Landlord using calculator to work out how much rent to charge tenants

What do I do if my tenant ends up on benefits?

October 8, 2013 Mary Latham 5 Comments

Mary Latham, professional landlord with over 40 years experience has taken time out of her busy schedule to exclusively write about her own experiences as a landlord.  In particular, Mary focuses on a relevant question in today’s rental market…‘What do I do if my tenant ends up on benefits?’

Keep an eye out over the next few weeks for this three part series of personal experiences which should benefit not only landlords but tenants who find themselves in not too dissimilar situations. Over to Mary…

Many landlords tell me “I wouldn’t take a tenant on benefits” and my reply “How do you avoid them?”  Let me explain.

Until a few years ago I had never had a tenant who relied on benefits to pay their rent, most of my properties are let to either students or those who have good jobs. For years I had helped landlords with issues relating to tenants on benefits and I had also heard from many landlords that some tenants on benefits make great long term tenants.  It was not until some of my own tenants had a change in their circumstances that I had firsthand experience.

Young Professional Couple Holding Keys

Case 1: Tenant on benefits as a result of losing his job

A young couple with a child moved into one of my flats, their credit references were good and his earnings were easily high enough to cover the rent.  For over a year the rent was paid in full and on time and they were happy tenants and were enjoying the new baby who had just been born. One month the rent was late and after a week I called to ask if there was a problem.

I was told that there was no problem and that the rent would be paid the next day.  The next day part of the rent was paid.  I called again and this time a tearful young woman told me that her partner had lost his job and she needed to talk to me.  I went to see her and what transpired was that she had thought that they had savings which would cover the rent until he found a new job.

When she heard from the bank that there were insufficient funds to cover the standing order for the rent she went to see them.  She found out that their savings account was empty and they had no money in their current account either.  She confronted her partner and he eventually admitted that he had an on-line gambling habit and he had gone through their savings hoping for the “big win”.

Their relationship broke down and eventually he moved out.  She approached the Housing Benefit department and made a claim.  She would be paid enough to cover the rent but only from the date of the claim and by this time she was 6 weeks in arrears and had no way of getting the money to pay me.

Cutting a very long story short the partner came back and the rent arrears rose to 10 weeks.  By this time I had served a Section Notice on them.  One day she called me to say that she had been offered a property in a cheaper area and that the Housing Benefit would cover her new rent but they had no money to pay what she owed me and if I evicted her she would lose the other property.  She wanted to move out at once but she had no money to pay for a removal company or van hire. I agreed to write off the rent arrears and to pay for the removal van and they moved on.  This was the best option for all of us, since they had no money and no assets.

The lessons from this case

  1. Tenants’ must claim as soon as they are eligible otherwise they will never catch up on the rent that they owe
  2. I needed to know the details of the claims procedure and the forms needed
  3. I needed a “direct payment” clause in my tenancy agreement in future
  4. I needed a blank direct payment claim form on file
  5. I needed to serve a Section 21 on all my future tenants during the first fixed term and then allow the tenancy, as I always do, to become statutory periodic tenancies so that the Section 21 Notice remains valid and has no expiry date.

Mary Latham (@landlordtweets)

Mary’s experience is common and no matter how strong your intentions to find tenants in work, nothing can prepare you for what may transpire to your tenants’ situation during the tenancy.

Most importantly, resolutions to situations like this can only be resolved through landlord and tenant communication. Ignoring the situation may result in a scarred credit history with County Court Judgements which may have future implications on the tenants’ credibility when renting again.

Tune in next week for another of Mary’s landlord experiences in part 2 of 3 articles focusing on her own landlord and tenant relationships.

About Mary Latham

Mary has been a landlord since 1972, letting all types of property to most client groups and carrying out much of her own refurbishment.

She was founder and Chair of the Association of Midlands Landlords where she ran a help line for landlords for 9 years, until AML joined The National Landlords Association in 2007 and she became the West Midlands Regional Representative for NLA.

Summary
Tenant on Benefits - Part 1 (Job Loss)
Article Name
Tenant on Benefits - Part 1 (Job Loss)
Description
Mary Latham, landlord and active member of the NLA shares her experience of dealing with a tenant on benefits in this 3 part series.
Author
Publisher Name
LettingaProperty.com
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5 Comments

    April 3, 2019 REPLY

    I am a landlord with a new AST tenancy agreement in force for a duration of 6 months ending at midnight 17th July. I have read Mary Latham’s blogs on HB tenants with great interest and I have been looking at serving a Section 21 notice on my tenant during the AST period as recommended by Mary, but it seems that I have to give a date for it to become effective and then will only last for 6 months. Have I misunderstood Mary’s intention, or can I serve it without an end date? I am confused.

    I will be out of the country when the AST ends, and the tenant paid the first 6 months rent in advance, I am therefore trying to cover myself if I don’t start to receive monthly rent at the end of the AST period.

    I would really appreciate your clarification on this.

    I am also considering inserting a direct payment clause into future AST tenancy agreements, (also mentioned by Mary), but I don’t know what the pros and cons are, and I don’t know how to word such a clause.

    I look forward to hearing from you.

    Many thanks

      Lewis Chatham
      April 30, 2019 REPLY

      Good afternoon Sue, thanks for getting in touch and let’s see if I can make this a little simpler for you. First of all, do you want the tenants to vacate the end of the fixed term on the 17th July or would you prefer a new fixed term contract to be drafted for a period of either 6 or 12 months? If nothing is drafted, the tenancy will automatically go into a “statutory periodic tenancy”, whereby the landlord should serve two months notice to bring the agreement to an end, and the tenant should serve one. If the tenancy started or was renewed after 30 September 2015, you are required to give your tenants the Section 21 notice by filling in form 6a and in this form, a date is required. If the tenants do not leave, you, the landlord, may apply to the court for an order under section 21(1) or (4) of the Housing Act 1988 requiring the tenant to give up possession. The notice is valid for six months only from the date of issue.

      Sue, I appreciate there is a lot to digest and as you will be overseas, have you considered an agency, like ourselves, to collect rent on your behalf? This way, if the tenant does stop paying rent, we will take care of serving the correct notices and dealing with the legal proceedings to gain vacant possession.

    November 8, 2013 REPLY

    Life changes every day so we can’t be
    sure about our future. We can loose job, like in the first case and
    then get the whole family into trouble. The landlord is really good person, as
    she understood the situation and helped the young couple. I don’t think others
    would do the same in this situation. I
    am also a landlord, but luckily all the tenants had their stable work and paid
    me every month. The only thing that I can say is that nobody can
    predict how things will be going.

    November 1, 2013 REPLY

    I have just received this message on Facebook… “I just wanted you to know that I read your linked posts and find them all very interesting – especially todays re tenants on benefits!
    As a tenant on SOME benefits it annoys me that we get a bad name – I am ALWAYS a month ahead on my rent and have NEVER been late – a roof over my head is priority.

      November 4, 2013 REPLY

      Thanks for sharing Mary. Some of our best tenants are in receipt of housing benefits and many of whom started their tenancies in full time employment. With your tips, landlords can learn how to deal with these circumstances to ensure smooth sailing throughout the term.

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