tenants homeless & contributing to massive fraud, & costing taxpayer millions in fraud, homeless, all associated costs.

Landlord Phil

13:12 PM, 5th September 2020
About 3 months ago

Ok, this is way over my head, as I don't do benefits tenants. The reason being is that I don't trust the benefits system. I've been stung before & despite there being many good benefits tenants out there, I just don't trust their masters. Politically I'm a bad person, but I'll take the criticism over taking losses again. I'll follow the law & consider them, but I've yet to meet anyone that can convince me that the benefits system will work for me. I live to stand corrected but currently I can't see that happening without the system becoming the legal guarantor. So why am I replying? Well, Bill, can you do something for the PRS please? Can you get this to court? Somebody needs to challenge the system if it's ever going to change. I can't change it, if I were in a position to I would try. Maybe, if enough of the PRS get things in front of a magistrate, we might start to see a fair deal for landlords. Just putting the suggestion out there. Nothing else I suggest ever seems to get anywhere, despite it making sense. Go for it Bill, see if you can make a difference. We need some champions!

Mick Roberts

18:32 PM, 5th September 2020
About 3 months ago

Reply to the comment left by Phil Robinson at 05/09/2020 - 13:12
U exactly right and u do make sense. Problem we have is, DWP don't see sense at all and in the end they beat u with their stupidity. And if and when u finally get through to someone after 2 years and they say Ooh I get u now Mick, that's terrible isn't it, they then end up moving department and the new person han't got a clue what u on about. And as ever, the end loser is the tenant. Cause of the very thing that is supposed to be helping them, the Benefit UC system, actually makes it worse for them to get accommodation.

Bill irvine

12:43 PM, 6th September 2020
About 3 months ago

Reply to the comment left by Phil Robinson at 05/09/2020 - 13:12
Hi Phil,

The purpose of my article was to highlight how landlords can already secure favourable results in LHA or UC Overpayment situations by educating themselves as to how to do this. Those that do, can often achieve success without the need for a First or Upper-tier tribunal, on many occasions.

For those that don’t have the time or inclination help is available, usually on a No win, No fee basis. So, when overpayments occur, each and everyone could be challenged, when appropriate, with no disincentive in terms of the landlords’ position.

If you’re referring to the More general problems landlords/agents encounter, with councils and/or DWP, even here, there’s a lot they can do to mitigate their potential losses, despite DWP’s attempts to frustrate & impede them.

In contrast, where landlords’ attempts to secure compensation for their rental losses are rejected by DWP, we’re currently left with a DWP Complaints Process which can only be described as a joke. The first two internal stages take around 6 months to clear. The third stage, where referrals are submitted to the Independent Case Examiner takes 2 years and those, including me, that have prosecuted cases to this level have discovered, even when you secure an outcome confirming DWP Maladministration, ICE recommends an “apology” rather than force DWP to recompense the complainant. I’m now pursuing a number of these cases with the Parliamentary Ombudsman (PHSO) the last stage in the complaints process.

In one case, where DWP Confirmed it intended paying my client £3550 in arrears of housing costs, later reneged, paid the tenant by mistake, who promptly misused the funds. So we sued in County Court, using the online small claims procedure. The District Judge however dismissed the case, on the basis, the landlord had no legal right to sue as the £3550 represented housing costs and any APA was simply a discretionary arrangement where the landlord received the sum on the tenant’s behalf.

If any landlord invested in this area requires some help with LHA or UC I normally run sessions for the NRLA but due to COVID these were temporarily suspended. Check out its website for future events. I also run 1-2-1 sessions for landlords/agents. Details can be found in the training section of my website.

Bill

Landlord Phil

14:21 PM, 6th September 2020
About 3 months ago

Reply to the comment left by Bill irvine at 06/09/2020 - 12:43
Hi Bill,
You definitely are the right man to sort these things out. Just one thing from my side though, hearing your experiences just reinforces my "don't risk it" attitude. There's increasing pressure to take on such tenants, with no guarantees. The recent case in York now means I have to show tenants around my properties that are never going to fit with my criteria. It's good that the benefits system has landlords that are prepared to risk it. I just hope that the system never gets to the point that we're forced to take tenants of the governments choice. Don't laugh, it could happen. Trump was never going to be president, Boris couldn't really become PM, we were never going to leave Europe & mutant flu was never going to kill over 40000 British people in a few months, yet here we are.

Bill irvine

16:30 PM, 6th September 2020
About 3 months ago

Reply to the comment left by Phil Robinson at 06/09/2020 - 14:21
Hi Phil

Who would have thought, UC claim numbers would double in 3 months, between March-July, despite the Chancellor’s COVID mitigation measures?

Many of those affected are people who had never been unemployed before, never mind claimEd a means-tested benefit. When the financial packages are withdrawn in October, it’s anticipated this could add a further 2-4 million to the unemployment register and UC awards.

I’ve been doing Zoom sessions, sometimes 4/5 per week, for landlords & letting agents who have overnight inherited UC claimants and are desperate to secure detailed briefings on the key elements of the UC scheme. That interest is unlikely to dissipate anytime soon, as the numbers of claimants rise even more.

So, whilst you may currently go through a vetting process that might eliminate potential UC claimants, there’s every chance, if you have a few properties, that through time, one of your existing tenants could be similarly affected.

Bill

Landlord Phil

9:06 AM, 7th September 2020
About 3 months ago

Reply to the comment left by Bill irvine at 06/09/2020 - 16:30
Hi Bill,
Regrettably I'm already in this position. UC are really stressing my tenants, it seems I'm a social worker now too. None of us can steer away from the obvious & unavoidable, so I just have to deal with it. But my point is that I'm not going to increase my risk factor by taking on more UC tenants if I don't have to. I am in awe of those landlords that actively seek out UC clients, but it's not for me at all. My last UC case ended up in court, & getting a ruling for £6500 of the £7500 I was owed was amazing. But taking a £1000 hit along with the multiple court dates & hassle involved just isn't my thing. My theory is, if your employer doesn't pay you for a few months, do you keep going to work? Of course not. If someone takes money from your bank account, do you just say oh well? If your car gets stolen, is that the price of car ownership? Of course not. So the law now says I must consider benefits tenants. I'll consider them. When the DWP wades in as the legal guarantor, then I'll be happy to up my game to become an active UC landlord. Until then, I'm simply going to consider them, and probably accept another tenant instead. Let's be real here. Unless UC is going to pay more than a regular working tenant, why should I increase my risk factor? They can change their methods & therefore the payment terms at the drop of a hat. I can't work like that as a professional landlord. Who pays my mortgage? So the key is, the DWP need to be the legal guarantor, or landlords like me will simply continue to do our legal duty, which is to just consider UC claimants. If we reject, that's still our choice (at least for now). If they start to force tenants on us, and I can see that coming, then the whole portfolio goes up for sale. If government wants the control, then they get the burden too. This they can't avoid. My call is to have them work with us, respect us & recognise that we have some value to the community. As it is, we have no respect & are viewed in a less than favourable light. The opinion seems to be that we're all millionaires taking our millions from the poor. Harsh but that's how we're billed. Read the popular press if it's not already obvious. I have the solution, it's just not palletable to the DWP. And for the moment, my hand is better than theirs, until the politicians decide to change the rules of the game. Eventually, there will be so few players that the PRS will become unsustainable. The daft thing is that government seem hell bent on causing a problem. But I guess politicians deal with problems, not solutions. It's better for their individual purposes, I get it. Doesn't make it right thought.


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