Exclusive: Huge frustrations with Universal Credit rent payment system revealed

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HMO operator Nick Sturgeon says providing accommodation to UC claimants is becoming too risky and expensive to consider.

A landlord based in South Yorkshire
has contacted LandlordZONE to share his growing exasperation with the Universal
Credit (UC) rent payments system and how it continues to cause mounting problems
for his business, and many other landlords like him.

Nick Sturgeon, a professional
HMO landlord, rents out properties to tenants in receipt of Universal Credit
and recently put his concerns to the Department of Work and Pensions (DWP).

These include how, because
the DWP insists on paying claimants direct initially, it can take him up to 11
weeks to receive his first rent payments when a tenant gets into arrears.

In other words, when these
tenants use the money to fund their living expenses rather than pay the rent, payments
are subsequently then switched to the landlord, but often too late.

“Support is not given to the
private landlord under the Universal Credit system because of the way the
legislation is structured,” says Sturgeon.

“This is causing a massive
reduction in the number of landlords willing to take tenants in receipt of UC,
pushing up homeless numbers and raising poverty because people on benefits are
finding it increasingly difficult to be safely housed. 

“For example, I have reduced
down from operating 11 properties to just two because of the way UC payments
are administered.”

Other key failings of the
system put to DWP by Sturgeon include:

• How the system does
  not factor in the mental and physical state of a UC tenant. To avoid the almost
  inevitable arrears they get into, vulnerable tenants should have their rent paid
  directly to their landlord from the start of a tenancy, says Sturgeon.
• DWP Case Managers and
  Account Managers rarely respond when sent paperwork by landlords chasing
  payment or requesting that rent be paid to them direct after the tenant has
  agreed that it should take place.
• When a tenant in
  receipt of UC gets into arrears, it can take months and even years for the
  money to be recouped by the landlord via the Third Party Deductions system.
• If a tenant is in
  arrears and then moves out, it is very difficult for landlords to get the money
  owed deducted from the person’s benefits payments.
• Private landlords are
  treated more harshly than social landlords or charities providing
  accommodation, who are more easily able to be reimbursed for arrears through
  the Alternative Payments System.

“Why are such normal and previously standard arrangements
not allowed or extended to the private landlord under Universal Credit when
this was a lynchpin of the Housing Benefit system?” asks Sturgeon.

“It ensured that a tenant could request accommodation from
a landlord who knew they would be paid retrospectively for providing the
accommodation.”

If you are a landlord suffering similar problems with the
UC payments system as Nick, get in touch via editor@landlordzone.co.uk.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Exclusive: Huge frustrations with Universal Credit rent payment system revealed | LandlordZONE.

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Developers scramble to offload discounted property to landlords

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Newbuild specialist agency James Pendleton says builders are struggling to sell properties not included within the government’s Help to Buy scheme, and are cutting prices heavily to shift stock.

Landlords are being offered property bargains in the
capital as developers try to sell-off new-build stock that doesn’t attract Help
to Buy financing.

Some developers are offering discounts of up to 20% and
for example landlords have been getting a 14.1% reduction over the past three months on average when buying
new builds in London through estate agent James Pendleton — down £141 per sq ft to £864 per sq ft.

This compares with an average discount of just 2.6% for re-sold property –
private vendors are much less able or keen to cut their asking prices.

Lee Pendleton, founder of James
Pendleton, says there has been a gradual build-up of new build stock in
many areas that hasn’t shifted as quickly as developers would like.

He points to Brexit and a political impasse in
Westminster during the last year as the cause. Says Pendleton: “Once developers find the right buyer,
they are very prepared to reduce the price beyond anything you would think
possible.”

David
Galman, sales director at Galliard Homes, adds: “Finished stock, if priced sensibly,
will sell, certainly with the added bonus of the Help to Buy option. 

“At developer’s year-end, buyers are
often able to cash in on a developer’s requirements to their respective boards
and get a broader discount.”

