What to do when taking on a benefits tenant?

by Readers Question

13:36 PM, 8th August 2017
About A year ago

What to do when taking on a benefits tenant?

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What to do when taking on a benefits tenant?

Could I ask what other Landlords are doing when taking on benefit tenants.

I usually only take on benefit tenants if they can provide a homeowner guarantor.

I am finding in some areas that some tenants can only provide working guarantors and some on benefits can’t even get a guarantor.

Could I ask what other landlords do if they have properties in areas were there are a lot of housing benefit tenants and what you do if applicants are struggling to get guarantors ?

Many thanks

The Property Man



Comments

Neil Patterson

13:39 PM, 8th August 2017
About A year ago

Property118 member Mick Roberts is a wealth of knowledge for readers if you see the comments in his members profile >> https://www.property118.com/member/?id=278

Gary Dully

3:28 AM, 9th August 2017
About A year ago

I have just issued another section 8 for rent arrears and as usual it's a tenant on benefits.

Stay clear of them, get professional tenants instead.

Gromit

9:36 AM, 9th August 2017
About A year ago

Avoid!!

Universal Credit + frozen Housing Benefit + higher taxes = more arrears + more hassle + lower profits (or even losses)

terry sullivan

9:44 AM, 9th August 2017
About A year ago

avoid--you are getting a millstone

Dr Rosalind Beck

9:44 AM, 9th August 2017
About A year ago

I would hold out a bit to try and get a working tenant but don't cut off your nose to spite your face. I once held on to try and get a tenant with a working guarantor and gave up after 7 months of a void - then having to let to someone without one (when I could have let it umpteen times before that point). It just wasn't possible for people in that area to get guarantors. I couldn't get one myself if I needed one as my only relatives are pretty poor or wouldn't want to do it. I don't see a problem with getting a working guarantor who doesn't own their own home. As long as their salary is enough, you could then get an attachment of earnings if the tenant defaulted. Obviously, the guarantor could lose their job, but this is a risky business and we have to be able to handle it when things do go wrong despite all our efforts to cover all angles. Good luck.

Mark Lynham

10:06 AM, 9th August 2017
About A year ago

as already said, i'd now avoid like the plague....

Laura Delow

11:21 AM, 9th August 2017
About A year ago

Remember that even a working tenant can lose their job & end up on benefits.
If you are to consider a new tenant on benefits, obviously go for a guarantor if possible, but still put in place either way; Rent Guarantee Insurance. If with guarantor who passes mustard, you'll get the low premium version, but if no guarantor, as long as they don't have any defaults or CCJ's & they meet the following requirements, you can cover them too (up to you to decide if you or the tenant pays for this upfront or over 12 monthly installments):-
* The Rent shown on the Housing Benefit Tenancy Agreement must not exceed any Government Housing Benefit cap or limit
* The Rent must throughout the course of the Housing Benefit Tenancy Agreement be paid directly to the Insured by the relevant Local Authority and not to the Tenant in any part.
* The Housing Benefit Tenant must not be in receipt of state benefits which exceed any government cap or limit
* The Property named in the Housing Benefit Tenancy Agreement is not located outside the Local Authority’s borough boundaries
* You must have written evidence that Housing Benefit was approved for the tenant from the start date of the Tenancy Agreement
* there has been no dispute at the property between landlord & tenant in the last 3 years
* you are not aware of any ongoing dispute at any of your properties
Then the cover is:-
Excess
* 2 full months of rent (i.e. 2 full months rental arrears) or £250 whichever the higher irrespective who is receiving the Housing Benefit
* the rent does not exceed £2500 pm
* maximum rent payable per claim of £10,000 or 12 months whichever the lesser
* Nil excess for Eviction Cover and £1,000 for any other accepted claim under the Legal Expenses section
I use Coversure. (t) 0800 093 9009
Good luck

Robert Mellors

11:38 AM, 9th August 2017
About A year ago

I usually take on benefit tenants, about 90% of my properties are let to benefit tenants. I try to get home owning rent guarantors, but this is very difficult as many tenants don't have such guarantors, so a working guarantor is the next best option.
Other possibilities include:
Getting a larger deposit.
Get a larger amount of rent in advance.
Ensure the Housing Benefit comes to you (either directly, or via Tasker).
See if you can get any rent guarantee insurance (and perhaps add the cost on to the rent charged).
Get multiple working rent guarantors (this spreads the risk, and means you have multiple targets for enforcement if necessary, e.g. if one guarantor becomes unemployed. It is also more people trying to make sure that the tenant does not fall into arrears or cause damage).
Get a paper bond (rent and/or damage guarantee from an organisation).

These are just some options, which can be used individually or in whatever combination is suitable, but benefit tenants are high risk so you need to consider all options for reducing that risk, so as to protect yourself, and also in the interest of the tenant (so they do not end up being evicted).

Also, as soon as they have rent arrears, apply for direct deductions from their benefits JSA/ESA/IS so as to keep the arrears to a minimum and to mitigate your losses and any subsequent claims against the guarantors.

Robert Mellors

11:46 AM, 9th August 2017
About A year ago

Reply to the comment left by Laura Delow at 09/08/2017 - 11:21Hi Laura

How do you get:
"You must have written evidence that Housing Benefit was approved for the tenant from the start date of the Tenancy Agreement"?
All the councils I deal with won't give anything in writing until they have processed the actual HB claim, and they cannot do this until the tenancy has started and they have received the HB claim following the start of the tenancy.
Years ago they used to do a "pre-tenancy determination" but that is only saying what the maximum HB would be, so it was only a rough guide, it did not mean that the particular prospective tenants would actually receive that (or have been approved to receive that).

CARIDON LANDLORD SOLUTIONS

13:42 PM, 9th August 2017
About A year ago

To help mitigate potential loses from takin on Housing Benefit tenants it is important to find out as much information from the tenant such as income details.
It is also a good idea to get your tenant direct from the Local Authority Homeless Persons Unit that way if there is a problem throughout the tenancy you will be able to contact the referrer who maybe able to intervene and provide you with assistance. Local Authorities may also have schemes for Private Landlords who take on Benefit Claimants such as rent deposit schemes so contact your Local Authority and see what they have on offer.
It is also important to ensure that you rent is set at the Local Housing Allowance rate which is the amount of rent that the Local Authority will pay, if you set higher the chances are the tenant will not top up and fall into arrears.
Also request that Housing Benefit make direct payment to you as the landlord in order to safeguard the payment and obtain tenant consent to be able to discuss the tenants Housing Benefit claim.
If you need further advise and assistance please feel free to contact our offices and we will be happy to assist.

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