The Government may tell us that recovery is well underway and things can only get better, but for some tenants in the UK, times are still hard, jobs are scarce and juggling finances is even more difficult when you are living on social benefits.

Things are, in fact, quite likely to get worse. Tenants receiving Local Housing Allowance (LHA) are often receiving other benefits and these benefits are being combined into one monthly payment – Universal Credit. The new system launched in 2013 and all claimants will be in the scheme by 2015. The Government’s focus is on educating people to run their own lives so this will mean a drastic (for some) change as they will have to manage their money over a month and pay their landlord directly.

A growing number of landlords believe that many tenants won’t be up to the task and that they, the landlords, will lose out, as rent monies are channelled elsewhere, whether that is for the children’s shoes or a night out.

A considerable number, including Fergus and Judith Wilson, who own 1,000 letting properties in Kent, and Kevin Green, who owns 700 in Wales, have said they will stop letting to tenants on benefit as they are already experiencing an unacceptable level of rent arrears.

With high demand across the UK, landlords are able to choose their tenants and view the working tenant as a better bet. One landlord said that with the eviction rules favouring the tenant “every time” the landlord is stuck with “idle layabouts who prefer to drink than pay their rent”. Harsh words, but are they right? The differing attitudes raise several questions:

● How can landlords avoid issues with rent arrears?
● Are tenants on LHA more likely to get into arrears?
● Do landlords understand how Universal Credit will work?
● If LHA tenants do get into arrears, how hard is it to get them out of the property?

PREVENTION

The best way to avoid rent arrears is to fully reference every tenant and take out rent guarantee insurance. Both these routes have a financial cost, so some landlords go ahead with a tenancy ‘blind’. Even with referencing, circumstances change and the best tenants can fall into arrears. The best path here is for the agent or landlord to act on the problem immediately and discuss it with the tenant.

“Landlords often blame their agent for arrears and tell them to ‘sort it’ but legally, there are limits to what the agent can do.” Tessa Shepperson Landlord Law

Common sense maybe, but Tessa Shepperson, a specialist landlord and tenant lawyer, who runs the website www.landlordlaw.co.uk says that it’s good to talk.

“Try to reach agreement with the tenant, for example regarding payment by instalments, a change of the payment date, or maybe granting permission for a lodger to help with the rent (although take care that this will not bring the property within HMO regulations).”

If all fails, the landlord will often blame the agent and tell them to ‘sort it’, but, says Tessa, there are limits to what an agent can do. “The letting agent can give evidence on the landlords behalf at any court hearing for possession, subject to the terms of his agency agreement.”

“What the agent cannot do, is to issue court proceedings on behalf of the landlord, and in particular, sign the statement of truth on the court forms. The Civil Procedure Rules provide that only the litigant personally and his solicitor can sign the statement of truth on the court proceedings. This is set out in Practice Direction 22, which says at 3.22: An agent who manages property or investments for the party cannot sign a statement of truth. It must be signed by the party or by the legal representative of the party.

This is because court proceedings can prove more complex than people imagine. Indeed, once started it may be difficult to halt a court claim.”

For example a tenant may bring a ‘counterclaim’ for disrepair. Even if the landlord then withdraws the claim for possession, the tenant can continue with his counterclaim and the landlord may end up paying compensation to the tenant along with costs.”

Despite this, many agents do issue proceedings and one of the most common reasons for a claim being thrown out of court is that it is signed by the letting agent.

Landlords will probably be unhappy at this, but they cannot expect letting agents to act as solicitors – something for which they are not qualified or insured.