He adds that multiple sales can often gain an even better deal. “What
vendors, developers and landlords need to look out for is the bulk buyer who
really isn’t a bulk buyer, someone who tries to get a vast discount by claiming
he is a cash bulk buyer, but is really trying to broker individual sales,” says
Galman.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Developers scramble to offload discounted property to landlords | LandlordZONE.

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Tenant claiming £10k damages?

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Hi everyone, I’d appreciate any input that the members might have with my predicament. I am currently the defendant in a case that one of my tenants has brought through the small claims court. The tenant is claiming in excess of 10k against me and has listed the following reasons.

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Call for new Chancellor to reverse decline in PRS

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The Chancellor must use his first Budget to take immediate action to reverse the decline in the supply of rented housing, say landlords.

With landlords selling more properties than they are buying and others switching to short-term holiday lets for tax reasons

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Budget 2020: Action needed to halt fall in supply of homes

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The Chancellor must take action in the Budget to reverse the fall off in the supply of rented housing say landlords. With landlords selling more properties than they are buying and others switching to short-term holiday lets for tax reasons, unless action is taken tenants are going to find it increasingly hard to find the […]

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Universal Credit: update for landlords

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The Department for Work and Pensions has published a newsletter for landlords who have tenants in receipt of Universal Credit. The newsletter includes the latest information on the managed migration pilot scheme in Harrogate as well as the latest statistics on Local Housing Allowance and Universal Credit. It also includes a new video for private […]

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YOU told us: Rising costs for landlords are forcing up rents

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Two sets of research reveal how many landlords are planning to increase their rents this year as costs rise.

A
LandlordZONE Twitter poll has found that 62% of landlords intend to increase their
rent in the next 12 months, while a
survey of Belvoir letting agents shows nearly three-quarters of its offices expected rental
increases throughout 2020.

Belvoir, which has 170
branches across the UK, found
72% of offices were predicting rent rises, with almost a quarter expecting
rents to be static and just 6% anticipating a drop in rents.

“The tenant
fee ban, combined with punitive tax changes and ever-changing costly regulatory
demands have resulted in landlords incurring considerable additional charges,”
says Belvoir CEO Dorian Gonsalves.

Belvoir found
that many fed-up landlords planned to quit the private rented sector. David
Devlin, owner of Belvoir Devizes, says the Tenant Fees Act puts all new and
renewing tenancy costs on landlords, who are understandably recouping those
costs through higher rents.

“Coupled with
punitive changes in taxes and ever-increasing regulatory demands, landlords are
being driven out of the sector, which is reducing supply,” says Devlin. “Add to
this steady and increasing demand and it will obviously have the inevitable
effect of rents rising.”

While tenants
are winning more rights, it is coming at a cost, adds Gonsalves: “Although the
government is trying to help tenants, reducing supply when demand is increasing
is resulting in rents rising in those areas where tenants’ wages are increasing
more than inflation.”

Tim Hassell,
founder of central London lettings agency Draker Lettings, says: “I think a rise in rents is well over-due in
central London. What people don’t realise is that rents here have been steadily
falling for landlords over the past decade as low interest rates have prompted
huge new investment in buy-to-let which has in turn created a glut of stock in
the market.

“But it’s only been in recent months that we’ve seen landlords
begin to exit the market as rents have slipped and costs increased, prompting a
15% drop in stock. This is beginning to push prices up.”

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – YOU told us: Rising costs for landlords are forcing up rents | LandlordZONE.

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Renewing a Business Lease

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Commercial Property:

A commercial lease is based on contract law and a contractual agreement between landlord and tenant. The rules laid down are those as agreed in the lease agreement and are largely unencumbered by statutory rules, unlike the case with a residential tenancy, which is just the opposite – largely governed by statutory rules.

However, when a business (commercial) lease (England & Wales) comes to an end, that’s when statutory rules start to apply. Under the statutory rules laid down by the Landlord and Tenant Act 1954 Part II, a business tenant has security of tenure – i.e., most tenants have an automatic right to renew their lease at a revised (market) rent on similar terms to the original lease.

This article applies primarily to England and Wales. Other regions and jurisdictions are often similar but there may be important differences. This is not a definitive interpretation of the law, every case is different and only a court can decide. If in doubt seek expert advice.

