Vital Contacts for LHA Landlords

by John Paul

9:21 AM, 9th March 2012
About 9 years ago

Vital Contacts for LHA Landlords

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Vital Contacts for LHA Landlords

LHA Top Tips for landlords. Article 2 in a series of 8

Inform yourself. If you don’t know all the rules about being a landlord for Local Housing Allowance tenants, at the very least be sure you know where to look when you need information fast.

  1. Well, you’re reading these LHA Top Tips so you’re off to a great start!
  2. The book most councils deal with and which is updated every year around June is ‘The Guide to Housing Benefit and Council Tax Benefit.’ It can be purchased through Amazon.
  3. The most important legislations are the Housing Benefit Regulations 2006 and The Housing Benefit and Council Tax Benefit (Decisions and Appeals) Regulations 2001 and further information can be found at www.legislation.gov.uk
  4. Understand the LHA rates in your area. Visit www.direct.gov.uk and search “LHA rates”. The tools they provide help to determine not only how many bedrooms your tenant is eligible for but also what rates are paid for a specific postcode. LHA rates are reviewed annually and can go up or down. Be aware of these changes as they will affect cash flow.
  5. A great source for updates and changes to benefit structures is www.dwp.gov.uk
  6. Your local authority – know who the contacts are. Some councils will offer information and advice through their websites or Landlord Packs to support PRS landlords letting to LHA tenants. Build a relationship with the people who will be over-seeing the funding for your tenant.
  7. Your mortgage broker or lender. Some lenders will say they do not provide finance for LHA tenanted properties but this is rarely the case.
  8. Your insurers- Taking on LHA tenants will affect your insurance premiums due to the perceived increased risks. You must inform your insurers to ensure that your policies remain valid in the event of a claim.
  9. Letting Agents. If you are using a letting agent, it is important to speak to them about their knowledge and systems. You need to know that the person you are entrusting with probably the most expensive asset you own knows what they are talking about. You must make sure they have sufficient knowledge and experience in dealing with LHA tenants and councils.

    • Ask for references from current landlords and tenants.
    • Ask to see their systems for managing late payments or changes in tenant circumstances.
    • Ask what their systems are for checks on property condition and handling repairs.
  10. You. It would be foolish to pretend that dealing with the issues faced by some LHA tenants is straightforward. Many will be managing difficult family circumstances, financial insecurity, debt and unemployment. You must be patient and a good communicator. Before you begin, decide to what extent you are prepared to offer support and define where your boundaries are and then be prepared to stick to them.

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Comments

John Paul

7:43 AM, 10th March 2012
About 9 years ago

Hi Paul, it was around 25-35% on my policy, not a fortune. Since I always have LHA tenants it's not a big issue for me. I understand every penny counts so would suggest that if LL needs to correctly inform the insurers of the exact type of tenant they house, to keep a close eye on move ins etc as I mentioned before we had 2 LL claims refused because they didn't let the insurers know their professional tenant had moved out and had been replaced by a LHA tenant.

Frazer Fearnhead

5:39 AM, 13th March 2012
About 9 years ago

Thanks for a great article JohnPaul. After hearing you speak a couple of years and investigating the position further ago I started to move into the LHA market and now have a number of properties let to LHA tenants. However sometimes the councils are not paying the rates stated on the LHA website, even though the tenants do qualify for the room rate we are asking for. Getting a straight answer out of them as to why not is proving difficult - have you any experience of why this sometimes happens and what any answer as to what can be done about it.   

John Paul

20:09 PM, 13th March 2012
About 9 years ago

Hi Frazer, I must admit I've never come across this. We don't use the councils website for finding out LHA rate just in cas they forget to update it regarly. We always check using the LHA direct website. A reason maybe the income of the tenants that you might not be aware of. This can affect the HB entitlement of the claimant. Also the composition of the family will also have an affect especially if there are non dependants. Ask to speak to the council and escalate it as far as you can if they refuse to speak to you regarding information as to why they didn't pay what you expected. Try and build up a relationship with the council, explain you want to help and have a general thirst for HB knowledge.

22:03 PM, 13th March 2012
About 9 years ago

I found this useful and am now looking forward to rest of the series, nice one..
Regarding finance at point 7, I have to re-finance a house at 75% LTV in about 18 months. My current lender will not allow this for contracts of over 6 months.
Does anyone know where I can get this from a lender who allows LHA tenants over a long period? I will be looking to take a five year contract with my local council who install homeless families, which also gives me a warm feeling inside..

Jonathan Clarke

2:41 AM, 14th March 2012
About 9 years ago

Hi Frazer
Yes as John says there will be probably be another underlying reason as to why. They may not divulge to you under client confidentiality . Often in my cases its claw back from an overpayment previously to maybe another landlord

Jonathan Clarke

2:45 AM, 14th March 2012
About 9 years ago

Hi Wayne
I`m not a broker but my understanding is that the majority wont allow you to go over a 12mth AST. The reason being is that if you default and they want to repossess they dont want someone stuck in there on a 5yr contract.

Ben Reeve-Lewis

8:19 AM, 14th March 2012
About 9 years ago

The council I work for runs a Private Sector Leasing Scheme which you are mentioning. The council would in fact be the tenant and the people they place would have the shorter contracts. If they use the property to temporarily house people making homeless applications then they will have no pre-determined secuirty of tenure, they are known as "Section 188 placements" and under the case law of Mohammed v.  Manek & Kensignton & Chelsea they can only ever be licensees but if the property is used as longer term temporary accommodation, after a homelessness application has been completed most council's run them on 6 month ASTs but check with your council. Also bear in mind that technically the council is your tenant and find out what the lender thinks of this. The beauty of PSL schemes of course is that there is not rent liablity, if the tenant doesnt pay, the council still pay you and if they smash the place up the council fixes it

Mark Alexander

8:25 AM, 14th March 2012
About 9 years ago

BEWARE - very few mortgage lenders will agree to this. I know that some landlords choose to ignore their mortgage terms or claim ignorance of them but that carries the risk of the mortgage lender being able to call in the loan on the grounds of default, even if it is being serviced. I've heard landlords say "the lender will never know and why would they be bothered anyway if they are getting paid". OK, fair enough, I'm not aware of a reposession on these grounds, however, the lenders haven't got their backs against the wall right now. What do you think Mortgage Express might do when they get closer to their target date of having run down their book. I believe they only have around 6 years left.

Jonathan Clarke

9:12 AM, 14th March 2012
About 9 years ago

Hi Mark 
What do you think will happen to our MX mortgages after the 6 years. Whats their end game do you reckon to shift us?  ( providing we have complied with all their T&C`s of course)

9:22 AM, 14th March 2012
About 9 years ago

In reality though Mark if lAndlords sought lender permission the PRS would shrink 50% overnight. Letting without lender knowledge is widespread remember in 2010 a new law had to be brought in, the Mortgage Repossession (protection of tenants) Act to deal with the huge problem of lenders seeking possession without knowing there were tenants in residence. I deal with 3 or 4 every week

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