South East

Bill Irvine: LHA – Council “mindset” nearly bankrupts landlord aunt!

RLA
Written by RLA

Bill Irvine has contacted the RLA over a particular housing benefit case, in which he saved a landlord and tenant tens of thousands of pounds worth of council overpayments and arrears, over misleading suspicion on part of the council. The case deals with a landlord and housing benefit claimant tenant, who happen to be close family members – aunt and niece…

Bill Irvine has saved a landlord and tenant tens of thousands of pounds worth of council overpayments and arrears, over misleading suspicion on part of the local council. The case deals with a landlord and housing benefit claimant tenant, who happen to be close family members – aunt and niece.

This situation is more common, and more difficult than you might expect, with councils very suspicious of landlords housing benefit claiming tenants in their properties.

The following story outlines the difficulties this tenant (Miss B) and landlord (Miss W) ran into, and how Bill Irvine managed to intervene and ameliorate the confusion that led the council to act against the property, landlord and tenant alike:

Bill Irvine:

“I attended a tribunal hearing recently in Oxford, representing the interests of tenant & landlord who were also niece and aunt. The case highlights the often difficult task of convincing councils that there is nothing illegal, immoral or contrived about renting property to close family members and whilst claiming Housing Benefit (LHA). I deal with this type of case all too frequently and am usually able to overturn the council’s decision because they’re invariably flawed. Sometimes the case needs to be referred to a First-tier tribunal which can take months to arrange causing both tenant and landlords’ financial grief and strife.

In this case, the aunt (Miss W) who owned the property offered the tenancy to her single parent niece (Miss B) because she was experiencing anti-social problems from rowdy neighbours in her other private tenancy and despite the intervention of social services and a housing charity wasn’t able to secure either a council or housing association tenancy.

Not anticipating any problems they agreed an AST for 1 year at a monthly rent of £750 (2 bedroom rate). The tenant, Miss B submitted a claim for Housing Benefit (LHA) as her main income consisted of Income Support. In her application she declared her landlord as her aunt. Despite the family relationship HB was surprisingly awarded without any hitch. As suggested above, councils invariably operate a mindset refusing all such claims in the first instance, because the tenancy agreement is not deemed “commercial” in nature or the claim is perceived to be “contrived to abuse the HB scheme”. In this case, the initial award was quite encouraging.

However, 6 months into the award, HB was all of a sudden suspended and both ladies were called to a meeting where they were cautioned that there was an ongoing “fraud investigation” into the extent of their relationship. The Council had discovered that Miss B’s father and Miss W (landlord) had been living as a couple years before. Miss B’s father, along with two other business partners, had also built the house she was residing in, before selling it to Miss W at full market price 5 years ago. The investigation concluded with HB being withdrawn and an overpayment of £4,500 being pursued against the landlord. Miss W who had a BTL mortgage ran up substantial arrears with the lender bank until eventually the bank appointed an agent to intervene and take control of the property management. However, Miss W still remained the owner.

Miss B and her aunt fell out over the affair and stopped communicating. Miss B didn’t challenge the council’s decision because she didn’t know how to, whilst her landlord aunt, desperate to resolve matters, sought advice from a number of sources without success. The bank’s agent raised legal proceedings against Miss W but also wrote to the council saying it was now in control of the property management. On hearing this, the Council invited a new claim from Miss B and restored HB, making payment direct to the bank’s agent. This lasted for 9 months until the landlord managed to clear her debt to the bank; regain control; and avoid the real threat of bankruptcy.

The agent subsequently wrote to the Council stating it was no longer involved and that control now rested with Miss W. The Council promptly cancelled HB again. On this occasion, the landlord was referred to me. I wrote to the council stating that there were no grounds for withdrawing HB as payment to the agent was based on the same AST that aunt & niece had signed nearly three years before. There was no other agreement in existence and there must be a liability to pay rent before HB can be awarded. Consequently, there were no grounds for superseding the HB award. The Council refused; the tenant appealed; and the case was heard nearly 9 months later by a First-tier tribunal.

After the usual formalities, the Judge asked the council officer to immediately address the concerns I had raised about there being no grounds for altering the original award. She, like me, pointed the officer to a Tribunal of Commissioners decision R (H) 6/06 which had underlined the importance of this first step in the revision process. She explained to the officer that unless he could provide valid grounds for supersession she would have no option but to allow the appeal. After a bit of hesitation and stuttering he eventually conceded the point. Miss B, sat alongside me, hadn’t a clue what was happening until the Judge told her the appeal had succeeded.

Not entirely satisfied with our success, I asked the Judge to provide a full statement of her reasons, confirming the fact that the tenancy agreement, signed three years before, was both commercial in its terms and was not a case of contrivance and/or abuse of the HB scheme. She agreed; so on the way out of the hearing I asked to speak to the officer about what had occurred. He agreed, and I put it to him that the original refusal should now be reinstated and the £4,500 overpayment offset against the arrears. I was to some extent chancing my arm as Miss B had failed to appeal this decision and he could easily have refused on the basis the issue was time barred. A week later the award was fully revised over the three year period; £10,650 paid in arrears with £4,500 written off.

Unsurprisingly, both niece and aunt were delighted by the outcome. Miss B, at a stroke, had cleared her rent arrears and erased the threat to her tenancy being terminated. The landlord was now £14K better off and no longer threatened with bankruptcy and the loss of her property.

The Council now fully understands the critical importance of being able to demonstrate grounds for revision/supersession and is unlikely to make the same schoolboy error again. The same principles equally apply to situations where councils decide to change the LHA payee from landlord to tenant. Councils simply can’t do this on a whim, they must have good reason for doing so, and a request by the tenant for redirection, in itself, is not justification. So keep this in mind when you’re challenging such decisions. Councils often overlook this critical step; applying the approach outlined above could unlock substantial HB awards.”

Bill offers housing benefit training through the RLA and provides careful and considered articles to the RLA Landlords’ News Hub.

Anyone wishing any further information on this topic can contact bill at bill@ucadvice.co.uk or phone 07733 080 389.

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RLA

RLA

The Residential Landlords Association (RLA) represents the interests of landlords in the private rented sector (PRS) across England and Wales. With over 23,000 subscribing members, and an additional 16,000 registered guests who engage regularly with the association, we are the leading voice of private landlords. Combined, they manage almost half a million properties.

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