There are a few obscure exceptions but the main exception to this is where the tenancy is “contracted out” of the Act – where a tenant agreed with the landlord BEFORE the lease is signed that they would not be bound by the statutory rules. All other commercial tenancies default to the Landlord & Tenant Act protection rules.

If the proposed new lease is to be “outside the act” there are strict procedures which must followed before the lease is signed. The process necessitates the tenant receiving a specified form of noticed in advance that there is no automatic right of renewal and confirming its agreement.

The landlord has the right to refuse renewal, but only on very limited grounds, namely: if the tenant is in serious breach of its lease obligations (e.g. rent arrears, continually late paying rent etc), the landlord wishes to use the premises for their own business use, or to redevelop the property  – see schedule 3 of the Act.

Where the tenant is refused renewal by the courts on these grounds, and the where landlord successfully claims the premises back, the tenant usually has a right to compensation using a formula laid down in the Act.

The process of lease renewal is started off either by the landlord serving a notice with strict time constraints under section 25 of the Act (either proposing a new tenancy with proposed new terms, or opposing renewal) or the tenant serving a request for a new tenancy under section 26 of the Act.

There are prescribed forms for this in the Landlord and Tenant Act 1954, Part 2 (Notices) Regulations 2004. It is of course important to ensure these notices are valid in every respect and served correctly meeting the time deadlines: valid dates, names and addresses, entitlements etc.

The Civil Procedure Rules (CPR), which came into force on 1 April 2013, are designed to avoid costly legal disputes between landlords and tenants where a tenancy renewal is opposed or there are disagreements on renewal terms.

Lawyers will in the first instance try to get agreement and settlement or use independent arbitration (usually specified in the lease agreement) before resorting to the courts, but in any event opposed and defended lease renewal disputes can involve legal processes, can be time consuming, cause long delays and can therefore be expensive.

Landlords of commercial premises should be aware that once let, a commercial property may not easily be recovered. Tenants may remain in possession theoretically indefinitely,  and so it is very important to sign tenants up to a good strong lease agreement – a cheap off-the-shelf lease is unlikely to be sufficient in most cases.

However, reversion is not impossible, as the following case shows:

In the case of Youssefi v Mussellwhite 2014, the judge said that a tenant’s “persistent and wilful refusal” to comply with the terms of the lease would be good enough reason for the landlord to oppose a request for renewal under the Act.

The tenant had a lease of a house, shop and premises covered by the Landlord and Tenant Act 1954.

The tenant served a request for a new lease but the landlord opposed it under section 30(1)(c) of the Act on the ground that the tenant (1) was in breach of her repairing obligations, (2) was persistently late in paying rent, (3) repeatedly refused to allow the landlord access to inspect the premises, and (4) had failed to use the premises as per the lease user clause, that is as a shop.

After considering all these points both individually and collectively the court had to consider if it was fair that this tenant, given her past behaviour, was to be “foisted” on the landlord for a new term, or the property should revert back to the landlord.

Although the court found some of the points to be not serious enough of the others were considered serious, mainly the breaches of the access covenant and the user clause.

Finally, the judge considered that it would be unfair and prejudicial to expect the landlord to continue with the present tenant due to her past behaviour. The lease had contained a positive obligation to use the premises for a stipulated purpose.

Covenants to keep the property in repair and to use the property for a specific person are there to preserve the value of the reversion of the landlord’s and adjoining property, so the tenant’s actions (or inaction in this case) were deemed prejudicial to the landlord’s interests and the breach had been substantial.

This case is good news for landlords with difficult commercial (business) tenants; landlords can use evidence of a tenant’s bad behaviour in support of their case coupled with other substantial breaches of the lease as legitimate grounds to oppose a request for a new tenancy.

Landlords should always be diligent in recording all information relevant to a tenancy including all correspondence and communications between the parties, in case this should be required for legal proceedings.

The case may serve as a warning to commercial tenants and a useful bargaining counter for landlords to use when insisting on appropriate behaviour during the lease term.

If you have any questions about any of the issues here, post your questions to the LandlordZONE® Forums – these are the busiest Rental Property Forums in the UK – you will have an answer in no time at all.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Renewing a Business Lease | LandlordZONE.

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Landlords- make sure your tenants know about EU settlement scheme

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It has been nearly a month since the United Kingdom stopped being a member of the European Union, triggering the transition period. As you may already be aware, if EU citizens wish to stay in the UK beyond 31st December 2020 (when the transition period ends) they and their close family members will need to […]

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Three quarters of Belvoir franchises predict rent increases in 2020

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In the wake of Britain’s exit from Europe, a Belvoir survey
reveals that almost three quarters of franchisees anticipate rental increases
throughout 2020.

“Belvoir commissioned media property expert Kate Faulkner to
survey a representative cross-section of Belvoir franchisees in England,
Scotland, Wales and Northern Ireland,” says Belvoir CEO Dorian Gonsalves. “The
results show an overwhelming 72% of offices predicting rent rises in 2020, with
almost a quarter expecting rents to be static and just 6% anticipating that
rents will decrease in their area.

“The reasons stated are the tenant fee ban, combined with
punitive tax changes and ever-changing costly regulatory demands that have
resulted in landlords incurring considerable additional charges. As Belvoir has
noted in the past, rent increases vary from region to region, with some areas encountering
resistance as rents are typically capped by wage growth and where supply
exceeds demand.

“Belvoir offices in Westminster, Wembley, Wood Green and Queens Park, predict that now the uncertainty over Brexit has passed, rents are likely to increase by around 1-2%. Six Belvoir offices surveyed in the South East, with the exception of Maidenhead, all predicted rental increases. “In the South West, David Devlin, owner of Belvoir Devizes said: “The Tenant Fees Act (TFA) put all new and renewing tenancy costs on landlords, who are understandably recouping those costs in terms of higher rents. Coupled with punitive changes in taxes and ever increasing regulatory demands, landlords are being driven out of the sector, which is reducing supply. Add to this steady and increasing demand and this will obviously have the inevitable effect of rents rising.”

In Yorkshire, the market is buoyant due to a successful
local economy, with franchisees forecasting static to rising rents. Chris
Duffy, owner of Belvoir Doncaster said: “The local economy in Doncaster is
thriving. A strong demand plus a shortage of stock is leading to rent
increases. The distribution sector is thriving; Amazon, Next, Ikea, Lidl, along
with companies such as Siemens. Companies are finding it hard to fill
vacancies, leading to wage growth. There is a shortage of good quality
properties of all types with the exception of single room accommodation.  These two factors are resulting in landlords
being able to charge higher rents for good quality properties.  Most properties are letting on the first day
of viewings.”

Glenn Broadwell of Belvoir Leeds North West said:
“Legislation, coupled with landlords now feeling the full effect of losing
mortgage tax relief, will see landlords asking more for valuations to exit the
market. We have already had more valuations this year, and a landlord has put
their property on the market asking us to serve notice on two tenants in a
shared property.”

A similar picture is revealed in the North East, the North
West, Wales and Scotland. Rob Price, owner of Belvoir Cardiff is expecting
rents to increase and said: “Void periods are short, demand is high and many
investors are leaving the market. We expect this to continue through 2020,
leading to increased rents.”

Nick Horan of Belvoir Dundee reported a general reduction in
the number of rental properties due to legislation and taxation, while tenant
demand remained the same.

Commenting on the results of the survey, Dorian Gonsalves
said: “Although the government is trying to help tenants, reducing supply when
demand is increasing is resulting in rents rising in those areas where tenants’
wages are increasing more than inflation. This means that although tenants may
be getting more rights, it is coming at a cost,”

“Moving forward, what is important is for the
government to implement a fair system that works for both landlords and
tenants. Failure to do so is likely to result in a shortage of new rental
properties, making it more difficult for tenants to find an affordable home.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Three quarters of Belvoir franchises predict rent increases in 2020 | LandlordZONE.

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